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Fertilisers · Green Hydrogen · Policy AnalysisIndia’s Hydrogen Purchase Obligation: What It Will Mandate, Who It Will Cover, and When It Will Finally Be Notified
The Hydrogen Purchase Obligation has been in a draft Cabinet note since 2021. Five years on, it remains unnotified — making it simultaneously the most discussed and least implemented policy in India’s green hydrogen ecosystem. Meanwhile, SECI has completed green ammonia auctions for 705,000 tonnes per year across 13 fertiliser plants, with prices that came in 40 to 50% below European rates. This article explains what the HPO actually proposes, why it keeps getting delayed, and what the market is already doing in its absence.
India’s Hydrogen Purchase Obligation was first proposed in a draft Cabinet note circulated for inter-ministerial consultation in mid-2021. The original trajectory envisioned starting at 0.15% of hydrogen consumption in FY 2023-24 and reaching 10% by FY 2029-30. As of March 2026, it has not been notified as a statutory mandate. No ministry has publicly given a 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 13 fertiliser plants covered by the tender. The rest of India’s 22 existing ammonia plants and 17 refineries remain outside any mandatory green hydrogen commitment.
The Green Hydrogen Certification Scheme of India (GHCI), launched in April 2025, provided the foundational certification architecture that an HPO would rest on. A statutory HPO mandate requires a definition of what qualifies as green hydrogen — the GHCI supplies that definition. In this sense, the GHCI was a necessary precondition for HPO notification, and its April 2025 launch removes one of the key structural blockers to the HPO moving forward.
The core delay in HPO notification is interministerial in nature. MNRE owns the mandate, but the Department of Fertilisers (cost impacts on urea producers), MoPNG (refinery competitiveness), the Ministry of Finance (fertiliser subsidy bill implications) and DPIIT (industrial policy) all have legitimate stakes and concerns. The Energy Conservation (Amendment) Act 2022 provides a potential statutory basis, but the political economy of who bears the cost remains the binding constraint.
CBAM is changing the fertiliser sector’s incentive structure for green ammonia in a way that makes the HPO less essential than it was in 2021. From January 2026, Indian urea and ammonia exports to the EU face CBAM levies priced on embedded emissions. Green ammonia has near-zero CBAM exposure. The India-EU FTA concluded January 2026 provides no CBAM exemption. For export-oriented fertiliser producers, the commercial case for green ammonia is building independently of the HPO.
What the HPO actually proposes
The Hydrogen Purchase Obligation, as originally framed in the draft Cabinet note circulated by MNRE in 2021, is a demand-side mandate modelled on the Renewable Purchase Obligation that has successfully driven renewable energy adoption in India’s power sector. Just as the RPO requires distribution licensees and open access consumers to source a minimum percentage of their electricity from renewable sources, the HPO would require specified industries to source a minimum percentage of their hydrogen requirements from green hydrogen — produced from renewable electricity through electrolysis or from biomass conversion.
The initial proposal covered two sectors: petroleum refining and fertiliser production. These were chosen because they are the two largest consumers of hydrogen in India. The country consumes approximately 17 to 19 million tonnes of ammonia annually, with over 50% of total domestic hydrogen consumption devoted to fertiliser production — primarily urea synthesis via the Haber-Bosch process using grey hydrogen from imported or domestic natural gas. India’s refineries are the second largest hydrogen consuming sector, using hydrogen for desulphurisation of petroleum products to meet Bharat Stage VI emission norms.
The draft trajectory, as reported from the Cabinet note, proposed a progressive ramp-up beginning at 0.15% of hydrogen consumption in FY 2023-24, rising to 0.5% by FY 2025-26, then accelerating to 1.5%, 3.5% and 6.5% in subsequent years, targeting 10% by FY 2029-30. At 10% of India’s hydrogen consumption across fertilisers and refining — approximately 17 to 19 million tonnes total — the HPO would mandate roughly 1.7 to 1.9 million tonnes of green hydrogen per year by 2029-30. This aligns closely with the National Green Hydrogen Mission’s domestic consumption target of 1.5 MMTPA by 2030, which represents approximately 30% of the Mission’s total 5 MMTPA ambition.
