Last month, the Union Cabinet, approved India’s targets for the third Nationally Determined Contribution (NDC) for the period 2031 to 2035, for the country’s commitments under the UNFCCC and its Paris Agreement for achieving sustainable development and climate justice. Amongst the three quantifiable targets, by 2035, India aims to reduce emissions intensity by 47% from 2005 levels, achieve a 60% share of non-fossil fuel-based installed power capacity, and enhance its carbon sink to 3.5-4.0 billion tonnes of CO₂ equivalent through expanded forest and tree cover. For achieving emission intensity targets as well as clean energy targets, a demand push is also needed to drive climate action.
Public procurement, often treated as a routine administrative function, can serve as a powerful demand-side instrument for enabling low-carbon industrial transition, particularly in hard-to-abate sectors such as steel and cement. According to the World Trade Organization, globally, government procurement accounts for 10–15% of GDP. According to World Economic Forum, public spending is linked to nearly 15% of greenhouse gas emissions and addressing these emissions could generate a $ 4 trillion economic boost and create around three million jobs. In India, procurement is even more significant, estimated at 20–22% of GDP, with approximately $ 0.5 trillion in annual contracts awarded as reported on government e-procurement portal. Combined with India’s large-scale infrastructure expansion, government emerges as a major market actor whose purchasing decisions can reshape industrial pathways. By acting as a ‘first customer’, public procurement can accelerate adoption of low-carbon technologies, support market creation, drive innovation, and enable economies of scale, thereby bridging the gap between emerging solutions and widespread market deployment.
Steel and cement sit at the core of India’s infrastructure expansion, supporting highways, housing, metro systems, and energy networks, while also being among the most emissions-intensive sectors. Government-linked projects alone consumed over 30 million tonnes of steel in FY-2024, significantly contributing to emissions. As demand rises, so will carbon footprints. Green public procurement is therefore critical. By embedding environmental criteria in purchasing, the government can create large-scale demand for low-carbon materials, giving producers confidence to invest in cleaner technologies despite initial cost premiums.
The steel sector illustrates this challenge clearly. Accounting for roughly 10-12% of India’s total emissions, it faces deep structural barriers to decarbonisation. Green hydrogen-based steelmaking, for instance, remains significantly more expensive than conventional routes. There are further challenges such as limited scrap availability, infrastructure gaps, and weak emissions transparency across supply chains further complicate the transition.
A key transition challenge lies on the demand side, where procurement decisions are driven largely by the lowest price (L1) criterion, with little regard for environmental performance. Without a clear market signal, producers lack incentives to scale low-carbon technologies. Public procurement can help shift this dynamic. While concerns about cost are valid, they can be overcome over time. According to a paper published in Water and Energy International journal, green steel may cost 25-40% more to produce, but this translates to only a 1-2% increase in final project costs. Over time, economics are likely to improve as technologies mature, and green hydrogen prices decline. Simultaneously, carbon-intensive steel will become more expensive due to carbon pricing and trade measures, making early adoption both strategic and practical.
Similarly, the cement sector offers a parallel opportunity. India’s cement demand is projected to grow nearly fivefold by 2070, driven by urbanisation and infrastructure expansion. While the industry has progressed through blended cements and efficiency measures, innovations such as Limestone Calcined Clay Cement (LC3) provide promising low-carbon alternatives, with operational costs 13-27% lower than conventional cement. However, policy support remains uneven.
Procurement reforms can help close this gap. First, standardising definitions, updating schedules of rates, and incorporating preferential scoring for low-emission materials in tenders can create a level playing field. While the General Financial Rules of the ministry of finance allow consideration of non-price variables, including environmental characteristics, there are no clear or mandatory guidelines to operationalise them. Updating model tender documents to explicitly include environmental criteria, through phased mandates, can unlock emissions reductions without materially increasing costs. Second, policy intent must be matched with institutional readiness. A centralised procurement information portal for green steel and cement, akin to MSME Sambandh, can improve transparency and coordination across ministries, states, and public sector entities. Third, targeted financial instruments, such as viability gap funding, tax incentives, and carbon credit mechanisms, can help bridge initial cost differentials and accelerate market uptake. Finally, procurement must move beyond price-only evaluation. Embedding lifecycle-based costing can internalise environmental externalities and prevent long-term carbon lock-ins.
Global initiatives and domestic pilots have laid the foundation; what is needed now is scale. When the government chooses low-carbon materials, it reshapes markets, builds supply chains, and drives costs down. If one lever can deliver scale, speed, and systemic impact, it is public procurement.
(The views expressed are personal)
This article is authored by Taruna Idnani, associate fellow and Shailly Kedia, senior fellow, The Energy and Resources Institute (TERI).
