Coal gasification scheme: ₹37,500 crore to cut imports

Why coal gasification is back in focus

India’s renewed push on coal gasification is being framed as an energy-security and industrial raw material strategy, even as decarbonisation outcomes remain uncertain. An Observer Research Foundation report said coal gasification can help strengthen raw material security by reducing dependence on imported coal and natural gas. The context is a period of geopolitical instability and volatile global energy prices. The report also highlighted how war-triggered disruptions in global gas markets forced domestic steelmakers to reduce output and ration existing supplies. That disruption has kept attention on the risks of import dependence for fuels and feedstocks.

At the policy level, the Union Cabinet has approved a ₹37,500 crore coal gasification scheme. The government’s stated objective is to position domestic coal not only as a power fuel but also as an industrial and energy-security asset. The move also reflects concerns over import dependence for liquefied natural gas (LNG), methanol, ammonia and fertilisers. By accelerating coal gasification, the government aims to cut imports, support manufacturing, and reduce exposure to global commodity shocks.

The raw material security angle: LNG dependence and supply risk

The ORF report described natural gas as a raw material security risk for India. It noted that India is the world’s third-largest importer of LNG, with imports accounting for 50.1 percent of the total supply. Such reliance can expose the economy to currency volatility, supply-chain disruptions, and geopolitical crises, including the ongoing West Asia conflict mentioned in the report context.

For heavy industry, the risk is not abstract. The report cited war-triggered disruptions in global gas markets that forced domestic steelmakers to cut output and ration available supplies. For industries that use gas as fuel or feedstock, price and availability shocks can quickly spill into production schedules and cost structures. This is one of the key reasons the policy narrative now emphasises “energy independence” and “self-reliance” alongside industrial growth.

What coal gasification produces and why it matters

Coal gasification converts coal into syngas. That syngas can be used to produce methanol, ammonia, fertilisers, synthetic fuels and chemicals. The government’s broader framing is that domestic coal can be upgraded into products that India otherwise imports in large volumes, including LNG-linked inputs and petrochemical feedstocks.

The report and policy announcements also connect the initiative to a resilience objective. If imported gas or chemical feedstocks become expensive or unavailable, domestic conversion capacity can act as a buffer. But the ORF report also cautioned that coal gasification has uncertain decarbonisation outcomes, indicating that the initiative is being justified primarily on security-of-supply and industrial policy grounds.

Cabinet scheme: incentives, capacity targets, and timelines

Under the Cabinet-approved scheme, new coal gasification projects will be eligible for financial incentives of up to 20 percent of plant and machinery costs. The programme targets around 75 MT of coal and lignite gasification capacity. India’s broader objective remains 100 MT by 2030, as cited in the policy push.

Separately, the country currently has seven major coal gasification projects in various stages of development, according to the information provided in the report-style compilation. The scheme’s design reflects the government’s attempt to move projects from announcement to execution, using incentives and policy changes to improve viability.

Coal India’s project pipeline: MoUs, approvals, and joint ventures

Coal India Ltd (CIL) has been positioned as a central executing agency through partnerships with other public sector enterprises and joint ventures. Two years and a bit after launching the coal gasification mission, CIL signed memoranda of understanding (MoUs) in October 2022 with GAIL for a coal-to-SNG project in Burdwan district of West Bengal. That project was envisaged at a cost of ₹13,052.81 crore. CIL also signed an MoU with BHEL for a coal-to-ammonium nitrate project in Odisha, proposed with an investment of ₹11,782.05 crore.

However, the timeline shows that approvals were not immediate. It took until January 2024 for the Union Cabinet to approve the equity investments by CIL in these joint ventures with two state-owned entities. At the time, the Cabinet Committee on Economic Affairs (CCEA) said CIL would set up two coal gasification plants to help achieve the 100 MT target by 2030 and to support India’s objectives of self-reliance and energy independence.

New projects mentioned: Maharashtra and West Bengal

To mitigate supply risks highlighted by the steel sector experience, several coal gasification plants have entered the pipeline. These include projects by Greta Energy and Metal Private Ltd in Maharashtra, and a joint venture between Coal India Ltd and the Steel Authority of India in West Bengal.

