In a highly anticipated move, the Ministry of New and Renewable Energy (“MNRE”) initiated the Scheme for Procurement of Green Ammonia under Mode 2A (“Scheme”) as part of the Strategic Intervention for Green Hydrogen Transition (“SIGHT”) Programme. Unveiled on January 16, 2024, under the ambitious National Green Hydrogen Mission (“NGHM”), this initiative seeks to revolutionize the production and utilisation of Green Ammonia. The primary objectives of this Scheme include maximizing the production of Green Ammonia, fostering a competitive edge in cost compared to traditional fossil fuels, and catalysing the widespread adoption of Green Ammonia.

The Scheme represents a pivotal step towards promoting sustainable energy practices, aligning with global efforts to mitigate climate change and reduce dependence on conventional fuels. As the MNRE spearheads this initiative, it not only opens new possibilities for a greener and more eco-friendly energy landscape but paves pay for addressing environmental concerns and stimulating economic growth in the renewable energy sector. 

KEY FEATURES OF THE GREEN AMMONIA SCHEME 

1. Implementation Agency : The MNRE will oversee the implementation of the Scheme, with the operational support of the Solar Energy Corporation of India Limited (“SECI”).
2. Green Hydrogen Standard : In order to qualify for incentives under the Scheme, bidders are required to ensure that the amount of Green Hydrogen used in the production and delivery of Green Ammonia does not exceed 0.1765 kg per kg of Green Ammonia.
3. Incentive : Fixed incentives under the Scheme will be disbursed over three years, calculated on an INR/Kg basis. The incentive rates for each year are as follows: 
   
   • INR 8.82/kg for the first year,
   • INR 7.06/kg for the second year, and
   • INR 5.30/kg for the third year.
4. Restrictions : If a bidder has obtained an incentive under Mode 1 of the SIGHT Programme, an incentive under Mode 2A can be availed only for additional capacity.
5. Capacity Allocation : SECI will initiate the bidding process under Mode 2A, wherein demand will be aggregated, and bids will be solicited through a competitive selection procedure with a predetermined incentive for the production and delivery of Green Ammonia at the most economical rate. This will apply to an accessible capacity of 5,50,000 MT in the first tranche of Mode 2A.
6. Bidding Process : Bidders must provide quotations for the following in their bid: 
   
   • the yearly production capacity of Green Ammonia to be supplied, with the quoted capacity remaining consistent throughout the Ammonia Purchase Agreement period, and 
   • the pricing of Green Ammonia in INR/Kg.
7. Selection Process : Capacities will be assigned to the qualified bidder(s) based on the quoted price in INR/kg, wherein the bidder with the lowest price will be allocated its admissible capacity first. This allocation process will continue in descending order of quoted prices until the available capacity is fully allocated.
8. Eligibility for Bidding : The bidder’s net worth at the end of the preceding Financial Year must be INR  5 crores or more per thousand MT per annum of the quoted production and supply capacity of Green Ammonia.
9. Payment of Incentives : The allocated capacity for a bidder will remain consistent over three years, and the annual incentive payout for any given year will be computed based on either the allocated capacity or the actual production and supply in that year in kilograms, whichever is lower.
10. Miscellaneous : Other details such as earnest money deposit, performance bank guarantees, and the draft of the ammonia purchase agreement will be set out in the tender documents. 

THE WAY FORWARD

The introduction of the Scheme marks a significant stride toward advancing the objectives set forth by the NGHM. The Scheme’s fixed incentives over a three-year period, coupled with the meticulous allocation process based on quoted prices, not only incentivise bidders but also establish a competitive framework for the sustainable production and supply of Green Ammonia. As SECI opens the bidding process under Mode 2A, bidders face the dual challenge of presenting competitive pricing and consistent and reliable Green Ammonia production. 

As an energy law firm and as legal advisors to various stakeholders in the green hydrogen market, we look forward to the issuance of tenders under Mode 2A and feedback from industry stakeholders and experts. 

Feel free to reach out to our leading energy lawyers Praveen Raju, Amoolya Khurrana, and Janhavi Joshi in case of any queries.