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Fertilisers · Green Hydrogen · Policy AnalysisIndia’s Hydrogen Purchase Obligation (HPO): What It Is, Why It Is Delayed, and When It May Finally Arrive
Discussions around a draft green hydrogen consumption obligation framework have circulated in inter-ministerial consultations since 2021. Nearly five years on, it remains unnotified — making it the most consequential unresolved demand-side policy in India’s hydrogen sector, yet still absent from the statute book. Meanwhile, SECI has completed green ammonia auctions for roughly 0.7 MTPA across 11 completed auction rounds covering multiple fertiliser plants, with prices that came in roughly 25 to 50% below Northwest European rates. This article explains what the green hydrogen obligation in India actually proposes, why it keeps getting delayed by interministerial friction, and how the market is partially solving demand creation without it.
Industry and policy discussions around the early draft HPO framework reportedly considered a phased trajectory scaling toward ~10% by 2030, though the government has never publicly released a final official schedule. As of March 2026, it has not been notified as a statutory mandate. No ministry has publicly given a firm notification date.
The India Hydrogen Alliance (IH2A), in a formal submission to the government in May 2025, proposed 10% HPO for all existing refinery and ammonia plants and 100% HPO for all new or expanded plants by 2030. IH2A estimates that without HPO and demand-side support, the combined USD 80 billion in announced hydrogen-related investments in India is at risk of becoming stranded.
The SIGHT Mode 2A auctions completed by SECI in August 2025 demonstrated that market-based demand aggregation can substitute partially for a statutory HPO — but only for the specific fertiliser plants covered by the tenders. The rest of India’s existing ammonia plants and refineries remain outside any mandatory green hydrogen commitment.
The Green Hydrogen Standard for India, legally notified in August 2023, defined the 2 kg CO₂e/kg H₂ threshold. However, it was the subsequent operational rollout of the Green Hydrogen Certification Scheme (GHCI) in April 2025 that provided the foundational auditing architecture. GHCI materially improves the enforceability of any future HPO by enabling measurement, reporting, and verification.
The core delay in HPO notification is interministerial in nature. MNRE owns the mandate, but the Department of Fertilisers, MoPNG, the Ministry of Finance, and DPIIT all have legitimate stakes and concerns regarding cost impacts. The Energy Conservation (Amendment) Act 2022 provides a potential statutory basis, but the political economy of who bears the green premium cost remains the binding constraint.
CBAM is changing the fertiliser sector’s incentive structure for green ammonia. From January 2026, CBAM’s financial phase begins for covered fertiliser products including ammonia and urea imported into the EU. Green ammonia has near-zero CBAM exposure. For export-oriented fertiliser producers, the commercial case for green ammonia is building independently of the HPO.
What the Green Hydrogen Obligation in India actually proposes
The Hydrogen Purchase Obligation is a demand-side mandate modelled on the Renewable Purchase Obligation that successfully drove renewable energy adoption in India’s power sector. Just as the RPO requires distribution utilities and large consumers to source a minimum percentage of their electricity from renewables, the HPO would require specified industries to source a minimum percentage of their hydrogen requirements from green hydrogen. While industry commonly uses the term HPO, the final notified mechanism may be framed legally as a Green Hydrogen Consumption Obligation (GHCO) or minimum clean hydrogen share requirement.
The initial focus covers two sectors: petroleum refining and fertiliser production. These are the two largest consumers of hydrogen in India. The country’s domestic ammonia demand is approximately 17 to 19 million tonnes annually. Because hydrogen constitutes only ~17.6% of ammonia by mass, this 17–19 MTPA ammonia demand translates into much lower pure hydrogen demand. Total pure hydrogen consumption is roughly 6 to 7 million tonnes per year, with fertilisers accounting for over 50% of this demand (primarily for urea synthesis) and refineries accounting for most of the remainder (for desulphurisation of petroleum products).
Industry and policy discussions around the early draft HPO framework reportedly considered a phased trajectory scaling toward ~10% by 2030, though the government has never publicly released a final official schedule. A 10% HPO across these two sectors would mandate roughly 0.6 to 0.7 million tonnes of green hydrogen per year by 2030. This represents a substantial portion of the National Green Hydrogen Mission’s domestic consumption target of 1.5 MTPA by 2030.
