Every green hydrogen project in India includes budgets for land, renewable power and electrolyser. Yet very few account for cost of water. Water is the one of the critical inputs that is not owned by the developer. Its access depends upon permission from a State government, amid competing claims from farmers and cities. This article explores the regulatory framework that governs water approvals, and its growing importance among lenders and European offtakers, and how the resulting risks can be managed contractually.
1. Why Water has Become a Legal Question
Chemically, approximately nine litres of pure water are required to produce one kilogram of hydrogen via electrolysis[1]. But this is an ideal number since the theoretical requirement does not reflect the real demand of an operating plant. A plant may need additional water for treatment, cooling, electrolyser operation, purification losses, which can increase actual water requirements can on a substantial level. Recent studies suggest that commercial electrolysis requires around roughly 10-22 litres per kilogram of hydrogen, while total water demand including cooling can be significantly higher, considering electrolyser technology, cooling system and climatic conditions[2].
Applying the above math to the National Green Hydrogen Mission’s (NGHM) target of 5 million tonnes of green hydrogen per year by 2030, water requirement of 20 litres per kilogram would translate into roughly 100 million cubic metres of water each year. At a national level, the requirement seems relatively small when compared against India’s total water usage. But locally, the impact can be enormous. The Mission’s designated hubs and the largest awarded projects are concentrated in Kutch, Kandla and Dahej in Gujarat, Paradip, Gopalpur and Jagatsinghpur in Odisha, Kakinada in Andhra Pradesh, Thoothukudi in Tamil Nadu, and the solar belts of western Rajasthan. Several of these locations are officially classified as water-stressed which creates a potential conflict.
So, yes green hydrogen is “low carbon”, but that doesn’t automatically mean that is resource neutral. Sustainability parameters of any technology need to be assessed across multiple factors. The key policy question then becomes, ‘Should green-hydrogen projects be situated in water-scarce regions simply because those regions have excellent renewable energy resources or port infrastructure?
As per a study conducted by WRI India in September 2026, water is a major determinant for selecting a green hydrogen hub. By using a two-stage GIS-based methodology, the study found that proximity to renewable energy and to hydrogen consumers were two strong factors nationally. Water availability was ranked as the third, ahead of power-transmission and transport infrastructure. Gujarat, leads the list as India’s most resource-ready State, reflecting its combination of renewable capacity and water access. While Rajasthan ranked lower on account of limited water availability despite its strong renewable resources. The study flagged several other renewable-rich clusters, including parts of western Rajasthan, Andhra Pradesh and Madhya Pradesh, as unlikely hub sites for the same reason[3]. This means that a developer or lender would need to assess renewable energy availability and water availability separately, with water diligence being undertaken in water-stressed geographies, first.
The developments discussed below have moved water from a technical input to a legal and regulatory issue due to the following factors:
Certification now factors water: On 18 June 2026, the Ministry of New and Renewable Energy laid out final guidelines under the Green Hydrogen Certification Scheme of India for quantifying greenhouse gas emissions associated with offsite water withdrawal and treatment[4]. A producer’s water source and treatment pathway now directly affects whether its hydrogen remains under the 2 kilograms of carbon dioxide equivalent per kilogram threshold.
Lenders scrutinise water: Lenders require developers to secure a guaranteed supply of enough water matching the loan tenor. Without this, the project financing may not proceed. This means that if the loan is for x years, the lender would want confidence that the project will have sufficient water for the relevant period and not merely a temporary supply arrangement.
Off takers due diligence: Off taker is a customer who agrees to buy hydrogen. For example, European buyers reporting under the ESRS E3 water standard may ask their suppliers about the source of water. This is particularly relevant where the buyer must adhere to the EU’s sustainability reporting rules[5].
2. Who Owns the Water: the Constitutional and Doctrinal Position
Water is a subject, falling in the state list. Entry 17 of the State List in the Seventh Schedule to the Constitution provides the State legislatures power over water supplies, irrigation, canals, drainage, embankments, water storage and water power, subject to Parliament’s authority over inter-State rivers under Entry 56 of the Union List. In practical terms, green hydrogen developers must secure their water supply in accordance with the applicable State regulatory framework and from the relevant State or local authorities.
It has also been clarified by the Union Government that since water is a State subject, green hydrogen developers need to comply with State regulations to secure water supply. In this regard, two legal principles become relevant in case water allocation gets contested, restricted or withdrawn:
In M.C. Mehta v. Kamal Nath (1997) 1 SCC 388[6], the Supreme Court clarified that natural resources are held by the State in trust for public benefit. Hence, water allocation to an industry does not confer ownership over the underlying resource and remains subject to applicable law and public-trust obligations.
