Cement Companies Set to Raise Green Power Capacity to 6 GW by FY2028: ICRA

India’s major cement companies are expected to increase their green power capacity by nearly 50 percent to 5.8-6.0 GW by March 2028 from around 4.0 GW in March 2026, according to rating agency ICRA.

The increase is expected to be supported by investments of INR  12,000-13,000 crore over the next two years. ICRA estimates that the additional green power capacity could generate annual savings of INR  6,200-6,700 crore, translating into a payback period of 1.8-2.2 years.

The cement industry, one of the most emission-intensive sectors, is pursuing decarbonisation through green power, blended cement, alternative fuels and improvements in clinker efficiency. Major cement producers have also outlined net-zero emission roadmaps over the next 15-20 years.

According to ICRA, the calcination process accounts for 57-60 percent of the industry's total emissions, while fuel combustion contributes 27-30 percent and electricity consumption accounts for 10-13 percent. This makes a multi-pronged approach necessary to reduce emissions.

The shift towards green power is being driven not only by sustainability commitments but also by the need to reduce exposure to fuel price volatility and improve cost competitiveness.

Anupama Reddy, Vice President and Group Head, Corporate Ratings, ICRA, said that he energy-intensive nature of cement manufacturing, combined with persistent fuel price volatility and supply-side risks, is driving the sector's transition towards green power.

ICRA estimates that every 5 percent increase in green power replacement can reduce power and fuel costs by INR 15-16 per tonne. At a 25 percent replacement level, the savings could reach Rs. 75-80 per tonne and support operating margin expansion of 140-160 basis points.

ICRA's sample set comprises Ultratech Cement, Shree Cement, ACC, Ambuja Cements, Birla Corporation, Dalmia Bharat and The Ramco Cements. These companies together accounted for 65 percent of India's installed cement capacity as of March 2026.

The industry is also evaluating carbon capture, utilisation and storage (CCUS) as another decarbonisation pathway. The Government of India has proposed an outlay of INR  20,000 crore over five years to support CCUS deployment across key sectors, including cement.

However, ICRA expects large-scale commercial adoption of CCUS to remain gradual because of high implementation costs, significant energy requirements for carbon capture and processing, and limited carbon dioxide transportation and storage infrastructure.

Blended cement is expected to remain an important emissions-reduction measure, although its adoption is likely to increase gradually due to application-specific requirements and customer preferences.

India's thermal substitution rate of around 6 percent is also significantly below global benchmarks, indicating scope for greater use of alternative fuels, including biomass, municipal waste and industrial waste. Major cement companies are targeting thermal substitution rates of 10-15 percent over the next three to five years.

ICRA said that higher use of alternative fuels could contribute to both emissions reduction and improved profitability.

Green financing is also emerging as an enabler of the industry's decarbonisation efforts. While still at a nascent stage in India, some leading cement manufacturers have used sustainability-linked bonds and loans to fund renewable power projects, waste heat recovery systems and other sustainability-focused initiatives.

With significant capital expenditure planned for energy transition projects, ICRA expects green financing to become a more meaningful funding avenue for the cement industry in the coming years.