The Demand Creation Map
| Driver | Mandatory? | Sectors Covered | Current Status |
|---|---|---|---|
| HPO | Yes | Refining & Fertilisers | Draft Pending |
| SIGHT (Mode 2A) | No | Selected Fertiliser Plants | Active |
| CBAM | External (EU) | Export-oriented Plants | Active |
| Voluntary Offtake | No | Domestic / Export | Growing |
India’s Renewable Purchase Obligation has been one of the most consequential National Green Hydrogen Mission demand side policy instruments in the country’s energy history. By requiring utilities and large consumers to source a minimum percentage of electricity from renewables, the RPO created a guaranteed offtake market that made renewable energy projects bankable — reducing the cost of capital, enabling long-term PPAs, and ultimately driving down solar tariffs from over Rs 15/unit in 2010 to below Rs 2.20/unit today. Industry explicitly invokes this parallel, arguing that HPOs can replicate the success of RPOs in green hydrogen. The structural logic is identical: mandate demand, create bankable offtake, enable investment, drive down cost. The difference is that green hydrogen faces a larger cost gap than solar faced in 2010 — making the transition support framework more important, not less.
Five years of waiting — the timeline of non-notification
On India’s 75th Independence Day, Honourable Prime Minister Shri Narendra Modi Ji announces the National Hydrogen Mission. Discussions around an HPO framework began in 2021 during early National Hydrogen Mission consultations.
Parliament amends the Energy Conservation Act to introduce the Carbon Credit Trading Scheme and to grant the central government powers to specify a minimum share of renewable energy — including green hydrogen — in industrial energy consumption. This amendment removes a legal architecture barrier, creating the statutory basis on which an HPO could be notified without requiring standalone legislation.
Union Cabinet approves the NGHM with a total outlay of Rs 19,744 crore. SIGHT programme notified — Rs 17,490 crore for production incentives and electrolyser manufacturing. The HPO is listed as a demand-side intervention to be developed but is not notified alongside the Mission framework.
MNRE legally notifies the “Green Hydrogen Standard for India”, officially setting the boundary threshold at 2 kg CO₂e per kg of H₂. This provides the foundational legal definition required for any future mandate.
MNRE launches the operational phase of the Green Hydrogen Certification Scheme of India (GHCI) — establishing the auditing portal and accrediting verification agencies (ACVAs). This removes a critical operational blocker to the HPO: GHCI materially improves the enforceability of any future HPO by enabling measurement, reporting, and verification.
The India Hydrogen Alliance submits a formal proposal recommending 10% HPO for existing domestic refinery and ammonia plants, and 100% HPO for new or expanded projects by 2030. The submission warns that USD 80 billion in investments are at risk without firm HPO demand signals.
SECI issues a landmark tender under SIGHT Mode 2A (Tranche I) for green ammonia across domestic fertiliser plants, with a 10-year offtake period and PLI support. This is the voluntary, incentive-driven parallel track to the statutory HPO — creating demand by making green ammonia economically viable through subsidies rather than mandates.
SECI completes 11 of 13 planned Mode 2A auctions — awarding roughly 0.7 MTPA to producers with the lowest tariff of Rs 49.75/kg discovered by Acme Cleantech for supply to Paradeep Phosphates Limited in Odisha. The auctions demonstrate that market-based demand aggregation with PLI support can drive green ammonia economics.
As of March 2026, no statutory HPO notification has been issued. The GHCI is operational, the SIGHT programme is delivering market results, but the mandatory demand obligation remains unnotified.
Why it keeps getting delayed — the interministerial problem
The HPO has not been notified not because the concept is unaccepted but because the cost of the obligation falls across ministry boundaries in ways that create legitimate inter-departmental friction. Understanding this friction is essential for any forecasting of when the HPO will actually land.
The Department of Fertilisers problem
India’s urea sector operates under a heavy subsidy architecture. The government pays fertiliser producers a fixed per-tonne subsidy based on the cost of production, enabling urea to be sold to farmers at heavily controlled prices. The subsidy bill runs to tens of thousands of crores annually. When green hydrogen costs more than grey hydrogen — as it does today — an HPO mandate on fertiliser producers increases their production cost, which either increases the subsidy burden on the Department of Fertilisers and ultimately on the Ministry of Finance, or reduces the profitability of fertiliser companies.
