Assocham seeks incentives for hydrogen-based steelmaking, green finance in FY27 Budget

New Delhi: Ahead of the Budget, Industry body Assocham has urged the government to provide incentives for hydrogen-based direct reduced iron (DRI) and concessional green finance to help the steel sector transition to low-carbon production.

Finance Minister Nirmala Sitharaman is expected to table the Union Budget for the Financial Year 2026-27 in Parliament on February 1, 2025.

In its pre-Budget recommendations for the domestic steel sector, the chamber also suggested incentives for waste-heat recovery systems and the establishment of renewable captive power plants to curb emissions.

The industry body noted that decarbonisation presents both a challenge and a competitive opportunity, asserting that these measures can accelerate sustainable production.

Assocham further pitched for incentivising scrap collection and recycling, noting that strengthening domestic recycling infrastructure through skilling is essential to reduce the country's dependence on imports.

Highlighting the challenges, Assocham pointed out that despite being the world's second-largest steel producer after China and maintaining a healthy growth rate of 8-9 per cent, the sector is facing significant headwinds.

Elevated input costs of key raw materials, a depreciating rupee, and heavy reliance on imported coking coal — due to negligible domestic mineable reserves — remain major pain points.

Furthermore, the chamber stated that iron ore production has been stagnant, and many of the auctioned mines are yet to start production. The growing steel demand and continued export of iron ore is creating pressure on supply, resulting in high costs for domestic mills.

Assocham believes the upcoming Union Budget offers a vital opportunity to position India as a global manufacturing hub for steel and value-added products under the 'Make in India' initiative.

To achieve this, the body has called for promoting iron ore beneficiation, removing import duty on critical raw materials, and rationalising royalty calculations to eliminate double taxation.

It also emphasised that incentivising R&D in steel recycling, alloy innovation, and process digitisation will enhance productivity and reduce dependence on specialty steel imports.