India’s hydrogen and biofuels sectors are rapidly emerging as critical components of the country's clean energy transition, driven by climate commitments, energy security concerns, and global de-carbonization trends. However, the journey ahead is complex, shaped by policy push, technological readiness, and the ability to scale sustainably.

In the hydrogen space, the Indian government’s launch of the National Green Hydrogen Mission marks a decisive pivot towards positioning the country as a global hub for green hydrogen production and exports. With an outlay of  Rs. 19,744 crore, the mission targets 5 MMT of annual green hydrogen production capacity by 2030, supported by an ecosystem of electrolyzer manufacturing, renewable energy integration, and demand creation across sectors like refining, fertilisers, steel, and mobility. This aggressive ambition is underpinned by India’s advantage of low-cost renewable power, but scaling green hydrogen remains capital-intensive and infrastructure-deficient. Electrolyzer technology is still largely imported, and the sector lacks robust off-take agreements or guaranteed demand to de-risk early investments. Furthermore, the absence of a clear certification system for green hydrogen creates uncertainty for international trade and emissions accounting.

As of March 2025, over 200 MW of green hydrogen production capacity is under development, and domestic electrolyzer manufacturing has picked up momentum with over 8 GW of annual capacity announced by major players such as Reliance Industries, Adani New Industries, and L&T. These developments come alongside international tie-ups, including hydrogen corridor collaborations with the European Union and Japan, as India positions itself as a future exporter of green hydrogen and ammonia.

Simultaneously, biofuels—especially ethanol and compressed biogas (CBG)—have gained momentum as near-term solutions to decarbonize transport and agriculture-linked emissions. The Ethanol Blending Programme has achieved a major milestone with a 12 per cent blending rate in petrol by 2024, moving toward the 20 per cent target by 2025. This expansion has catalyzed investment in second-generation ethanol plants, using agri-residues and municipal waste to reduce reliance on food crops. However, feedstock volatility, pricing challenges, and infrastructure gaps in distribution continue to hinder the sector’s scalability.

Despite these hurdles, the broader clean fuels ecosystem in India is beginning to attract global strategic interest and private capital. Several Indian conglomerates are announcing giga-scale hydrogen and bioenergy projects, often tied to export aspirations. Yet, unless complemented by aggressive domestic demand creation, supportive market mechanisms, and a transparent carbon pricing system, these sectors risk becoming technology showcases rather than transformative industries.

Strategic initiatives gaining momentum

As of early 2025, India’s hydrogen and biofuels sectors are witnessing accelerated activity driven by policy momentum, international collaboration, and private sector investment. One of the most significant developments is the implementation phase of the National Green Hydrogen Mission. The government has initiated pilot projects and disbursed incentives under the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme to support domestic manufacturing of electrolyzers and green hydrogen production. Leading Indian energy companies such as Reliance Industries, Adani New Industries, and Indian Oil Corporation have announced gigawatt-scale green hydrogen plants in Gujarat and Rajasthan, with timelines aligned to begin phased operations by 2026.

India’s renewable energy advantage continues to be a fundamental enabler. Solar tariffs averaging Rs. 2.4/kWh and favorable land policies in states like Gujarat and Rajasthan have made co-located renewable-hydrogen facilities increasingly viable. Pilot hydrogen projects in refining and fertilizers are underway, with Indian Oil Corporation launching a 10 TPD green hydrogen facility at its Panipat refinery and NTPC exploring hydrogen blending in gas pipelines. The government is expected to roll out green hydrogen consumption mandates in fertilizers and refining by the end of 2025, a key step in securing demand certainty for producers.

In parallel, India signed strategic hydrogen cooperation agreements with countries such as Germany, Japan, and the UAE, laying the foundation for green hydrogen and ammonia exports. These agreements include provisions for co-development of hydrogen corridors, technology transfer, and carbon certification standards. Notably, a new policy on green hydrogen bunkering and port infrastructure was introduced to facilitate maritime transport of hydrogen derivatives, targeting early movers in green shipping and fertilizers.

Simultaneously, the biofuels segment has sustained its upward trajectory. India achieved a 12.5 per cent ethanol blending rate by early 2025 and remains on track to meet its E20 target by mid-year. Ethanol production crossed 5.8 billion liters in FY24–25, up from 4.7 billion liters the previous year. Second-generation ethanol plants have begun operations in Panipat, Bargarh, and Bathinda, using agricultural residue as feedstock and significantly reducing lifecycle emissions. Meanwhile, compressed biogas (CBG) has received a fresh boost under the SATAT scheme, with 370 CBG plants commissioned and an additional 500 in the pipeline. India now produces nearly 1,000 tonnes of CBG per day, although logistical and pricing challenges persist.

Strong policy push

On the policy front, the 2025 Union Budget allocated Rs. 3,000 crore for green fuel infrastructure, including hydrogen storage, pipeline feasibility studies, and biomass aggregation hubs. The government also launched the Bioenergy Alliance of India, aimed at improving coordination between agriculture, energy, and environment ministries to streamline biofuel project implementation. Private capital is increasingly flowing into the space, with bio-CNG startups and hydrogen tech companies attracting over $600 million in venture and strategic funding in the past year.

