Gujarat is emerging as a key hub for renewable hydrogen development in India, supported by its refinery and ammonia production capacity, renewable energy resources and port infrastructure. However, large-scale hydrogen projects in the state remain in feasibility stages, highlighting the challenge of translating policy support and production ambitions into operational capacity, according to an S&P Global Energy report.
Incentives For Early Projects
The report, titled ‘Gujarat Green Hydrogen: Turning an Ambition into Reality’, said the state has set a target of producing three million metric tonnes of renewable hydrogen annually by 2035. While Gujarat has the highest renewable hydrogen production ambition among the Indian states examined in the report, its large-scale projects are yet to progress beyond feasibility assessments.
Gujarat's hydrogen strategy, finalised by the state Energy and Petrochemicals Department in December 2025, includes financial incentives for early projects and measures aimed at supporting hydrogen production, infrastructure and consumption.
The state policy provides incentives for the first 500 MW of electrolyser capacity commissioned in Gujarat, with eligible projects required to have capacities between 1 MW and 10 MW. Support includes a 20 per cent capital expenditure subsidy on eligible components, capped at Rs 10 million per MW.
Additional support is available for battery energy storage systems, oxygen collection and bottling, and water desalination facilities supplying electrolyser projects. The policy also provides a 20 per cent capital expenditure subsidy of up to Rs 350 million for eligible green hydrogen hubs producing at least 3,000 metric tonnes annually.
Gujarat is also offering infrastructure-related assistance, including a 50 per cent reimbursement of transmission and wheeling charges for renewable energy used to produce hydrogen for the first five years of operations, subject to specified limits.
On the consumption side, the state has introduced subsidies for hydrogen refuelling stations, hydrogen-powered buses and heavy-duty vehicles. It also provides reimbursement of Rs 50 per kilogram of renewable hydrogen used for industrial purposes or blended into the natural gas network, with each scheme carrying a five-year duration and a budget of Rs 2.5 billion.
Industrial Base Supports Demand
The report identified Gujarat's existing industrial and energy infrastructure as a potential advantage in developing a renewable hydrogen economy. Around 40 per cent of India's refinery capacity and approximately 30 per cent of its ammonia production capacity are located in the state. These industries offer potential domestic applications for renewable hydrogen, particularly in replacing existing fossil-based hydrogen and supporting the production of lower-carbon ammonia.
Gujarat also has nearly 50 GW of combined solar and wind energy capacity and the highest electricity generation capacity among Indian states, according to the report. At least 40 per cent of India's maritime trade enters through ports located in Gujarat, creating potential advantages for equipment deliveries and hydrogen-derived product exports.
The state has also received support through India's national hydrogen programme. Under the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme, funding has been allocated for renewable hydrogen integration with refineries, while additional tenders for methanol and ammonia are expected to support demand development.
Despite these advantages, the report noted that most hydrogen capacity in Gujarat remains at an early development stage. Gujarat leads in the number of projects in advanced stages among the states examined, but Andhra Pradesh and Odisha have greater capacity in advanced project development.
Export Competition
Gujarat's west coast location could support exports of hydrogen derivatives, particularly ammonia, to overseas markets. The report said freight costs for ammonia shipped from India's west coast to Europe are estimated at USD 30-40 per metric tonne, lower than those for shipments from east coast projects.
However, Gujarat-based producers would still face competition from Middle Eastern suppliers, whose ammonia freight costs to Europe are estimated to be USD 30–40 per metric tonne lower than those from India's west coast.
The report said state-level grants, alongside support from the central government, would be needed for Indian projects to remain competitive in export markets. It also identified China as a major competitor in the global renewable hydrogen market, with the Middle East pursuing large-scale export-oriented projects.