The Indian metallurgical landscape is currently navigating a critical transition as the push for sustainable manufacturing gains unprecedented momentum. A recent analysis by the Institute for Energy Economics and Financial Analysis highlights the urgent need to provide targeted policy and financial support to India’s secondary steel sector. As the nation aggressively expands its heavy manufacturing capabilities, equipping these mid-tier producers with the tools to decarbonize is essential for aligning industrial growth with long-term climate goals and maintaining global competitiveness in an increasingly eco-conscious market.
Empowering the backbone of domestic steel production
The secondary steel sector operates as a massive, often underrepresented engine of the Indian economy. Unlike the large integrated mega-mills that rely on traditional blast furnaces, this segment utilizes electric arc furnaces and induction furnaces to process raw materials.
Currently, the secondary steel industry comprises over 2,500 active units spread across the country, collectively accounting for roughly 45 to 50 percent of India’s total crude steel output. Despite utilizing electric furnaces, the sector's carbon footprint remains stubbornly high. This is primarily because a massive portion of these mid-tier mills rely heavily on coal-based sponge iron, also known as direct reduced iron, as their primary feedstock. Furthermore, the electricity powering these furnaces is largely drawn from a national grid that is still heavily dependent on thermal coal power. The Institute for Energy Economics and Financial Analysis points out that to genuinely clean up India's steel supply chain, the government must prioritize the secondary sector, transforming these agile, decentralized mills into pioneers of green metallurgy rather than leaving them to bear the brunt of future carbon taxes alone.
Addressing financial and technical barriers to green steel
Transitioning thousands of mid-tier manufacturing units toward low-carbon operations requires massive capital deployment, which currently stands as the industry's highest hurdle.
Secondary steelmakers typically operate on incredibly tight profit margins and lack the massive balance sheets enjoyed by primary integrated producers. Funding the transition to renewable energy sources, upgrading furnace technologies to improve energy efficiency, and integrating green hydrogen are financially unviable for most standalone rolling mills without external assistance. The recent report strongly advocates for the introduction of tailored financial instruments to bridge this gap. Providing subsidized interest rates for green technology upgrades, offering tax rebates for renewable energy procurement, and establishing dedicated green transition funds are critical steps. By lowering the financial barrier to entry, policymakers can incentivize induction furnace operators to actively sign direct power purchase agreements with solar and wind energy developers, structurally removing fossil fuels from their daily power mix.
Boosting scrap availability to optimize furnace efficiency
A fundamental shift in raw material procurement is absolutely necessary to lower the emission intensity of the secondary sector. The most immediate and commercially viable pathway to green steel production is maximizing the use of recycled ferrous scrap.
Melting recycled steel scrap in an electric furnace consumes significantly less energy than reducing fresh iron ore, actively bypassing the carbon-heavy processes associated with coal-based sponge iron. Industry data shows that utilizing one tonne of steel scrap saves approximately 1.1 tonnes of iron ore and drastically reduces overall greenhouse gas emissions. However, domestic availability of high-quality scrap remains a severe bottleneck, forcing the industry to import roughly 8 to 9 million tonnes of scrap annually to meet its needs. The institute urges a rapid formalization of India's metal recycling ecosystem. By aggressively expanding the network of automated Registered Vehicle Scrapping Facilities and improving urban waste collection frameworks, India can generate millions of tonnes of premium domestic scrap. A robust circular economy guarantees that secondary steelmakers have an uninterrupted, cost-effective feed of clean raw materials right at their doorstep.
Aligning with national climate targets and global trade norms
From a broader macroeconomic perspective, decarbonizing the secondary steel sector is a non-negotiable requirement for India’s future industrial dominance. The central government has set a highly ambitious National Steel Policy target to achieve 300 million tonnes of annual crude steel capacity by the end of the decade, alongside a sovereign commitment to reach net-zero emissions by 2070. Achieving both volume growth and carbon reduction simultaneously is impossible without the full participation of the secondary mills. Furthermore, the global trade environment is rapidly implementing strict carbon accountability measures, such as the European Union’s Carbon Border Adjustment Mechanism. If Indian secondary steelmakers fail to lower their emission intensity, their value-added exports will face severe financial penalties at international borders. By acting on the recommendations to support and subsidize the green transition today, India is actively protecting the operational margins of its mid-tier manufacturers, ensuring that the domestic steel industry remains fiercely competitive, highly profitable, and globally respected for decades to come.