Home › Research › India's Hydrogen Purchase Obligation

India's Hydrogen Purchase Obligation (HPO): What It Is, Why It Is Delayed, and When It May Finally Arrive

Discussions about a draft green hydrogen consumption framework have been making the rounds in inter-ministerial meetings since 2021. Fast forward nearly five years, and we are still waiting for it to be officially notified. This makes it the most significant unresolved demand-side policy in India's hydrogen sector, conspicuously absent from the statute books. In the meantime, SECI has successfully wrapped up green ammonia auctions for about 0.7 MTPA across 11 rounds for various fertiliser plants. Interestingly, the discovered prices were roughly 25 to 50% lower than Northwest European rates. In this piece, we break down what India's green hydrogen obligation actually proposes, why inter-ministerial friction keeps causing delays, and how the market is stepping up to create demand on its own.

By Reclimatize.in 30 March 2026 Fertilisers  ·  Green Hydrogen  ·  CBAM  ·  Policy Analysis

What the Green Hydrogen Obligation in India actually proposes

The Hydrogen Purchase Obligation is a demand-side mandate directly modelled on the Renewable Purchase Obligation that so 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 the industry commonly uses the term HPO, the final notified mechanism may ultimately be legally framed as a Green Hydrogen Consumption Obligation (GHCO) or a minimum clean hydrogen share requirement.

Right now, the initial focus is squarely on two major sectors: petroleum refining and fertiliser production. These happen to be 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 around 17.6% of ammonia by mass, this 17 to 19 MTPA ammonia demand translates into a 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 the desulphurisation of petroleum products).

If we look back at early draft discussions, the plan was reportedly to gradually scale up to a 10% mandate by 2030. However, the government hasn't yet published a final, official timeline. A 10% HPO across these two sectors would effectively mandate roughly 0.6 to 0.7 million tonnes of green hydrogen per year by 2030. That represents a very substantial portion of the National Green Hydrogen Mission's domestic consumption target of 1.5 MTPA by 2030.

The Demand Creation Map

Five years of waiting: the timeline of non-notification

Why it keeps getting delayed: the interministerial problem

The HPO hasn't been delayed because the concept itself is rejected. It is delayed because the cost of the obligation falls across various ministry boundaries in ways that inevitably create legitimate inter-departmental friction. Understanding this push-and-pull is absolutely essential for anyone trying to forecast when the HPO will finally land.

The Department of Fertilisers concern

India's urea sector operates under a very heavy subsidy architecture. The government reliably pays fertiliser producers a fixed per-tonne subsidy based entirely on the cost of production, which enables urea to be sold to farmers at heavily controlled, affordable prices. This subsidy bill routinely runs into tens of thousands of crores annually. When green hydrogen costs more than grey hydrogen (as it clearly does today), slapping an HPO mandate on fertiliser producers instantly increases their production cost. That increase must go somewhere: it either balloons the subsidy burden on the Department of Fertilisers (and ultimately the Ministry of Finance) or it severely eats into the profitability of the fertiliser companies.

The DoF's concern, therefore, is highly practical, not theoretical. A 10% HPO on India's urea sector translates into a very real cost increase that someone has to pay. Passing it to the farmer is impossible under the current political economy. Forcing it on the producer creates severe viability risks. And pushing it onto the government hits strict fiscal constraints. This is the ultimate binding constraint that no amount of pure policy enthusiasm can easily dissolve without first creating a clear financial architecture for who exactly bears the green premium cost during this awkward transition phase.

The Ministry of Petroleum and Natural Gas (MoPNG) dilemma

India's petroleum refineries are highly strategic national assets, with most being operated by government-owned companies like Indian Oil Corporation, BPCL, and HPCL. They produce fuels at prices that are heavily regulated to balance fiscal stability, energy security, and consumer cost. A mandatory HPO on refinery hydrogen consumption directly increases the cost of desulphurisation, and therefore the base cost of producing BS-VI compliant fuels. Crucially, this happens without any corresponding revenue uplift, since retail fuel prices are kept heavily regulated. MoPNG's concern naturally mirrors the DoF's concern: dropping a mandate without a clear financial architecture to absorb the extra cost creates an unfair burden on public sector enterprises with no obvious mechanism to recover it.

