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Fertilisers · Green Hydrogen · CCTS & CBAMIndia's Hydrogen Purchase Obligation Is Still Pending, but SECI's Green Ammonia Auctions Have Already Changed the Economics
Although India's proposed Hydrogen Purchase Obligation for the fertiliser sector remains officially unnotified as of April 2026, the market is moving forward regardless. The Solar Energy Corporation of India (SECI) recently completed reverse auctions under the SIGHT programme, discovering green ammonia prices that approach parity with mid-cycle imported grey ammonia. While this parity isn't universal across all gas price environments, it significantly reduces transition risks for well-positioned off-takers, particularly those tapping into SECI-linked supply corridors. At current auction prices, SIGHT incentives and potential carbon credit values offset the bulk of the dreaded green premium. As a result, the mandate appears far less destructive to profit margins than earlier models suggested. This breakdown maps the draft trajectory, quantifies the emissions offset impact, and unpacks why the domestic fertiliser subsidy framework remains the final structural hurdle.
Key Takeaways
India's proposed Hydrogen Purchase Obligation (officially called the GHCO in policy documents) has not yet been formally issued under a statutory mandate as of April 2026. However, the statutory authority is already in place through the amended Energy Conservation Act 2001 and the National Green Hydrogen Mission. While formal notification is highly anticipated, the government hasn't publicly committed to an implementation date. Regardless, planning for this shift now is the correct posture for any urea or ammonia plant executive with a three to seven-year operational horizon.
The SECI SIGHT programme has effectively created a demand signal without waiting for the formal mandate to drop. In late 2025, SECI ran reverse auctions for 724,000 tonnes per annum (TPA) of green ammonia intended for 13 fertiliser units across the country. Assuming a moderate grey ammonia baseline of around Rs 45 per kilogram, the lowest discovered green price implies a premium of just 10%. While these prices reflect heavily incentivized auction outcomes and shouldn't be confused with unsubsidized market prices, they completely restructure the economics of the transition.
The interaction between the Carbon Credit Trading Scheme (CCTS) and green hydrogen blending provides crucial, albeit modest, regulatory value. In a scenario where a plant earns tradable surplus certificates that clear at roughly Rs 800 per tonne of CO₂e, a 10% green blend could generate around Rs 6.0 crore a year in regulatory value for a 1 million tonne urea plant. Stacked against a total green premium cost of Rs 26.9 crore per year, the net residual cost narrows to roughly Rs 20.9 crore, or just Rs 209 per tonne of urea.
The fertiliser subsidy paradox serves as the final structural barrier. India's retail urea price is strictly fixed at Rs 242 per 45-kg bag. When a urea plant incurs that residual Rs 20.9 crore compliance cost for a 10% blend, it absolutely cannot pass the cost along to farmers. It must either flow into the government's subsidy budget or compress plant margins. SIGHT incentives largely solve this issue by absorbing the bulk of the green premium upstream, meaning the government's incremental cost to absorb this across the entire sector is remarkably minimal compared to the massive annual urea subsidy budget.
The European Carbon Border Adjustment Mechanism (CBAM) connection for fertilisers is present but remains a secondary concern. While CBAM certificate surrenders begin in 2026, India exports very limited subsidized urea to the EU. For non-urea fertilisers, substituting green ammonia does reduce CBAM-relevant embedded emissions. Ultimately, domestic subsidy mechanics and local CCTS obligations are driving India's green ammonia transition much harder than European border taxes.
The Draft Trajectory: What the 2021 Cabinet Note Proposed
The Hydrogen Purchase Obligation, as originally envisioned in the 2021 draft cabinet note, proposed a graduated trajectory for fertiliser producers and petroleum refiners that closely mirrors the existing Renewable Purchase Obligation framework. The logic is simple: mandate a small initial percentage that grows progressively, creating the regulatory certainty needed to make green hydrogen production investments bankable. While never formally notified as a statutory mandate, this trajectory has guided industry planning for years. In May 2025, the India Hydrogen Alliance (IH2A) submitted a formal proposal that aligned with a 10% target for existing plants by 2030, and aggressively proposed a 100% green hydrogen mandate for all new builds and expansions from 2030 onwards.
Across the refineries and ammonia plants mapped in industry proposals, a 10% obligation aggregates to massive demand, meeting a significant portion of the National Green Hydrogen Mission's target of 1.5 million metric tonnes by 2030. The glaring gap between stated national ambition and current installed capacity is exactly the problem a mandatory obligation is designed to solve.
