- 22.6 mnt gasification capacity either operational or under implementation
- Coal gasification expected to expand domestic coal demand beyond power
India has 22.6 million tonnes per annum (mnt/year) of coal gasification capacity operational or under development as focus shifts towards coal chemicals and synthetic fuels.
The Government of India has significantly strengthened its coal gasification strategy by approving an INR 37,500 crore incentive scheme aimed at accelerating investment in coal-to-chemicals and synthetic fuel projects, as it works towards its target of 100 mnt of coal gasification capacity by 2030.
According to the Ministry of Coal, India currently has 22.6 mnt of coal gasification capacity either operational or under implementation. The newly approved incentive programme is expected to support projects capable of consuming an additional 75 MTPA of coal, substantially advancing the country’s long-term gasification ambitions.
Coal gasification emerges as a strategic policy priority
Coal gasification has become a central pillar of India’s strategy to increase the value derived from its abundant domestic coal resources while reducing dependence on imported natural gas, methanol and chemical feedstocks.
Rather than burning coal directly for power generation, gasification converts coal into synthesis gas (syngas), which can subsequently be processed into methanol, ammonia, synthetic natural gas (SNG), hydrogen and a range of downstream chemicals.
The government views the technology as a means of diversifying coal utilisation beyond conventional thermal power generation while creating new domestic manufacturing opportunities.
Capacity pipeline reaches 22.6 MTPA
The Ministry said the current pipeline comprises:
While this represents meaningful progress, it remains well below the government’s 100 MTPA target by 2030, highlighting the scale of investment still required over the next four years.
Larger incentive package seeks to unlock private investment
Recognising the capital-intensive nature of coal gasification, the government has substantially enhanced financial support under the newly approved scheme.
Under the earlier INR 8,500 crore programme announced in January 2024, projects were eligible for financial assistance of up to 15% of capital expenditure, subject to prescribed limits.
The new INR 37,500 crore scheme, approved in May 2026, raises this support to up to 20% of eligible plant and machinery costs, significantly improving project economics for developers.
The enhanced incentives are expected to encourage greater participation from both public sector companies and private investors.
Focus extends beyond power generation
The Ministry said the government’s objective extends beyond coal utilisation alone.
Coal gasification is being promoted to manufacture:
- Methanol
- Coal-based chemicals
- Synthetic Natural Gas (SNG)
- Fertiliser feedstocks
- Other downstream industrial products
The government also indicated that policy support includes facilitating coal availability, streamlining approvals, promoting indigenous technologies and strengthening the overall regulatory framework for gasification projects.
Diversifying domestic coal demand
Coal gasification also offers an additional avenue for monetising India’s vast coal reserves beyond electricity generation. As renewable energy continues to expand, policymakers increasingly view coal gasification as a means of sustaining long-term domestic coal demand while reducing import dependence for chemicals and industrial feedstocks.
Unlike thermal power generation, demand for chemical products remains closely linked to industrial growth, providing a potentially more diversified market for domestic coal.
BigMint’s assessment
The approval of the INR 37,500 crore incentive scheme represents one of the most significant policy interventions undertaken by the government to promote coal gasification. By increasing financial support from 15% to 20% of eligible project costs and targeting an additional 75 MTPA of coal utilisation, the government has substantially improved the commercial viability of what has traditionally been one of the most capital-intensive segments of the coal value chain.
However, while policy intent is clear, execution remains the critical challenge. India’s current operational and under-construction capacity of 22.6 MTPA remains less than one-quarter of the 100 MTPA target set for 2030. Achieving the remaining capacity within the next four years will require rapid project execution, significant private sector investment, timely environmental clearances and continued technological advancement.
From a market perspective, coal gasification has the potential to reshape India’s domestic coal demand over the longer term. Instead of relying predominantly on thermal power generation, the country could increasingly utilise coal as a feedstock for chemicals, fertilisers, methanol and synthetic fuels. This would diversify coal consumption, create higher-value industrial products and strengthen India’s energy and feedstock security.
For India’s coal industry, the initiative is strategically important because it opens a new avenue for demand growth at a time when the power sector is gradually becoming more renewable-intensive. While coal-fired generation will remain the dominant source of electricity for the foreseeable future, successful commercialisation of coal gasification could create an additional structural demand driver for domestic coal, particularly lower-grade non-coking coal and lignite that are well suited to gasification technologies.
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