- 22.6 mnt/y gasification capacity currently operational or under implementation
- Gasification increasingly targets chemicals, steel and import substitution
India’s coal gasification ambitions are entering a potentially important new phase, with Reliance Industries Limited’s (RIL) proposed INR 2.73 lakh crore underground coal gasification complex adding a new dimension to a growing pipeline of projects spanning fertilisers, synthetic natural gas, ammonium nitrate, hydrogen and steel.
The Reliance proposal is unusual because it seeks to gasify coal underground, rather than mine it and feed it into a surface gasifier. If successful, it could establish a pathway for monetising deep coal resources that may otherwise be difficult or uneconomic to extract conventionally.
But viewed alongside projects being developed by Coal India Limited (CIL), Jindal Steel and private-sector companies, it also points towards a broader strategic shift: India is seeking alternative, higher-value uses for its vast coal resources as the power sector gradually becomes less coal-intensive.
The government has targeted 100 million tonnes (mnt) of coal gasification by 2030. Around 22.6 mnt/year of capacity is currently operational or under implementation, including around 8 Mnt/year at Jindal Steel, 2.6 mnt/year at Talcher Fertilisers and around 12 mnt/year across eight projects under the government’s earlier incentive programme.
Reliance takes gasification underground
RIL proposes developing the Chintalapudi and Recherla coal blocks in Andhra Pradesh’s Eluru district, containing an estimated 3.13 billion tonnes of G12-G13 coal, much of it located more than 600 metres underground.
Rather than extracting this coal conventionally, underground coal gasification (UCG) converts the coal in situ into synthesis gas, or syngas, which can subsequently be used to produce hydrogen, methanol, ammonia, synthetic natural gas and other chemicals.
Reliance proposes an initial exploration and pilot phase involving up to INR 3,000 crore through 2027. Subject to establishing commercial viability, around INR 1.2 lakh crore could follow during development in 2028-30 and another INR 1.5 lakh crore during production over subsequent decades. The overall INR 2.73 lakh crore figure should therefore be viewed as a long-term, conditional investment proposal rather than committed near-term capital expenditure.
UCG receives a different policy push
An important distinction exists between Reliance’s proposal and India’s broader surface gasification programme.
The Union Cabinet approved a new INR 37,500 crore incentive scheme in May specifically for surface coal and lignite gasification projects. It offers financial support of up to 20% of plant and machinery costs and is intended to support projects consuming around 75 mnt/year of coal and lignite.
RIL’s underground project would therefore not directly qualify for this particular incentive pool.
UCG instead benefits from a separate policy framework. The government provides a 50% rebate on revenue share for coal used for gasification, while UCG projects have also received concessions normally available to underground mines. These include reducing the auction floor revenue share to 2% from 4%, waiver of upfront payments and a 50% reduction in performance security. The government has also established specific UCG guidelines and provisions within Coal Mine Development Agreements.
This distinction matters because India is effectively pursuing two gasification pathways simultaneously: large surface plants converting mined coal into industrial feedstocks, and UCG aimed at monetising deeper or potentially stranded coal resources.
Surface gasification is further advanced
India’s surface gasification programme already has an operating industrial example.
Jindal Steel’s Angul operations use coal-derived syngas in direct reduced iron (DRI) production, demonstrating how domestic non-coking coal can partly substitute imported energy and steelmaking raw materials.
Talcher Fertilisers represents the next major test. The project is designed to gasify high-ash domestic coal to produce around 1.27 mnt/year of urea.
Coal India is meanwhile moving downstream from mining into chemicals.
Bharat Coal Gasification and Chemicals Limited (BCGCL), a joint venture between CIL and Bharat Heavy Electricals Limited (BHEL), is developing the Lakhanpur project in Odisha to produce around 0.66 mnt/year of ammonium nitrateusing high-ash domestic coal.
CIL is also pursuing coal-to-synthetic natural gas projects at Sonepur Bazari in West Bengal and Chandrapur in Maharashtra through partnerships with major energy companies.
These projects are strategically significant because Coal India would no longer simply mine and sell coal. It would convert part of its resource base into higher-value industrial feedstocks.
Import substitution is the underlying strategy
The common thread across India’s gasification programme is increasingly clear. It is not primarily another route for generating electricity from coal.
It is an import-substitution strategy.
India remains substantially import-dependent for several of these products. The government estimates LNG import dependence at more than 50%, urea around 20%, ammonia almost 100% and methanol around 80-90%.
The government estimates that commissioning projects under its gasification schemes and Talcher Fertilisers could ultimately generate around INR 1.5 lakh crore/year of import substitution.
That is arguably the strongest economic rationale for the strategy: converting India’s abundant domestic coal into molecules that would otherwise have to be imported.
Economics, carbon and geology remain critical tests
There remains a substantial gap between India’s 100 mnt ambition and proven commercial reality.
Gasification plants are extremely capital intensive, while India’s high-ash coal presents technical challenges that imported gasification technologies were not necessarily designed to handle.
Carbon is another fundamental issue. Gasifying coal does not eliminate its carbon footprint. Without effective carbon capture, utilisation and storage (CCUS), producing hydrogen, synthetic natural gas or chemicals from coal can remain highly carbon intensive.
UCG introduces another layer of risk that conventional surface gasification does not face.
Because combustion and gasification occur underground, operators must control the subterranean reaction zone while preventing contamination of surrounding groundwater. At depths exceeding 500-600 metres, geological integrity, cavity behaviour, gas containment and eventual land subsidence become critical engineering and environmental considerations.
RIL’s exploration and pilot stage is therefore particularly important. The project will have to demonstrate not merely that syngas can be produced, but that the underground reaction can be controlled, monitored and isolated safely over prolonged periods before investment on the proposed commercial scale can be justified. The project’s commercial viability remains explicitly conditional on the results of that initial phase.
BigMint assessment
Reliance’s proposal is significant less because INR 2.73 lakh crore will necessarily be invested and more because it extends India’s gasification strategy into an entirely different resource category: deep coal that may otherwise never be economically mined.
At the same time, surface gasification is beginning to create an industrial chain stretching across Odisha, West Bengal and Maharashtra.
The strategic direction is becoming clearer.
As renewable capacity expands and coal’s long-term share in electricity generation comes under pressure, India’s coal industry needs to consider whether its enormous resource base can create value beyond simply supplying power stations.
Gasification offers one possible answer: convert domestic coal into gas, fertilisers, chemicals, hydrogen and steelmaking feedstocks that India currently imports.
But surface and underground gasification should not be conflated.
Surface projects now have substantial direct government financial support through the INR 37,500 crore incentive scheme. UCG instead relies on mining and revenue-share concessions and must overcome considerably different geological and environmental risks before its commercial potential can be established.
The next few years should therefore provide several distinct tests.
Talcher will test large-scale coal-to-fertiliser economics. Lakhanpur will test indigenous high-ash coal gasification technology. Sonepur Bazari will test coal-to-synthetic natural gas. Jindal is testing deeper integration between gasification and steelmaking.
And Reliance could test something fundamentally different: whether India’s vast deep coal resources can create economic value without the coal ever being brought to the surface.
If these technologies prove commercially viable, India’s coal story could gradually shift from how much coal the country mines to how much economic value it can extract from its coal resource.
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