India’s Renewable Purchase Obligation has been one of the most consequential demand-creation policy instruments in the country’s energy history. By requiring distribution 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. The IH2A explicitly invokes this parallel, arguing that HPOs can replicate the success of RPOs in green hydrogen the same way RPOs did for renewables. 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 — which makes the HPO design, transition support, and any associated CfD 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, laying the political foundation for India’s green hydrogen push. MNRE begins circulating the draft Cabinet note for a Green Hydrogen Consumption Obligation (GHCO) — later renamed HPO — for inter-ministerial consultation in June-July 2021.
Union Cabinet approves the NGHM with a total outlay of Rs 19,744 crore up to 2029-30. 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. SECI begins preparations for the Mode 2A green ammonia demand aggregation tender for the fertiliser sector.
Parliament amends the Energy Conservation Act to introduce the Carbon Credit Trading Scheme and, crucially, to grant the central government powers to specify a minimum share of renewable energy — including green hydrogen — in industrial energy consumption. This amendment creates the statutory basis on which an HPO could be notified without requiring standalone legislation. The amendment removes a legal architecture barrier to HPO notification.
SECI issues a landmark tender under SIGHT Mode 2A for 724,000 MTPA of green ammonia across 13 domestic fertiliser plants, with a 10-year offtake period and PLI support starting at Rs 8.82/kg in year one. 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.
MNRE launches the Green Hydrogen Certification Scheme of India — setting a 2 kg CO₂e/kg H₂ threshold, establishing GHCI as mandatory for producers selling domestically or using government incentives, and designating BEE as the certifying authority. The GHCI removes a critical prerequisite for HPO: a legally enforceable definition of what qualifies as green hydrogen. Without GHCI, an HPO mandate could not be enforced because there would be no way to verify compliance.
The India Hydrogen Alliance submits a formal proposal to the Government of India recommending 10% HPO for all 39 existing domestic refinery and ammonia plants, and 100% HPO for 8 new or expanded projects by 2030. IH2A estimates these two tranches would meet 45% and 55% of the NGHM’s 1.5 MMTPA domestic target respectively. The submission notes that India’s installed electrolyser base is less than 40 MW — below 1% of what a 1.5 MMTPA target requires — and warns that USD 80 billion in investments are at risk without HPO demand signals.
SECI completes 11 of 13 planned Mode 2A auctions — awarding 705,000 MTPA to producers including Acme Cleantech Solutions (370,000 MTPA across 4 plants), with the lowest tariff of Rs 49.75/kg discovered by Acme for the IFFCO Paradeep plant in Odisha. At Rs 49.75/kg, green ammonia is approximately 10% more expensive than grey — a dramatic narrowing from the 50 to 80% premium of 2022. The auctions demonstrate that market-based demand aggregation with PLI support can drive green ammonia economics faster than a statutory HPO alone.
As of March 2026, no statutory HPO notification has been issued. The draft framework has been circulating in inter-ministerial consultation for approximately five years. The GHCI has been notified, the SIGHT programme is delivering market results, but the mandatory demand obligation that would de-risk private investment across the full 47-plant universe — not just the 13 SIGHT Mode 2A plants — remains unnotified. No ministry has publicly committed to a notification timeline.
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, even after the SIGHT Mode 2A auction results — 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 until they can absorb the premium through efficiency gains.
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 GHCI notification in April 2025 resolved the definitional problem. 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.
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 — and they deserve careful examination.
