Decarbonization is the central pillar of the three landmark reports unveiled by NITI Aayog to transform India’s most energy-intensive sectors.
As the nation targets a $30 trillion economy by 2047, the reports warn that cement and aluminum production could increase four- to five-fold, necessitating an immediate shift in technology and fuel sourcing. The decarbonization roadmaps provide a phased timeline for integrating renewable energy, nuclear power, and carbon capture technologies to ensure that India’s growth does not breach its climate commitments.
Sector-wise financial and technical incentives:
The following table summarizes the specific incentives and levers proposed in the official roadmaps to drive decarbonization across the identified hard-to-abate sectors:
| Sector | Primary Decarbonization Lever | Key Financial & Regulatory Incentives |
| Aluminum | Transition to RE-RTC (round-the-clock) & nuclear | Dual electricity transmission rights; flexibility to use captive plants as Independent Power Producers (IPPs). |
| Cement | CCUS & clinker substitution (fly ash/Slag) | Creation of a National CCUS Mission; carbon credit trading scheme (CCTS) incentives to make RDF cost-competitive with coal. |
| MSMEs | Energy-efficient equipment & solarization | 15% viability gap funding (VGF) for efficient boilers; capital subsidies for rooftop solar; 8-9% credit-guarantee fund allocation. |
The three-phased shift for aluminum:
The aluminum sector, which currently has a higher emission intensity of 21 tCO₂/t than the global average of $15 tCO₂/t, faces a rigorous decarbonization schedule.
- Short-term (till 2030): Transitioning to round-the-clock (RE-RTC) renewable energy and enhancing grid connectivity.
- Medium-term (2030–2040): Large-scale adoption of nuclear power for captive energy needs.
- Long-term (beyond 2040): Full integration of carbon capture, utilization, and storage (CCUS) for remaining coal-based plants.
MSMEs: the grassroots transition
India’s 69 million MSMEs, including steel re-rolling and foundries, contribute nearly 30% of the GDP but are heavy fossil fuel users.
The decarbonization strategy for this segment focuses on a cluster-based framework. The report recommends establishing a National Project Management Agency (NPMA) to oversee the transition of these clusters. Key levers include a 20% reduction in specific energy consumption through efficient boilers and heat pumps, supported by a 15% capital subsidy via viability gap funding (VGF).
“Decarbonization across these sectors is essential for achieving India’s climate commitments while ensuring long-term economic competitiveness in a sustainability-conscious global market,” said BVR Subrahmanyam, CEO, NITI Aayog.
The decarbonization challenge in cement:
Decarbonization of the cement sector is a massive undertaking, as production is projected to surge sevenfold from 391 million tons (2023) to nearly 2,100 million tons by 2070.
NITI Aayog identifies calcination—the chemical process of turning limestone into clinker—as the culprit for 57% of sectoral emissions. To hit net-zero, the roadmap mandates a reduction in carbon intensity from 0.63 $tCO_2/t$ to 0.09-0.13 $tCO_2/t$ by 2070.
Strategic levers:
- Clinker Substitution: The roadmap pushes to reduce the clinker-to-cement ratio from 67.5% to 62% by increasing the use of fly ash, slag, and calcined clays.
- Alternative Fuels (RDF): It promotes the use of refuse-derived fuel (RDF) from municipal waste to replace coal. While RDF is currently more expensive due to low energy density, the report suggests carbon credit incentives to bridge the price gap.
- National CCUS Mission: The most ambitious lever is a dedicated mission for carbon capture, utilization, and storage, targeting pilots that capture up to 2,000 tons of $CO_2$ per day.
Decarbonization of the steel re-rolling sector:
While the primary steel industry has separate long-term goals, NITI Aayog’s MSME roadmap targets the steel re-rolling and foundry clusters. These units are often less efficient than integrated plants and contribute significantly to local pollution. The decarbonization strategy here focuses on low-hanging fruit and immediate technological upgrades.
“Decarbonization of MSME steel units can achieve a 55-62% emission reduction potential over the next five years by switching to natural gas and induction furnaces,” the report highlights.
MSME Steel & Foundry Levers:
- Fuel Switching: Moving from coal-fired furnaces to natural gas (NG) and high-efficiency electrical induction furnaces.
- Energy Efficiency: Mandating a 20% reduction in specific energy consumption through upgraded rollers, milling devices, and waste heat recovery systems.
- Cluster Aggregation: Establishing an energy monitoring cell to help small steel units track CO₂ and access bulk-purchased green power.
Financial Support Mechanisms:
To ensure these sectors don’t collapse under the cost of decarbonization, the government is proposing:
- 15% Capital Subsidy: Viability gap funding for MSME steel units to upgrade plant machinery.
- Performance Standards: Creating a unified performance benchmark for all cement manufacturers to drive competitive efficiency.
The global competitive edge:
The urgency of these decarbonization roadmaps is also driven by global trade measures like the EU’s Carbon Border Adjustment Mechanism (CBAM). By lowering the carbon footprint of domestic metal and manufactured goods, India aims to protect its exports (which for MSMEs stand at 45.7% of total exports) and position itself as a global leader in green manufacturing.