The DoF’s concern is therefore not theoretical. A 10% HPO on India’s urea sector translates into a real cost increase that someone must pay — either the farmer (impossible under current political economy), the fertiliser producer (viability risk), or the government through enhanced subsidies (fiscal constraint). This is the binding constraint that no amount of policy enthusiasm can dissolve without a clear financial architecture for who bears the green premium cost during the transition.
The MoPNG problem
India’s petroleum refineries are strategic national assets, most operated by government-owned companies like Indian Oil Corporation, BPCL and HPCL. They produce fuels at prices regulated to balance fiscal stability, energy security and consumer cost. A mandatory HPO on refinery hydrogen consumption increases the cost of desulphurisation — and therefore the cost of producing BS-VI compliant fuels — without any corresponding revenue uplift, since retail fuel prices are regulated. MoPNG’s concern mirrors the DoF concern: a mandate without financial architecture to absorb the cost creates a burden on public sector enterprises without a clear mechanism to recover it.
The Ministry of Finance problem
Any financial architecture to support HPO compliance — whether a Contract for Difference, a premium top-up, or enhanced fertiliser subsidy — requires budgetary allocation. IH2A has specifically proposed a USD 2 billion CfD framework to support the transition of all existing plants to 10% HPO and all new plants to 100% HPO by 2030. That is approximately Rs 17,000 crore. In the context of India’s overall budget and competing priorities, this is achievable. But it requires MoF sign-off, and MoF’s default position on new subsidy commitments — particularly in sectors already heavily subsidised — is caution.
MNRE: Owns the mandate, wants notification — green hydrogen production targets at risk without demand signal.
Department of Fertilisers (Chemicals and Fertilisers Ministry): Concerned about cost implications for urea subsidy bill and producer viability. Needs assurance that the green premium will not increase the subsidy liability.
MoPNG: Concerned about refinery competitiveness and cost-of-production increases. Needs either financial support or a phased trajectory that aligns with grey-green cost convergence.
Ministry of Finance: Needs to approve any CfD or financial support mechanism. Default position is caution on new subsidy commitments.
DPIIT: Focused on industrial competitiveness — wants to ensure HPO does not create disadvantage for Indian industry against international competitors who may face no equivalent mandate.
The SIGHT Mode 2A auctions have demonstrated that green ammonia prices are approaching grey. The remaining constraint is the financial architecture for the transition period — and that requires all five ministries to agree simultaneously.
Why the HPO may initially apply only to new capacity
Given the interministerial friction over costs, the most politically and economically viable compromise may involve bifurcating the mandate between greenfield and brownfield assets. A blanket 10% mandate across all existing plants imposes massive immediate retrofit and operational costs. However, mandating 100% green hydrogen for new ammonia and refinery capacity, while setting a very low (or purely voluntary) target for existing plants, represents the path of least resistance.
This approach prevents the fossil lock-in of new infrastructure while protecting the immediate profitability of legacy, highly subsidised assets. The India Hydrogen Alliance implicitly recognized this dynamic in its May 2025 proposal, distinguishing between existing (10% target) and new/expanded (100% target) plants. As the government finalises the framework, this bifurcated application is the most likely policy design to emerge.
What SECI’s auctions have already achieved
While the HPO debate continues, SECI’s SIGHT Mode 2A programme has been building the market infrastructure that an HPO would depend on. The auction results from August 2025 are among the most significant data points in India’s green hydrogen story.
The roughly 0.7 MTPA of green ammonia awarded across 11 completed auction rounds covering multiple fertiliser plants will, when producing at full capacity, require approximately 124,000 TPA (0.124 MTPA) of green hydrogen. The 10-year offtake agreements give producers revenue certainty over a period long enough to underwrite project finance. The PLI support structure starts high and steps down: Rs 8.82/kg (year 1), Rs 7.06/kg (year 2), Rs 5.30/kg (year 3) — designed to bridge the early gap between green and grey costs while the market matures and economies of scale reduce production costs.