The 705,000 MTPA of green ammonia awarded across 11 auctions will, when producing at full capacity, require approximately 128,872 MTPA of green hydrogen — adding more to India’s green hydrogen production capacity than the entire current installed base at the time of the auctions. 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 the IFFCO Paradeep plant — is the most commercially important number to come out of India’s green hydrogen sector in 2025. At Rs 49.75/kg, green ammonia is approximately 10% more expensive than grey ammonia at current prices of approximately USD 515 per tonne (Rs 43 to 45 per kg at current exchange rates). That 10% premium is almost within range of what CBAM cost would impose on grey ammonia exports to the EU at current EU ETS prices. 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) | ~€10–20/t (Scope 1 only, current rules) | Near zero | Grey exposed; green unaffected |
| Green premium over grey | — | ~10% at Rs 49.75/kg (lowest auction) | Approaching parity by 2028–2030 |
| Cost relative to EU green ammonia | — | 40–50% cheaper | India retains cost advantage |
| Supply certainty | LNG price volatile | 10-year SECI offtake | HPO would further de-risk |
The table illustrates why CBAM is quietly doing part of the HPO’s work for export-oriented Indian ammonia producers. Grey ammonia exported to the EU faces a CBAM levy based on embedded emissions — currently moderate under Scope 1 rules, but expanding as the EU adds indirect emissions coverage. Green ammonia escapes that levy entirely. For IFFCO, which exports ammonia to international markets, the Rs 49.75/kg green ammonia price is not just an environmental commitment — it is a hedge against a growing CBAM cost trajectory on grey ammonia exports.
The AM Green Kakinada project — private sector ahead of the mandate
The AM Green Kakinada green ammonia plant in Andhra Pradesh reached final investment decision in August 2024 and was in active construction execution as of March 2026. This project — backed by AM Green, the green hydrogen platform of Greenko — is targeting production of green ammonia for both domestic fertiliser use and export, primarily to European markets where the CBAM zero-levy on green ammonia creates a structural advantage over conventional ammonia.
AM Green’s commercial rationale does not require a statutory HPO. It is driven by the combination of India’s low-cost renewable electricity (giving green hydrogen a structural cost advantage over European or Middle Eastern production), CBAM’s pricing of grey ammonia emissions in the EU, the India-EU FTA’s double-zero tariff structure for green ammonia, and SIGHT PLI support during the early years. The Kakinada project is the clearest current evidence that the commercial case for green ammonia is building independently of the HPO — and that the HPO, when it arrives, will accelerate rather than initiate the transition.
When the HPO will be notified — a realistic assessment
The GHCI launched in April 2025 removes the definitional obstacle. The SIGHT Mode 2A auctions demonstrate that green ammonia prices have converged to within 10% of grey — eliminating the argument that the cost gap makes an HPO 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 HPO-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 with lower initial targets than the original 2021 draft — possibly starting at 0.5 to 1% rather than the original 0.15% (since the original FY 2023-24 starting point has already passed), with a clear glide path to 10% by 2030. Third, the legal notification is issued under the Energy Conservation Act’s delegated authority — the same statutory route used for the CCTS and the GHCI.
Given the GHCI notification in April 2025 and the sustained pressure from the NGHM’s domestic target gap, a reasonable expectation is that HPO notification occurs in FY 2026-27 — the next budget and policy cycle window. The SIGHT Mode 2A auctions having proved the concept at scale, the remaining policy risk is political economy rather than market readiness. If the financial architecture can be agreed within the current fiscal year, HPO notification in the FY 2026-27 budget package is achievable. If interministerial friction persists, FY 2027-28 becomes the more realistic window — but by then, much of the commercial traction would already be happening through SIGHT and CBAM pressure regardless.
What the HPO means for fertiliser producers specifically
For India’s 22 existing ammonia plants — most of which are urea producers covered under the government’s fertiliser subsidy architecture — the HPO creates both a compliance requirement and a commercial opportunity. The compliance dimension is straightforward: obligated plants will need to source a defined percentage of their hydrogen from GHCI-certified green hydrogen, with penalties for non-compliance. The commercial dimension is less obvious but equally important.
