The government is readying a package to incentivise the adoption of green steel manufacturing in the country, officials said. It could be a combination of soft loans, interest subvention scheme, viability gap funding and production-linked incentive scheme, besides a revamped definition of 'green steel', they said.

The steel ministry has begun discussions with the finance ministry on the proposed package, which will be rolled out in different phases, according to the officials. "Talks are on the contours of the incentives... A call will be taken soon," said one of the officials, who did not wish to be identified.

The government will also prioritise green steel in public procurement, apart from mandating a timeline for the industry to adopt cleaner technology, steel secretary Sandeep Poundrik had said at a conference last month.

The push for local manufacturing of green steel comes at a time when the domestic industry is facing new challenges globally in the form of non-tariff barriers such as the Carbon Border Adjustment Mechanism (CBAM) of the European Union (EU). India's steel exports to the EU are likely to get costlier by $65-70 per tonne when the next phase of CBAM kicks in.

A recent Moody's report estimated that India would need $190-215 billion in investments to transition to a low-carbon economy. At present, the global average emissions intensity of steel is 1.85 tonnes of carbon dioxide per tonne of crude steel.