In another development, Bharat Petroleum Corporation Ltd (BPCL) said it has approved the formation of a joint venture company with Coal India Ltd to set up a coal gasification project at Western Coalfields in Maharashtra. A regulatory filing said the proposed project will produce synthetic natural gas (SNG), intended as an indigenous alternative to imported natural gas. These announcements underscore how the coal gasification push is spreading across both upstream coal entities and downstream fuel and industrial users.

Coal linkages and policy tweaks to support project viability

The government informed Parliament that Coal India has issued Letters of Intent (LoIs) for a total quantity of 1.45 million tonnes (MT) of coal to consumers procuring fuel through the Non-Regulated Sector (NRS) Linkage Auction Scheme, under the sub-sector “Production of Syngas – leading to coal gasification.” The minister also said Coal India has allocated provisional coal linkages of 3.9 MT to its joint venture companies.

On the supply side for private developers, the government said private coal gasification plants will meet coal needs from allocated captive mines as well as linkages from CIL mines. The broader policy push also includes amendments to coal allocation norms to create a separate, dedicated auction window for coal gasification projects, intended to improve fuel security and project viability.

Project execution and commissioning targets on record

Coal India is implementing four coal gasification projects in partnership with other Central Public Sector Undertakings (CPSUs). These include the Talcher coal-based ammonia-urea complex in Odisha, expected to be commissioned in FY 2027-28. Three other projects at Lakhanpur in Odisha, Bardhaman in West Bengal, and Chandrapur in Maharashtra are scheduled for commissioning in 2029-30.

The same compilation also notes that commissioning for joint venture projects at Lakhanpur (Odisha), Bardhaman (West Bengal), and Chandrapur (Maharashtra) is currently targeted for FY 2029-30. These dates provide the clearest on-record timeline for when large-scale capacity may begin contributing to the 2030 objective.

Coal-to-SNG: the Raniganj JV details

Coal India and GAIL have also signed a joint venture agreement for setting up a Coal to Synthetic Natural Gas plant using surface coal gasification technology. The plant is planned in the Raniganj area of Eastern Coalfields Limited in West Bengal. It is expected to produce 80,000 Nm3 per hour of SNG.

The annual production is slated at 633.6 million Nm3, and the project is expected to require 1.9 million tonnes of coal supplied by Coal India. Separately, a Ministry of Coal press release dated July 26, 2023 said CIL has signed MOUs with BHEL, GAIL and IOCL to take up coal gasification projects in the country.

Key numbers at a glance

Market impact: what changes for industry and investors

The most direct impact is on fuel and feedstock security for sectors exposed to imported LNG, methanol, ammonia, fertilisers, and petrochemical inputs. The report context links gas market disruptions to reduced steel output and rationing, indicating that supply reliability can become a production constraint, not just a cost issue. For project developers, the scheme’s incentive cap of 20 percent of plant and machinery costs is designed to improve project economics, while coal linkages and a dedicated auction window aim to reduce fuel supply uncertainty.

At the same time, the timeline suggests the policy push is long-cycle. With the Talcher project expected in FY 2027-28 and other major projects slated for 2029-30, most capacity additions are not immediate. Investors tracking coal, oil and gas, fertiliser, and steel value chains will likely focus on execution milestones such as joint venture formation, equity approvals, coal linkage allocation, and commissioning progress.

Why the story matters

Coal gasification sits at the intersection of industrial policy, import substitution, and energy security. The ORF report’s framing is clear that decarbonisation outcomes are uncertain, but raw material security benefits are a key driver. The Cabinet scheme and Coal India’s project list show the government is moving beyond targets to financing support, coal allocation changes, and multiple public sector partnerships.

The near-term test will be implementation. The record includes past lags between MoU signing in October 2022 and equity approvals in January 2024, highlighting that large projects can face procedural and investment decision delays. The next set of checkpoints is whether planned plants meet the stated commissioning windows and whether coal linkages and auctions deliver dependable fuel supply.

Conclusion

India’s ₹37,500 crore coal gasification scheme and the expanding project pipeline led by Coal India and its partners reflect a clear push to reduce exposure to imported LNG and other critical industrial feedstocks. The government has put numbers on capacity targets, incentives, and coal allocation support, while companies have outlined specific projects and commissioning timelines. The next updates to watch are project-level approvals, linkage allocations, and progress toward the FY 2027-28 and FY 2029-30 commissioning targets that underpin the 2030 capacity goal.