India achieved a 12 per cent ethanol blending rate in petrol and is on track to meet its E20 target by 2025. This has spurred investment in second-generation ethanol plants using agricultural residue, with facilities by HPCL and IOCL going live in Haryana and Bargarh, Odisha. Additionally, the government launched a National Biomass Supply Chain Alliance to improve logistics and aggregation of feedstock for bioethanol and compressed biogas production. Furthermore, India introduced a Bioenergy Policy Framework to streamline coordination between ministries and provide a long-term roadmap until 2040, addressing regulatory overlaps and investor concerns. The policy prioritizes scaling CBG, biodiesel, and sustainable aviation fuel (SAF), with incentives for advanced biofuel technologies. International companies and domestic startups alike are entering into joint ventures and licensing deals to localize production of sustainable fuels.

Despite these gains, the sector continues to face challenges such as cost parity with fossil fuels, inadequate infrastructure, and the need for clearer certification and carbon accounting frameworks. However, with green hydrogen production costs falling toward the $2/kg mark and growing international demand for sustainable fuels, India is now firmly positioned to lead in the global clean energy transition. If the current trajectory continues, the hydrogen and biofuels sectors could contribute over 10 per cent to India’s energy mix by 2030, transforming the country’s energy security and emissions landscape.

Challenges galore

The Indian hydrogen and biofuels sectors, despite their growing strategic importance and policy backing, face several systemic and operational challenges that could impede their scale-up and long-term viability. In the hydrogen space, the biggest hurdle lies in the high cost of green hydrogen production, primarily driven by the capital-intensive nature of electrolyzers and the intermittency of renewable energy sources. Although India has access to low-cost solar and wind power, integrating these with electrolyzer systems at industrial scale requires significant grid upgrades and storage infrastructure, which are currently underdeveloped. Furthermore, the absence of a domestic electrolyzer manufacturing base makes the sector heavily reliant on imports, exposing it to global price and supply risks.

Another major challenge is the lack of a robust demand-side framework. While supply incentives have been announced under the SIGHT program, there is limited clarity on long-term offtake agreements, carbon pricing mechanisms, or green hydrogen mandates across key consuming sectors such as steel, cement, and fertilizers. Without clear end-use obligations or incentives for industries to transition from grey to green hydrogen, market creation remains weak. Additionally, India lacks a formal certification system for green hydrogen, which is crucial for ensuring product traceability and enabling international trade, especially with regions like the EU that have strict carbon footprint standards.

In the biofuels sector, feedstock availability and supply chain fragmentation pose ongoing difficulties. The production of ethanol, especially second-generation ethanol from agri-residues, depends heavily on consistent and scalable biomass availability. However, logistics for collection, transportation, and storage of feedstock remain inefficient, particularly in rural areas. The pricing structure of feedstock is often volatile and lacks transparency, affecting the financial viability of projects. For compressed biogas, slow offtake by oil marketing companies, delayed payments, and unviable procurement prices continue to deter large-scale private participation.

The policy and regulatory ecosystem, while ambitious, also suffers from gaps. There is limited coordination between central and state agencies, and biofuels in particular are subject to a fragmented policy landscape with multiple authorities overseeing agriculture, environment, and energy. This often results in delays in approvals and regulatory uncertainty for investors. Moreover, both sectors face skill shortages in advanced technologies, engineering, and project management, further slowing down deployment.

While India has set bold targets for green hydrogen and biofuels, access to affordable finance remains a cross-cutting concern. Long gestation periods and high upfront costs deter commercial banks, and while international green finance is becoming more accessible, the absence of standard project risk assessment frameworks continues to limit large-scale capital inflows.

Way forward

The outlook for India’s hydrogen and biofuels sector in 2025 and beyond is cautiously optimistic, shaped by strong policy intent, global decarbonization momentum, and the urgent need for energy security and import substitution. Both sectors are expected to play a pivotal role in India's journey toward achieving its net-zero emissions target by 2070, and in diversifying the country's energy mix with cleaner, domestically produced alternatives.

Green hydrogen is positioned as a game-changer for hard-to-abate sectors such as refining, steel, heavy transport, and fertilizers. With the National Green Hydrogen Mission entering its implementation phase, the next few years will be crucial for moving from pilot projects to commercial-scale production. India’s access to low-cost renewable power gives it a strategic edge, and the emergence of domestic electrolyzer manufacturing is expected to reduce dependence on imports and bring down costs over time. However, for the hydrogen economy to take off, demand-side incentives and clear end-use mandates will be essential. The government's plan to launch hydrogen hubs and industrial corridors integrated with ports could accelerate infrastructure build-out and global export readiness. If supported by carbon pricing mechanisms and international certification standards, India could become a key global exporter of green hydrogen and its derivatives like green ammonia.

In the biofuels segment, the momentum is likely to remain strong, especially with India approaching its E20 ethanol blending target. The sector is set to benefit from increased investments in second-generation bioethanol and the growing adoption of compressed biogas, biodiesel, and emerging fuels like sustainable aviation fuel. The recent focus on creating a structured biomass supply chain, combined with viability gap funding and private-sector engagement, is expected to address some of the scalability constraints faced in the past. International interest in Indian biofuels, particularly for decarbonizing aviation and shipping, may also open up new export markets.