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Switching to green ammonia would help India reduce fertilizer subsidy burden: Report

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Switching to green ammonia would help India reduce fertilizer subsidy burden: Report In 2022-23, India’s fertilizer subsidy is expected to be close to ₹1.05 trillion.

According to a report by the Institute for Energy Economics and Financial Analysis (IEEFA), switching to green ammonia would help India reduce its fertilizer subsidy burden while also increasing energy self-reliance by reducing reliance on expensive liquefied natural gas (LNG) imports for fertilizer manufacturing.

For 2022-23, India’s fertilizer subsidy is expected to be close to ₹1.05 trillion ($14.2 billion), the third year in a row that it would surpass ₹1 trillion. However, high and fluctuating worldwide gas costs, worsened by the Russia-Ukraine conflict, have driven fertilizer prices to new highs, necessitating a significant increase in the subsidy.

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From $10.75 per MMBtu (metric million British thermal units) in January 2021 to $33.00 in January 2022, gas prices virtually tripled. Between October 2021 and March 2022, global urea prices rose to new highs of $690-794/tonne (₹51.4-60.4/kg). However, the Indian agriculture sector’s retail price of urea remained subsidized at ₹5.3/kg ($71/tonne), showing a significant subsidy of more than 90% on the worldwide benchmark price of urea.

In a statement, the report’s author Kashish Shah, an energy finance analyst at IEEFA, stated, ‘Demand for fertilizer in India is likely to grow, which would raise the need for further subsidies and LNG imports unless we convert to a cleaner and domestically generated feedstock.’

‘Green hydrogen is made by electrolyzing water using renewable energy sources, and it can be used to replace grey hydrogen, which is made from natural gas or methane, as a feedstock for ammonia manufacture.’

According to Mr. Shah, hydrogen consumption in the Indian fertilizer sector is expected to climb from roughly 3MT per year presently to 7.5MT by 2050.

According to the International Energy Agency’s (IEA) hydrogen project database, 8MT of green hydrogen to green ammonia production capacity is planned around the world.

The research examines the cost competitiveness of generating green ammonia utilizing various electricity inputs, including grid electricity, round-the-clock renewable power, and solar power plus batteries, from leading green hydrogen to green ammonia plants around the world.

The cost of producing green hydrogen is currently around $5.5 per kilogram, or $3 per kilogram in nations with abundant solar resources, and is expected to drop dramatically over the next decade. However, in order to compete with gray hydrogen at $2 per kg, the costs of two crucial inputs, electrolyzers, and renewable energy, must be reduced even more.

Also Read | Experts believe fertilizers subsidy ₹28,655 cr will benefit farmers and industry.

‘While the cost difference between green hydrogen and hydrogen produced from fossil fuels is shrinking, there is still a long way to go,’ Mr. Shah argues. He claims that manufacturing electrolyzers in India, in conjunction with the country’s burgeoning solar PV manufacturing base, will lower the cost of producing green hydrogen for green ammonia.

According to the report, the government’s new green hydrogen policy offers a variety of incentives to green hydrogen and green ammonia manufacturers, including land allocation in renewable energy parks, a 25-year waiver of interstate transmission charges, and renewable power banking for up to 30 days.