It must also be understood that land ownership does not mean that the owner would get unrestricted right to extract groundwater. Groundwater extraction would be subject to statutory and regulatory controls, including those administered by the Central Ground Water Authority (CGWA) under the Environment (Protection) Act, 1986, alongside State-level regulations. The Plachimada litigation illustrates the potential conflict between industrial groundwater use and competing public water needs[7].
For developers, this means they ought to secure both a reliable water supply arrangement as well as the necessary permissions to draw, treat and discharge water. These may involve different authorities and timelines.
3. Desalination is not a Regulatory Shortcut
For green hydrogen plants in the coastal areas, desalination can prove to be an effective alternative to freshwater sources. However, this does not mean that the project is free from environmental approvals. Regulators may still require Coastal Regulation Zone (CRZ) clearance, environmental approvals as well as compliances regarding brine disposal.
Water infrastructure can also create social risks. There can be a possibility of objections from fishing and coastal communities regarding marine water intake or brine disposal, thereby affecting environmental approvals and project timelines. Therefore, these risks must be assessed at the planning stage itself.
4. Water now Affects Certification and Marketability
Water is not just an operational input into green hydrogen production. It also affects the product’s certified carbon intensity. As per the guidelines issued by MNRE in June 2026, emissions associated with the treatment and transport of offsite water can be included within the well-to-gate emissions boundary for certification. This means that the way a producer obtains and treats the water can also contribute to the project’s emissions calculation.
The source of water and its treatment methodology can therefore affect whether the hydrogen remains within the applicable 2 kg CO₂e per kg of hydrogen threshold.
This also creates implications for marketability as in case of exports, off takers might want to seek information on the project’s water source, permits, abstraction volumes and water-related risks as part of their sustainability and supply-chain due diligence.
Accordingly, the water source should not be treated as an incidental operational detail. A change in the source or treatment pathway may affect the project’s certified emissions profile and, thereby, its contractual and commercial position with an off taker.
5. What Developers and Lenders Should Diligence
Developers and financers treat water as a core project-risk item, along with renewable energy land, and buyer commitments.
The due diligence should establish:
- Water allocation: quantity, source, duration, tariff and legal basis of the supply.
- Permits: groundwater NOCs, CRZ and environmental clearances, and pollution-control approvals.
- Curtailment risk: the circumstances in which supply may be reduced or suspended and the resulting contractual and financial consequences.
- Offtake implications: whether a change in water source or treatment could affect the project’s certification or carbon-intensity commitments.
- Financing: whether the water supply agreement and material water-related permits should be conditions precedent to financial close, and whether their loss should constitute a default or trigger a defined cure period.
Thus, it is important to keep in mind that a green hydrogen project is not water-secure only because it has access to renewable energy. Water rights, permits and supply risks need to be independently established and contractually protected before the project reaches financial close.
6. Conclusion
India’s 5 million tonnes per year green hydrogen target by 2030 could require approximately 100 million cubic metres of water annually at a consumption rate of 20 litres per kilogram. While this is modest at the national level, its concentration in water-stressed regions makes water a material legal, regulatory and financing risk. As water increasingly affects project approvals, certification and offtake, securing a reliable and legally defensible water supply should be treated as a condition of project bankability, not an operational requirement.
For green hydrogen, water security is becoming as important to bankability as renewable power.
Author: Jyotsna Chaturvedi, Head – corporate Practice
Co- Author: Aishwarya Jha, Advocate
- Hydrogen Reality Check: Distilling Green Hydrogen’s Water Consumption – RMI (https://rmi.org/resources/hydrogen-reality-check-distilling-green-hydrogens-water-consumption/)
- A Critical Review of Green Hydrogen Production by Electrolysis: From Technology and Modeling to Performance and Cost (https://www.mdpi.com/1996-1073/19/1/59)
- Green hydrogen hubs: Gujarat leads, while water and demand shape site choices, finds study – Down To Earth (https://www.downtoearth.org.in/energy/green-hydrogen-hubs-gujarat-leads-while-water-and-demand-shape-site-choices-finds-study)
- Guidelines for Quantifying Greenhouse Gas (GHG) Emissions from Offsite Water Drawl and Treatment, Ensuring Compliance with the Green Hydrogen Certification Scheme of India. | MINISTRY OF NEW AND RENEWABLE ENERGY | India (https://mnre.gov.in/en/notice/guidelines-for-quantifying-greenhouse-gas-ghg-emissions-from-offsite-water-drawl-and-treatment-ensuring-compliance-with-the-green-hydrogen-certification-scheme-of-india/)
- European Sustainability Reporting Standards (ESRS) Guide | UK SRS (https://sustainabilityreportingstandards.co.uk/european-sustainability-reporting-standards)
- M.C. Mehta vs Kamal Nath & Ors on 13 December, 1996 (https://indiankanoon.org/doc/1514672/)
- Hindustan Coca-Cola Beverages (P) Ltd. vs Perumatty Grama Panchayat on 7 April, 2005 (https://indiankanoon.org/doc/580673/)