Urea produced from green hydrogen is eligible for CBAM zero-levy treatment on exports to the EU. Given the India-EU FTA concluded on 27 January 2026 — which provides zero tariff access for Indian goods but no CBAM exemption — Indian urea and ammonia exporters will face a financial incentive to use green hydrogen specifically to eliminate the CBAM cost on EU-bound exports. This creates a natural first-mover market for green ammonia among India’s export-oriented fertiliser producers, independent of any domestic HPO mandate.
IFFCO’s participation in the SECI Mode 2A auctions for its Paradeep plant — accepting supply at Rs 49.75/kg from Acme Cleantech — is the most concrete demonstration of this commercial logic. IFFCO is not waiting for an HPO. It is responding to the combination of CBAM incentives, SIGHT PLI support, and the strategic value of being early in the green ammonia supply chain at a time when European buyers are actively seeking verified low-carbon ammonia alternatives.
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. No Indian fertiliser plant is legally required to procure any minimum percentage of green hydrogen. Participation in SECI’s SIGHT Mode 2A programme is voluntary for the 13 plants covered — plants accepted supply through a competitive tender that offered PLI financial incentives, not because they were mandated to. The only existing mandatory green hydrogen obligation for any Indian producer is the GHCI certification — which is mandatory for producers who sell hydrogen domestically or use government incentives, but does not require any minimum procurement level.
What is the legal authority under which the HPO would be notified?
The most likely statutory route is the Energy Conservation (Amendment) Act 2022, which amended the Energy Conservation Act to grant the central government powers to specify a minimum share of renewable energy — including green hydrogen — in industrial energy consumption. This is the same statutory route used for the CCTS and provides delegated legislative authority for mandating minimum clean energy use in specified industrial sectors. An alternative route would be under the Electricity Act 2003, but the EC Act route is more direct for industrial mandates. The legal architecture has been in place since December 2022; the delay is political economy, not legal framework.
How does CBAM interact with the HPO for fertiliser exporters?
CBAM has been financially live from January 2026, covering urea, ammonia and nitric acid exported to the EU. Grey ammonia exports face a CBAM levy based on embedded emissions — primarily from the hydrogen production process using natural gas. Green ammonia, produced from renewable electricity, has embedded emissions well below the EU threshold and is effectively exempt from the CBAM financial burden. For Indian ammonia producers exporting to Europe, switching to green ammonia under the SIGHT or HPO framework eliminates CBAM exposure — making the green premium partially self-financing through avoided CBAM costs. See our full analysis: CBAM and Indian Fertilisers.
What is the SIGHT Mode 2A programme and how does it differ from the HPO?
SIGHT Mode 2A is a voluntary, incentive-driven demand aggregation programme under the National Green Hydrogen Mission. SECI acts as a demand aggregator — tendering for long-term green ammonia supply to specific fertiliser plants at competitive prices, with PLI subsidies (Rs 8.82/kg declining over 3 years) bridging the cost gap between green and grey. Plants participate voluntarily, attracted by the offtake guarantee and the PLI support. The HPO, by contrast, would be a statutory mandate with penalties — applying to all obligated plants regardless of whether they participate in SIGHT. The two instruments are complementary: SIGHT builds the supply chain and proves the commercial concept; the HPO creates universal coverage and removes the reliance on individual plant willingness to participate.
What is the Green Hydrogen Certification Scheme (GHCI) and why does it matter for the HPO?
The GHCI, launched in April 2025 by MNRE, is India’s formal certification framework for green hydrogen — setting a 2 kg CO₂e/kg H₂ emissions threshold, establishing a four-stage certification process, and making certification mandatory for producers selling domestically or using government incentives. It is administered by BEE with ACV agency verification aligned to ISO 19870:2023. The GHCI matters for the HPO because a statutory mandate requiring industries to procure green hydrogen can only be enforced if there is a certified, verifiable definition of what qualifies. Without GHCI, obligated plants could claim compliance with any hydrogen labelled green. The GHCI’s April 2025 launch removed this critical prerequisite blocker — making the HPO notification legally feasible in a way it was not before.