India's ₹19,700 Crore CCUS Scheme Clears Finance Ministry Scrutiny, Heads to Cabinet

India's renewable build-out dominates its clean energy narrative. A parallel and structurally harder problem decarbonising industries where emissions are chemically inevitable has now received its most concrete funding commitment to date.

The Expenditure Finance Committee, the Finance Ministry body that evaluates large public expenditure proposals before they reach the Union Cabinet, has cleared a ₹19,700 crore scheme to develop carbon capture, utilisation and storage technologies and geological storage infrastructure across India's heavy industrial base. The clearance, reported by ET EnergyWorld and corroborated across multiple industry sources, moves the programme from a budget announcement to a financially approved scheme pending only Union Cabinet ratification.

The scheme was first announced by Finance Minister Nirmala Sitharaman in the Union Budget 2026–27 with an indicative outlay of ₹20,000 crore over five years. The EFC-approved figure of ₹19,700 crore reflects a minor reduction typical of the committee's financial review process. Cabinet sign-off would make the scheme formally operational and eligible for project applications.

The Investment Architecture

The ₹19,700 crore government outlay is structured as a viability gap mechanism rather than full project financing. The scheme is designed to catalyse an additional ₹17,800 crore in private sector co-investment, bringing the total programme pipeline to approximately ₹37,500 crore. The implied public-to-private leverage ratio of roughly 1:0.9 is conservative by infrastructure programme standards, which likely reflects an accurate read of investor appetite for first-of-kind CCUS deployment in an emerging market where carbon pricing signals remain weak.

Within the government allocation, a dedicated ₹2,500 crore R&D Innovation Fund is carved out to develop indigenous chemical absorption and mineral carbonation processes, advancing domestic technology readiness rather than funding commercial deployment directly. The distinction matters: CCUS cost trajectories are highly sensitive to technology maturity, and the gap between pilot-scale and demonstration-scale projects is where the largest unit-cost reductions historically occur.

The scheme's capacity target is 7 million tonnes per year of carbon capture. India's total CO2 emissions from the power sector alone are measured in billions of tonnes annually, so 7 MTPA represents an early-stage infrastructure target rather than a transformative volume. Its significance lies in the institutional and supply chain foundations it builds, not in the immediate emissions reduction it delivers.

Why Hard-to-Abate Sectors Cannot Wait for Renewables

The scheme targets five sectors: power generation, steel, cement, refineries, and chemicals. This is not an arbitrary list. In cement manufacturing, calcination the process of heating limestone to produce clinker releases CO2 as a direct chemical output regardless of what fuel powers the kiln. In steel, blast furnace reduction of iron ore produces CO2 as a process byproduct. In petrochemicals and refining, similar chemistry applies. Switching these facilities to renewable electricity addresses only the energy-related portion of their emissions; the process-related CO2 requires capture technology.

These five sectors are also the backbone of India's industrial economy. Tata Steel, JSW, UltraTech, Reliance Industries, Indian Oil, and their peers collectively represent hundreds of millions of tonnes of annual emissions that cannot be managed through electrification alone. Several of these companies already operate under India's Carbon Credit Trading Scheme, which sets binding emission intensity targets across nine industrial sectors. CCUS infrastructure gives them a compliance pathway that does not require dismantling operational assets.

The Carbon Pricing Gap

The scheme's structural limitation is the same one that has constrained CCUS globally outside of Norway and the United States: the absence of a carbon price high enough to make capture cheaper than paying to emit. Norway's Sleipner project, operational since 1996, was made viable by an offshore carbon tax. The US 45Q tax credit, enhanced under the Inflation Reduction Act to USD 85 per tonne for geological storage, triggered a significant private CCUS investment wave. India's CCTS, which is moving toward compliance trading in late 2026, prices carbon credits at an estimated USD 15 per tonne — a fraction of what project economics require for industrial-scale CCUS without government support.

The ₹19,700 crore scheme compensates for this pricing gap through direct capital support, which suits India's industrial financing environment. The open question is whether the viability gap structure will be calibrated precisely enough to attract private co-investment from companies managing tight capital expenditure cycles, without simply subsidising projects that would have proceeded regardless.

What to Watch

• Union Cabinet approval, which would trigger the scheme's formal operational status and open the project application window for industrial developers.
• Whether the CCTS compliance mechanism evolves to credit verified captured and stored CO2, which would materially improve CCUS project economics and reduce the scheme's dependence on direct public subsidy.
• Geological storage readiness: the scheme references priority basins including the Krishna-Godavari Basin and Rajasthan's geological formations, but test drilling, reservoir characterisation, and long-term monitoring frameworks are prerequisites for any storage project to proceed.