The global push towards decarbonization is unlocking new frontiers in clean energy, and India is poised to be a major player in this transition. Among Indian states, Karnataka is steadily carving a niche for itself in the green hydrogen economy. With its robust renewable energy capacity and forward-looking policies, the state is emerging as a favorable destination for green hydrogen investment. For corporate developers eyeing the sector, understanding Karnataka’s legal and regulatory landscape is essential.
Karnataka’s Strategic Advantage
Karnataka is already one of the top renewable energy producing states in India, with a strong base in solar and wind power. This renewable energy surplus is critical for green hydrogen production, which relies on electrolysis powered by clean electricity. The state’s geography, availability of land, and grid connectivity further strengthen its position as a preferred location for industrial-scale green hydrogen plants.
This blog is a part of our Navigating foreign investment in India: Key legal aspects for Success Blogpost.
Policy Framework Supporting Green Hydrogen
While Karnataka has not yet released a dedicated green hydrogen policy, it has signaled strong intent to support this emerging sector through its broader energy and industrial policies. The state government has expressed alignment with the central government’s National Green Hydrogen Mission and is working on integrating hydrogen-specific incentives under its upcoming Renewable Energy Policy 2022-27.
Under the existing policy regime, green hydrogen developers may benefit from:
- Land acquisition support in renewable energy parks
- Single-window clearance mechanisms under the Karnataka Udyog Mitra initiative
- Concessional wheeling and banking charges for captive renewable power
- Stamp duty exemptions and power tariff concessions for green energy projects
These provisions, although not hydrogen-specific yet, can be leveraged by corporates establishing green hydrogen infrastructure.
Upcoming Hydrogen Clusters and MoUs
In 2023 and 2024, Karnataka signed Memorandums of Understanding (MoUs) with multiple global and domestic players for green hydrogen and ammonia production. Mangaluru and Ballari have been identified as potential green hydrogen hubs due to their access to ports and steel industries.
The Karnataka State Industrial and Infrastructure Development Corporation (KSIIDC) and Karnataka Renewable Energy Development Limited (KREDL) are actively involved in identifying land and facilitating approvals for hydrogen-related projects. Corporate developers should watch for upcoming announcements regarding dedicated green hydrogen zones or industrial clusters.
FDI Opportunities in Karnataka’s Green Hydrogen Sector
The green hydrogen sector is 100 percent open to Foreign Direct Investment under the automatic route, as per India’s FDI Policy. Karnataka offers a particularly attractive proposition for foreign investors because of its:
- Established renewable energy ecosystem
- Transparent land acquisition and regulatory clearance processes
- Proactive investor facilitation through Karnataka Udyog Mitra and Invest Karnataka forums
Foreign companies entering through joint ventures, wholly owned subsidiaries, or strategic partnerships can benefit from both state and central government incentives. Karnataka’s infrastructure and legal clarity make it an ideal location for global players seeking a foothold in India’s green hydrogen supply chain from electrolyser manufacturing and storage solutions to hydrogen-powered mobility and export terminals.
In recent months, Karnataka has attracted foreign interest from companies in Germany, Japan, and the Middle East for integrated green hydrogen and ammonia export projects. The state’s willingness to collaborate on export-oriented infrastructure and policy flexibility provides an edge over other regions.
However, foreign investors must consider sector-specific legal due diligence, including land title verification, environmental approvals, and sectoral compliances for manufacturing or storage units. Local partnerships with Indian entities can also help mitigate regulatory risk and expedite project timelines.
Environmental and Regulatory Compliance
For corporates entering this space, regulatory compliance will require careful planning. Electrolyzer-based hydrogen production projects must obtain clearances under:
- The Environment Protection Act, 1986
- The Air (Prevention and Control of Pollution) Act, 1981
- The Water (Prevention and Control of Pollution) Act, 1974
Moreover, setting up large renewable energy-backed electrolysis plants may require environmental impact assessments (EIA), especially if water usage or land development crosses regulatory thresholds.
Given the novelty of the sector, local authorities may be unfamiliar with the hydrogen-specific aspects of projects. Developers should be prepared for proactive engagement with regulatory bodies and potential clarification requests.
Private Investment and PPP Opportunities
Karnataka has been encouraging public-private partnerships in clean energy, and green hydrogen is likely to receive the same treatment. Private developers may find opportunities to collaborate with state utilities for hydrogen blending pilot projects in natural gas pipelines, or even explore hydrogen storage and transport facilities through PPP models.
Early engagement with the Karnataka Power Transmission Corporation Limited (KPTCL), Karnataka Electricity Regulatory Commission (KERC), and the Department of Industries is recommended for navigating tariff approvals, infrastructure access, and project feasibility.
Alignment with Central Policy Incentives
The Government of India’s National Green Hydrogen Mission, launched in 2023, allocates over ₹19,000 crore for capacity-building and subsidies. Developers in Karnataka can tap into central-level incentives such as:
- Viability Gap Funding (VGF) for electrolysers
- Production Linked Incentives (PLI) for hydrogen equipment manufacturing
- R&D funding for hydrogen technology innovation
Karnataka-based companies may also qualify for incentives under the central scheme if their projects meet eligibility criteria.
Conclusion: A Window of Opportunity
Karnataka is well-positioned to play a leading role in India’s green hydrogen journey. While the regulatory regime is still evolving, corporate developers (both domestic and foreign) have a real opportunity to shape the market, establish first-mover advantage, and influence policy direction.
By aligning with both central and state-level objectives, leveraging existing clean energy capacity, and planning early-stage regulatory compliance, companies can unlock significant long-term value in Karnataka’s green hydrogen economy.
As the state prepares to formalize its position further through dedicated policy instruments, staying ahead of legal and FDI developments will be key to securing competitive advantage in this high-potential sector.
