India mulls using more natural gas in steel sector

India's steel ministry is considering increasing natural gas consumption in the sector as it aims to lower carbon emissions from the industry.

Steelmakers held a meeting with the steel ministry earlier this month, to discuss challenges and avenues to increase gas allocation to the sector, according to a government document seen by Argus. Steel producers requested that the government set gas prices at an affordable range of $7-8/mn Btu for them, to make their gas-based plants viable, as well as for a custom duty waiver on LNG procured for captive power. India's LNG imports attract a custom duty of 2.5pc. City gas distribution firms sell gas at market-determined prices to steel companies.

Representatives from the steel industry also requested for the inclusion of gas under the purview of the country's goods and service tax, and to be given higher priority in the allocation of deepwater gas, which has a higher calorific value. Deepwater gas is currently deployed mostly to city gas distribution networks.

Steelmakers are currently undertaking feasibility tests for gas pipeline connectivity at various steel plants. But a gas supply transmission agreement requires a minimum five-year period for investment approval.

The steel industry is heavily reliant on coal, and the sector accounts for about 8-10pc of carbon emissions in the country.

A task force of gas suppliers including IOC, Gail, BPCL, Shell, and HPCL and steel producers like Tata Steel, AMNS, All India Steel Re-roller Association and the Pellet Manufacturers Association has been set up, and the team is expected to submit a report on increasing natural gas usage and lowering carbon emissions by 15 May, the government document said. This team is one of the 13 task forces approved by the steel ministry to define the country's green steel roadmap.

The steel ministry aims to increase green steel exports from the country in the light of the policies under the EU's Carbon Border Adjustment Mechanism (CBAM), which will take effect on 1 January 2026. Under the CBAM, importers will need to declare the quantity of goods imported into the EU in the preceding year and their corresponding greenhouse gas emissions. The importers will then have to surrender the corresponding number of CBAM certificates. CBAM certificate prices will be calculated based on the weekly average auction price of EU Emissions Trading System allowances, expressed in €/t of CO2 emitted.

This is of higher importance to Indian steelmakers as the EU was the top finished steel export destination for Indian steelmakers during the April 2022-March 2023 fiscal year with total exports of 2.34mn t, and has been the preferred choice for Indian steel exports in the current fiscal year owing to higher prices compared to other regions.

Indian steelmakers have started to take steps to lower their carbon emissions by announcing collaborations with technology companies to decarbonise, and are trial injecting hydrogen in blast furnaces, and increasing the usage of natural gas in ironmaking.

By Rituparna Ghosh