The large investment in green hydrogen aims to help one of the world's biggest greenhouse gas emitters achieve net-zero carbon emissions by 2070.
The aim of the funding initiative is "to make green hydrogen affordable and bring down its cost over the next five years. It will also help India reduce its emissions and become a major exporter in the field," said Anurag Thakur, India's minister for information and broadcasting.
The funding will also serve to help establish the capacity to make at least five million metric tons of green hydrogen by 2030, which would add about 125 gigawatts of renewable energy capacity, the government has revealed.
As of October 2022, India had about 166 gigawatts of renewable energy capacity.
While hydrogen is a potentially zero-carbon fuel source, it can be more carbon intensive than gas and coal if derived from fossil fuels rather than through electrolysis powered by a renewable energy source, what is known as 'green hydrogen'.
Currently, 95 per cent of hydrogen produced worldwide is produced from fossil fuels by splitting natural gas into hydrogen and carbon dioxide and therefore has a high carbon footprint.
In addition to supporting the energy grid, the Indian investment in green hydrogen is expected to create more than a half million new jobs, attract more private investment into the sector, reduce fossil fuel imports and cut greenhouse gas emissions by 50 million metric tons.
"Our aim is to establish India as a global hub of green hydrogen," Thakur added. "We will make efforts to get at least 10 per cent of the global demand for green hydrogen [by 2030]."
The funding announced will provide support to many of India's leading renewable energy companies, which are investing in the technology. These include companies owned by the Adani Group, Reliance Industries and JSW Energy; public sector companies like Indian Oil and NTPC Limited; and renewable-only companies such as Renew Power.
As more and more nations support the development of green hydrogen, energy analysts expect manufacturing costs for green hydrogen to fall significantly in the next few years and estimate the green hydrogen market will grow 20-fold to $80bn by the year 2030.
"A robust policy framework, requisite financial support and an enabling ecosystem for technology development are essential to displace the country's conventional fuel mix with green hydrogen and enhance its industrial competitiveness in an increasingly decarbonising world," said Shreyans Jain, an India-based sustainable business strategy consultant.
In the UK, the government is consulting on new plans to mandate that all new boilers can generate heat from hydrogen instead of gas from 2026, as part of a set of initiatives aimed at helping households save on energy bills.
The decision goes against a recent review of more than two dozen independent studies, which found hydrogen will not have a major role in the future of heating homes across Britain.
India's announcement also follows the European Commission's September reveal of a €3bn hydrogen bank, designed to help build a future market for the fuel.
