Every 25% replacement with green power can reduce costs by Rs. 75–80/MT and support margin expansion
Rating agency ICRA expects India’s major cement companies to raise their green power capacity to 5.8-6.0 GW by March 2028, from around 4.0 GW as of March 2026. The increase is expected to be supported by planned investments of Rs. 12,000-13,000 crore over the next two years. The additional capacity could generate annual savings of Rs. 6,200-6,700 crore, translating into an estimated payback period of 1.8-2.2 years.
Although cement continues to rank among the most emission-intensive industries, major cement producers have established net-zero emission targets for the next 15-20 years. The calcination process contributes 57–60% of total emissions, while fuel combustion and electricity consumption account for 27-30% and 10-13%, respectively. The emission profile highlights the need for a broad-based approach to decarbonisation.
The Indian cement industry is stepping up its decarbonisation initiatives through greater use of green power, blended cement, alternative fuels and improvements in clinker efficiency. Alongside sustainability goals, the shift is also being encouraged by the need to manage fuel price volatility and improve cost competitiveness.
Providing further insights, Anupama Reddy, Vice President and Group Head, Corporate Ratings, ICRA, said: “The highly energy-intensive nature of cement manufacturing, coupled with persistent fuel price volatility and supply-side risks, is driving the sector’s transition towards green power. Among the various decarbonisation pathways available to cement producers, green energy remains one of the most commercially attractive options, ensuring both emission reduction and meaningful cost savings. Every 5% increase in green power replacement can lower power and fuel costs by Rs. 15-16 per tonne. Consequently, a 25% replacement level could translate into cost savings of Rs. 75-80 per tonne and support an operating margin expansion of 140-160 basis points.”
The cement industry is also assessing advanced solutions such as carbon capture, utilisation and storage (CCUS). The Government of India has proposed an outlay of Rs. 20,000 crore over five years to promote CCUS deployment across key sectors, including cement. However, widespread commercial adoption is expected to progress gradually because of high implementation costs, substantial energy requirements associated with carbon capture and processing, and limited infrastructure for CO₂ transportation and storage.
Blended cement continues to be an important avenue for lowering emissions, although its adoption is expected to progress gradually because of application-specific requirements and customer preferences. Meanwhile, India’s thermal substitution rate (TSR) of around 6% remains considerably below global benchmarks, leaving significant scope to increase the use of alternative fuels, including biomass, municipal waste and industrial waste.
Major cement companies are targeting TSR levels of 10-15% over the next three to five years. A higher substitution rate is expected to contribute to lower emissions while also improving profitability, Reddy added.
Green financing is also emerging as a significant enabler of the cement industry’s decarbonisation efforts. While the adoption of such financing remains at an early stage in India, some leading cement manufacturers have raised funds through sustainability-linked bonds and loans for renewable power projects, waste heat recovery systems and other sustainability-focused initiatives.
Green financing is expected to become an increasingly important funding source for the cement industry in the coming years.
