The Government of India (GoI) has embarked on an ambitious journey to establish the nation as a global hub for green hydrogen production and utilization. This vision is underpinned by a comprehensive legal and regulatory framework designed to incentivize stakeholders across the green hydrogen value chain. Central to this initiative is the National Green Hydrogen Mission (NGHM), which delineates the strategic roadmap for fostering a robust green hydrogen ecosystem in India.
Statutory and Policy Framework
The legal foundation for green hydrogen development in India is rooted in both statutory mandates and policy instruments that collectively promote sustainable energy. The following frameworks are germane to the current regime:
National Green Hydrogen Mission (2023):
Notified by the Ministry of New and Renewable Energy (MNRE) under executive powers derived from the Allocation of Business Rules, the NGHM aims to facilitate the production of 5 million metric tonnes per annum of green hydrogen by 2030. While not a statute per se, the Mission derives enforceability through administrative directions and budgetary allocations, and operates under the overarching aegis of the Energy Conservation Act, 2001.
- Energy Conservation Act, 2001 (as amended):
The amendment in 2022 introduced the concept of a carbon credit trading scheme and granted powers to the central government to specify a minimum share of renewable energy in energy consumption, which lays a statutory basis for mandating green hydrogen usage in certain industrial processes.
Electricity Act, 2003:
Under this Act, the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) are empowered to frame regulations promoting renewable energy, including concessional wheeling charges, banking facilities, and open access for renewable power used in green hydrogen production.
Environmental Protection Act, 1986:
While indirectly applicable, this Act authorizes the Central Government to lay down standards for emissions, effluents, and handling of hazardous substances, thereby potentially regulating the certification of hydrogen as ‘green’ based on electrolysis from renewable energy sources.
Foreign Direct Investment (FDI) Policy & Industrial Policies:
Green hydrogen is classified under the renewable energy sector, allowing 100% FDI under the automatic route. This is legally governed through Press Notes issued under the Consolidated FDI Policy by the Department for Promotion of Industry and Internal Trade (DPIIT), giving legal permissibility to international capital inflows in the sector.
Financial and Fiscal Incentives
The Government of India, through a combination of budgetary provisions and administrative measures, has operationalized a range of financial and fiscal incentives aimed at catalyzing green hydrogen adoption. The following constitute the key legal instruments of such incentivization:
Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme:
This is the central component under the NGHM and is subdivided into two schemes:
- Component I: Production-linked incentives (PLI) for green hydrogen producers based on the least average incentive sought (reverse bidding mechanism). Legal enforceability arises from tender documents issued under the General Financial Rules, 2017, and the mandate of MNRE.
- Component II: Incentives for electrolyser manufacturing based on manufacturing capacity and localization. These incentives are notified through official Gazette circulars and operate under delegated legislative authority from the executive.2. Customs and Tax Exemptions:
The Central Board of Indirect Taxes and Customs (CBIC), through notifications under the Customs Act, 1962 and GST Act, 2017, grants:
- Reduction or waiver of Basic Customs Duty (BCD) on electrolyser imports.
- GST concessions on renewable energy components used in hydrogen generation.
These exemptions are legally binding by virtue of statutory notifications issued under Section 25 of the Customs Act and corresponding provisions of the GST Act.
3.Viability Gap Funding (VGF):
Under the Green Hydrogen Mission, the Government proposes to offer VGF for pilot projects in sectors like steel, shipping, and long-haul transport. This funding is provided under the scheme-based budgetary allocations ratified through Parliament under the Union Budget, thereby enjoying statutory sanction.
4.Carbon Credits and Renewable Energy Certificates (RECs):
Entities producing green hydrogen from renewable sources are eligible to generate RECs under the REC Mechanism notified under Section 66 of the Electricity Act, 2003, and regulated by the CERC. These RECs are tradable instruments enforceable under statutory regulations.
Regulatory and Compliance Mechanisms
The regulatory regime governing green hydrogen in India is administered through a mosaic of central regulatory authorities, each with specific legal mandates derived from sectoral statutes. Key regulators and their powers include:
Ministry of New and Renewable Energy (MNRE):
The nodal ministry for policy formulation and implementation of the NGHM. It derives executive powers from the Government of India (Allocation of Business) Rules, 1961. MNRE issues binding guidelines and implementation frameworks through gazette notifications and administrative orders that have the force of delegated legislation.
2. Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs):
Under the Electricity Act, 2003, these bodies are empowered to:
- Approve power purchase agreements (PPAs) for green power used in hydrogen production.
- Determine transmission tariffs and banking policies.
- Issue regulations for Renewable Purchase Obligations (RPOs) and RECs.
Legal enforceability is conferred through Section 178 (central) and Section 181 (state) of the Electricity Act, and non-compliance may attract penalties under Section 142.
3.Bureau of Energy Efficiency (BEE):
BEE functions under the Energy Conservation Act, 2001 and plays a pivotal role in defining energy efficiency norms. It is authorized to:
- Develop performance benchmarks for green hydrogen usage.
- Recommend Minimum Energy Performance Standards (MEPS) for sectors utilizing hydrogen.
BEE’s notifications, once published in the official gazette, have statutory force.
4.Central Pollution Control Board (CPCB):
Under the Environment (Protection) Act, 1986, CPCB has the authority to regulate the environmental impacts of hydrogen storage and transport, and may set emission and effluent standards for allied industrial processes.
5.Hydrogen Purchase Obligation (HPO):
While not yet notified under a statutory mandate, the draft framework for HPO proposes to obligate certain industries (e.g., fertilizers, refining) to procure a defined percentage of their hydrogen requirement from green sources. Once notified, it is likely to be enforced under delegated authority from the Energy Conservation Act or Electricity Act.
Legal Challenges and Risk Considerations
Despite the robust policy backing and statutory evolution of the green hydrogen sector, several legal and regulatory challenges persist that may impede large-scale deployment and investment. The most salient issues are delineated below:
- Absence of a Unified Green Hydrogen Law:
There is currently no stand-alone legislation dedicated exclusively to green hydrogen. The regulatory architecture is fragmented across multiple laws, such as the Electricity Act, Energy Conservation Act, and Environmental Protection Act. This multiplicity leads to jurisdictional overlaps and regulatory ambiguities, raising concerns of legal certainty and predictability. - Undefined Standards and Certification Mechanisms:
At present, India lacks a codified legal definition and certification protocol for ‘green’ hydrogen. The absence of statutory norms for emissions thresholds, source-based classification (electrolysis vs. biomass), and Life Cycle Assessment (LCA) standards leads to compliance uncertainty. The Bureau of Indian Standards (BIS) and MNRE are in the process of developing national standards, but these are yet to attain legal enforceability. - Challenges in Power Procurement and Wheeling:
Legal complexities arise in obtaining open access approvals and concessional transmission tariffs for renewable energy used in hydrogen production. State-level variations in SERC regulations and frequent retrospective changes in policy undermine the stability of long-term hydrogen projects. - Land Use and Environmental Clearances:
Electrolyser installations, renewable power infrastructure, and hydrogen storage units often face delays due to cumbersome land acquisition laws and environmental clearance processes under the Environment Impact Assessment (EIA) Notification, 2006. The absence of green channel approvals for hydrogen infrastructure further exacerbates project risks. - Regulatory Uncertainty for Storage and Transport:
Hydrogen’s classification under hazardous substances requires compliance under the Static and Mobile Pressure Vessels (Unfired) Rules, 2016, and the Petroleum and Explosives Safety Organization (PESO) guidelines. However, these legal instruments are not yet tailored for hydrogen-specific infrastructure, creating procedural bottlenecks in licensing and safety compliance. - International Trade and Carbon Border Adjustment Mechanisms (CBAM):
As India aims to export green hydrogen and its derivatives, legal preparedness is needed to comply with evolving international trade standards and CBAM regulations, particularly from the European Union. Absence of domestic legislation harmonized with international carbon accounting norms may result in trade barriers and legal disputes under WTO frameworks.
Conclusion
India stands at a critical juncture where it must harmonize its legal architecture with its decarbonization ambitions through green hydrogen. While the government has taken significant steps through executive action and delegated legislation, further legal consolidation is necessary to ensure regulatory certainty, investor confidence, and compliance with global standards.
In summation, while India’s green hydrogen roadmap is progressing through strong policy impetus, the creation of a cohesive, codified, and forward-looking legal regime is indispensable to realize the full potential of this transformative sector.
