Indian Oil Corp (IOC.NS), the country’s top refiner, Larsen & Toubro (LART.NS) and Goldman Sachs-backed renewable energy producer ReNew Power will form a joint venture to develop the green hydrogen sector, helping India cut its carbon emissions.

The three companies have signed a binding term sheet to jointly develop green hydrogen projects, said a joint statement issued on Monday.

India, the world’s third biggest emitter of carbon dioxide, plans to annually produce 5 million tonnes of green hydrogen by 2030 as it seeks to meet its climate targets and become a production and export hub for the fuel.

Green hydrogen, produced using renewable energy, has some of the best environmental credentials among cleaner-burning fuels. The zero-carbon fuel is made using renewable power from wind or solar sources to split water into hydrogen and oxygen.

India will set up separate manufacturing zones, waive inter-state power transmission charges for 25 years and provide priority connectivity to electric grids to green hydrogen and ammonia producers in a bid to incentivise production, the federal power ministry said.

The five million tonnes production target is half of that of the European Union, which plans to produce 10 million tonnes of hydrogen from renewable energy by 2030.

While green hydrogen is not currently made in India on a commercial scale, the country’s richest men Mukesh Ambani and Gautam Adani have announced plans to produce it.

India, with a population more than three times larger than the EU, has a much lower per capita energy consumption, but among the fastest rates of energy demand growth in the world.

Mayank Bansal, chief commercial officer of ReNew Power, said the incentives announced by India could help lower cost of hydrogen manufacturing.

“Currently, manufacturing green hydrogen is a costly proposition and in cognizance of this, the government has correctly waived off inter-state transmission charges,” Bansal said in a statement.

India’s Power Minister RK Singh said on Wednesday green hydrogen manufacturers would also be allowed to transmit unused electricity to the grid.

Indian companies, including the country’s richest men Mukesh Ambani and Gautam Adani, had previously announced plans to produce green hydrogen.

State-run refiner and engineering and construction firm L&T and IOC also signed a binding term sheet to form a joint venture for manufacturing electrolysers, used for the production of green hydrogen.

Green hydrogen has some of the best environmental credentials among cleaner-burning fuels and will replace carbon-emitting fuels used in the refinery to process crude oil into value-added products, such as petrol and diesel.

An electrolyser splits water into hydrogen and oxygen using renewable energy such as solar or wind for producing green hydrogen.

Initially, the partnership will focus on green hydrogen projects at IOC’s Mathura and Panipat refineries in northern India and evaluate building other green hydrogen projects in the country, said S.M. Vaidya, chairman of IOC.

India also plans to provide federal financial support to set up electrolysers, as it wants to make the use of green hydrogen mandatory for refineries and fertiliser plants.

India’s refining sector consumes about 2 million tonnes of grey hydrogen, produced through the use of gas instead of renewable energy, the statement said.

“The Indian Oil-L&T-ReNew JV will focus on developing Green Hydrogen projects in a time-bound manner to supply Green Hydrogen at an industrial scale,” said S.N. Subrahmanyan, chief executive of L&T.