The Ministry of Finance hurdle

Any financial architecture designed to support HPO compliance (whether a Contract for Difference, a premium top-up, or an enhanced fertiliser subsidy) inevitably requires a budgetary allocation. IH2A specifically proposed a USD 2 billion CfD framework to support the transition of all existing plants to a 10% HPO and all new plants to a 100% HPO by 2030. That equates to approximately Rs 17,000 crore. In the grand scheme of India's overall budget and competing priorities, this is arguably achievable. However, it absolutely requires MoF sign-off, and the MoF's default posture on any new subsidy commitments, particularly in sectors that are already heavily subsidised, is extreme caution.

Why the HPO may initially apply only to new capacity

Given the intense interministerial friction over costs, the most politically and economically viable compromise might just involve bifurcating the mandate between greenfield and brownfield assets. Slapping a blanket 10% mandate across all existing legacy plants naturally imposes massive, immediate retrofit and operational costs. However, mandating 100% green hydrogen strictly for new ammonia and refinery capacity, while setting a very low or purely voluntary target for existing plants, represents the easiest path of least resistance.

This practical approach elegantly prevents the fossil lock-in of brand new infrastructure while safely protecting the immediate profitability of legacy, highly subsidised assets. The India Hydrogen Alliance implicitly recognized this delicate dynamic in its May 2025 proposal, smartly distinguishing between existing plants (suggesting a 10% target) and new or expanded plants (suggesting a 100% target). As the government slowly finalises the framework, this bifurcated application remains the most likely policy design to eventually emerge.

What SECI's auctions have already achieved

While the great HPO debate quietly continues, SECI's SIGHT Mode 2A programme has effectively been building the exact market infrastructure that an HPO would eventually depend on. The auction results from August 2025 are easily among the most significant data points we have in India's green hydrogen story.

The roughly 0.7 MTPA of green ammonia successfully 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 pure green hydrogen. The resulting 10-year offtake agreements give these producers the vital revenue certainty over a long enough period to properly underwrite project finance. The PLI support structure starts high and steps down gracefully: Rs 8.82/kg in year 1, Rs 7.06/kg in year 2, and Rs 5.30/kg in year 3. This is smartly designed to help bridge the early gap between green and grey costs while the market matures and economies of scale naturally reduce production costs.

The Rs 49.75 per kg lowest discovered price for green ammonia, set by Acme Cleantech for supply to Paradeep Phosphates Limited in Odisha, is arguably the most commercially important number to come out of India's green hydrogen sector in 2025. It is vital to remember that the ₹49.75/kg figure reflects discovered tender pricing strictly under SIGHT support and should not be lazily interpreted as an unsubsidized production cost. However, even as a subsidized delivered price, green ammonia at this specific level is only approximately 10% to 15% more expensive than grey ammonia at current prices (which is roughly USD 515 per tonne). This is remarkably 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 true viability without needing any HPO mandate at all.

The table perfectly illustrates exactly why CBAM partially substitutes for the HPO in export-oriented segments, but clearly not for India's domestic decarbonisation agenda. Grey ammonia imported directly into the EU faces heavy CBAM liabilities based primarily on embedded direct emissions from hydrogen production, with the total liability depending highly on final verified emissions, default values, and evolving embedded-emission methodologies. Green ammonia, meanwhile, escapes that levy entirely. For exporters, paying the green ammonia price is not just an environmental commitment; it is a highly calculated hedge against a growing CBAM cost trajectory.

When will the HPO be notified in India? A realistic assessment

The SIGHT Mode 2A auctions cleanly demonstrate that green ammonia prices have converged much closer to grey, effectively eliminating the tired argument that the massive cost gap makes an HPO completely unreasonable. The IH2A submission and the NGHM's own domestic targets provide the necessary quantitative case. What truly remains is simply establishing the financial architecture for the transition period, and crucially, getting inter-ministerial agreement to fund it.

The most likely notification pathway involves the following precise sequencing. First, MNRE successfully resolves the CfD or top-up subsidy mechanism directly with the MoF, formally establishing that the incremental green premium for obligated plants will be safely covered through a structured government payment rather than being passed entirely onto the industry. Second, DoF and MoPNG formally agree to a gently phased trajectory, possibly starting very small at 0.5 to 1% with a clear glide path to 10% by 2030. Third, the legal notification is finally issued safely under the Energy Conservation Act's delegated authority.

Given the successful GHCI operational rollout in 2025 and the sustained, growing pressure from the NGHM's domestic target gap, the probability of notification is steadily rising. Reclimatize's qualitative probability assessment suggests a reasonably high probability of notification in either FY 2026-27 or FY 2027-28, with only a moderate probability of a post-2028 delay, highly contingent on resolving that tricky financial architecture.