The Rs 49.75/kg lowest discovered price for green ammonia — set by Acme Cleantech for supply to Paradeep Phosphates Limited in Odisha — is the most commercially important number to come out of India’s green hydrogen sector in 2025. The ₹49.75/kg figure reflects discovered tender pricing under SIGHT support and should not be interpreted as an unsubsidized production cost. However, even as a subsidized delivered price, green ammonia at this level is approximately 10% to 15% more expensive than grey ammonia at current prices (roughly USD 515 per tonne). This is roughly 25 to 50% lower than many current Northwest European green ammonia cost estimates. The commercial logic for green ammonia in export-oriented contexts is rapidly approaching viability without any HPO mandate at all.
| Parameter | Grey Ammonia (today) | Green Ammonia — SIGHT Mode 2A | Green Ammonia — near-term outlook |
|---|---|---|---|
| Production cost (India) | ~USD 380–450/t (domestic gas) ~USD 515/t (imported LNG basis) | ~USD 572–704/t (including PLI) | ~USD 500–600/t by 2030 (declining) |
| CBAM exposure (EU export) | ~€16–58/t for urea (under actual vs default values); >€100/t for pure ammonia | Near zero | Grey exposed; green unaffected |
| Green premium over grey | — | ~10-15% at Rs 49.75/kg (lowest auction) | Approaching parity by 2028–2030 |
| Cost relative to EU green ammonia | — | 25–50% cheaper | India retains cost advantage |
| Supply certainty | LNG price volatile | 10-year SECI offtake | HPO would further de-risk |
The table illustrates why CBAM partially substitutes for the HPO in export-oriented segments, but not for India’s domestic decarbonisation agenda. Grey ammonia imported into the EU faces CBAM liabilities based primarily on embedded direct emissions from hydrogen production, with total liability depending on final verified emissions, default values, and evolving embedded-emission methodologies. Green ammonia escapes that levy entirely. For exporters, the green ammonia price is not just an environmental commitment — it is a hedge against a growing CBAM cost trajectory.
When will HPO be notified in India — a realistic assessment
The SIGHT Mode 2A auctions demonstrate that green ammonia prices have converged closer to grey — eliminating the argument that the cost gap makes an HPO completely unreasonable. The IH2A submission and the NGHM’s own domestic target provide the quantitative case. What remains is the financial architecture for the transition period — and the interministerial agreement to fund it.
The most likely notification pathway involves the following sequencing. First, MNRE resolves the CfD or top-up subsidy mechanism with MoF — establishing that the incremental green premium for obligated plants will be covered through a structured government payment rather than passed entirely to industry. Second, DoF and MoPNG agree to a phased trajectory, possibly starting at 0.5 to 1% with a clear glide path to 10% by 2030. Third, the legal notification is issued under the Energy Conservation Act’s delegated authority.
Given the GHCI operational rollout in 2025 and the sustained pressure from the NGHM’s domestic target gap, the probability of notification is rising. Reclimatize’s qualitative probability assessment suggests a high probability of notification in either FY 2026-27 or FY 2027-28, with a moderate probability of post-2028 delay, contingent on resolving the financial architecture.
Frequently Asked Questions
Is the HPO mandatory today for any Indian fertiliser plant?
No. As of March 2026, no statutory HPO notification has been issued. Participation in SECI’s SIGHT Mode 2A programme is voluntary. No Indian fertiliser plant is legally required to procure any minimum percentage of green hydrogen.
What is the legal authority under which the HPO would be notified?
The most likely route is the Energy Conservation (Amendment) Act 2022, which grants the central government powers to specify minimum renewable energy — including green hydrogen — shares in industrial energy consumption. This removes the need for standalone legislation.
How does CBAM interact with the HPO for fertiliser exporters?
CBAM covers urea and ammonia exports to the EU from January 2026. Grey ammonia faces a CBAM levy on embedded emissions. Green ammonia, with below-threshold emissions, effectively escapes the levy. For export-oriented Indian producers, green ammonia under SIGHT or HPO eliminates CBAM exposure — making the green premium partially self-financing through avoided CBAM costs.
What is the GHCI and why does it matter for the HPO?
The GHCI is India’s formal certification framework setting a 2 kg CO₂e/kg H₂ threshold. GHCI provides the certification architecture required for compliance verification, particularly for incentive-linked and standards-based transactions. Without GHCI, a statutory HPO mandate could not be enforced because there would be no verifiable definition of qualifying green hydrogen. The April 2025 operational launch removed this critical prerequisite for HPO notification.