The SECI SIGHT Auctions: Mitigating Transition Risk
In August and September of 2025, SECI ran reverse auctions for 724,000 TPA of green ammonia aimed at 13 fertiliser units across India under the SIGHT programme. This represented the first major commercial contracting of green ammonia for domestic fertiliser production, aggressively backed by government incentives.
| Off-taker | Plant Location | Volume (TPA) | Developer | Price (Rs/kg) | Variance vs Grey (Assumed Rs 45/kg) |
|---|---|---|---|---|---|
| IFFCO | Paradeep, Odisha | 100,000 | ACME Cleantech | Rs 49.75 | +10.6% (Lowest Bid) |
| IFFCO | Kandla, Gujarat | 100,000 | ACME Cleantech | Rs 54.73 | +21.6% |
| Coromandel Int. | Kakinada, AP | 85,000 | Jakson Green / OCIOR | Rs 50.75 | +12.8% |
| 10 other units | Various locations | Remaining TPA | Various Developers | Rs 49.75 to 64.74 | 10% to 44% Premium |
Assuming a moderate grey ammonia baseline of Rs 45 per kg, the critical number here is Rs 49.75 per kg, implying a premium of roughly 10%. It is important to note that grey ammonia costs are highly variable based on international LNG pricing. During gas price shocks, green ammonia can actually achieve absolute cost parity. This milestone achievement was driven by a competitive auction structure, robust SIGHT incentives, India's cheap renewable energy resources, and falling electrolyser costs. For off-takers participating in these supply corridors, the mandate appears far less terrifying than earlier operational models suggested.
For a non-urea fertiliser producer swapping green ammonia for imported grey ammonia, a 10% green blend at the lowest SECI price adds a Rs 4.75 per kg premium on just 10% of their total consumption. For a complex fertiliser plant consuming 300,000 tonnes of ammonia annually, taking 30,000 tonnes of green ammonia at this premium adds an incremental cost of approximately Rs 14.25 crore. Set against a typical integrated plant's annual operating revenue, this figure is financially manageable. It proves that the SIGHT program has successfully bridged the gap, shifting green hydrogen from a margin-destroying threat to a manageable procurement exercise.
What the Mandate Means for CCTS Intensity: The Quantified Model
The Rs 20.9 crore net residual cost perfectly illustrates how the policy mechanism functions in practice. While green hydrogen is not yet a standalone profit center at a Rs 800 carbon certificate price, the SIGHT incentives and CCTS offsets combine to aggressively reduce the green premium down to just Rs 209 per tonne of urea produced. Any financial executive treating the mandate as a multi-hundred-crore disaster is relying on outdated models. The real-world transition risk has been substantially mitigated.
The Fertiliser Subsidy Paradox: Why Intervening Upstream Matters
India sells urea at a strictly fixed retail price of Rs 242 per 45-kg bag, a price that has remained largely unchanged in real terms for decades. The government covers the difference between the actual cost of production and this retail price. For the upcoming fiscal year, the overall fertiliser subsidy budget remains astronomically high. When a urea plant blends green hydrogen and incurs a residual Rs 20.9 crore compliance cost, the selling price remains locked. The plant cannot pass that cost down to the farmer. The residual cost must either hit the government subsidy ledger or severely compress plant operating margins.
Economically, the government faces two choices: increase the fertilizer subsidy directly downstream to cover elevated production costs, or subsidize green hydrogen production upstream via SECI's SIGHT framework. The latter is overwhelmingly more efficient. It creates reliable supply, scales up electrolyser manufacturing, and structurally lowers the future cost curve for green fuels. By absorbing the bulk of the green-grey price gap through production incentives, only a marginal premium hits the fertiliser value chain. As a result, the government's incremental cost to absorb a 10% mandate across the entire sector is remarkably small compared to the massive annual urea subsidy budget. The recent SECI auctions definitively prove this calibration is commercially achievable.
Frequently Asked Questions
Has India's Hydrogen Purchase Obligation been formally notified for the fertiliser sector?
No. As of April 2026, the proposed obligation has not been formally issued under a statutory mandate. The original 2021 draft proposed a trajectory rising to 10% by 2030. In 2025, industry bodies formally proposed a 10% mandate for existing plants and 100% for new builds. SECI has partially operationalised demand through reverse auctions, but participation currently remains voluntary. Formal notification is widely anticipated by industry participants, but no official implementation date has been confirmed.
What did the recent SECI green ammonia auctions achieve?
SECI awarded 724,000 tonnes of green ammonia per year to 13 fertiliser plants at prices ranging from Rs 49.75 to Rs 64.74 per kilogram. Against a moderate grey baseline of Rs 45 per kg, the lowest bid represents a premium of just 10%. While these prices reflect heavy incentives and are not unsubsidized market rates, they demonstrate that near-parity is achievable in select supply corridors.
How does a 10% green blend affect a urea plant's carbon intensity under CCTS?
A standard urea plant consumes about 100 kilograms of hydrogen per tonne of urea. Grey hydrogen emits roughly 9.5 kg of CO₂ per kg, while green hydrogen is capped at 2.0 kg. Implementing a 10% blend reduces total emissions by roughly 75 kg of CO₂ per tonne of urea, resulting in a 3% overall intensity reduction. At a carbon certificate price of Rs 800, this creates around Rs 6.0 crore a year in regulatory value for a 1 million tonne plant, offsetting a significant portion of the initial green premium.
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