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India must deploy public capital more strategically to bridge the financing gap for green steel projects and avoid locking in high-carbon steelmaking for decades, according to a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).
The briefing notes that 92% of India’s planned steel capacity expansion from 180 million tonnes to 300 million tonnes is yet to be built, meaning technology choices taken now will shape emissions for the next 30–40 years. Once conventional blast furnace–basic oxygen furnace (BF–BOF) plants are commissioned, their long lifespans can “lock in” carbon-intensive production until 2060–70, undermining India’s net-zero ambitions.
IEEFA argues that green steel projects, though technically proven, remain risky and capital-intensive for private investors, requiring targeted public finance tools. International experience shows public support costs ranging from US$110 to US$1,168 per tonne of CO₂ abated, with instruments such as credit guarantees mobilising more private capital than direct grants.
The analysis highlights that continued reliance on BF–BOF would also deepen India’s dependence on imported metallurgical coal, with imports projected to nearly double by 2035. Well-designed public finance mechanisms, combined with measures like green public procurement and a robust carbon market, are seen as crucial to scaling low-carbon technologies such as Electric Arc Furnaces with scrap and Direct Reduced Iron–EAF routes, and positioning India as a leader in green steel among developing economies.
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