India Bets on Coal Gasification to Cut Imports, Build New Industrial Value Chain
Coal gasification is a process in which coal or lignite is converted into a synthesis gas, or “syngas”, rather than being directly burned for power generation.
September 21, 2026. By Abha Rustagi
India is stepping up efforts to turn its abundant coal reserves into gas, fertiliser feedstocks and industrial chemicals, betting that coal gasification can help reduce imports while creating new domestic manufacturing value chains.
The push has gained momentum after the government approved an INR 37,500 crore incentive scheme in May to promote surface coal and lignite gasification projects. The scheme aims to support the gasification of about 75 million tonnes of coal and help India move towards its target of gasifying 100 million tonnes by 2030.
Coal gasification is a process in which coal or lignite is converted into a synthesis gas, or “syngas”, rather than being directly burned for power generation. Syngas can then be processed into products including synthetic natural gas, hydrogen, methanol, ammonia, urea, ammonium nitrate and other industrial chemicals.
For India, which has one of the world's largest coal reserves but also relies heavily on imports of several energy and industrial products, the technology is being positioned as a way to extract greater economic value from domestic resources.
The government says imports of products that could potentially be substituted through gasification, including LNG, urea, ammonia, methanol and other industrial feedstocks, amounted to about INR 2.77 lakh crore in fiscal 2024-25.
From Coal to Chemicals
Unlike conventional coal-fired power generation, gasification seeks to use coal as an industrial feedstock.
The resulting syngas can be converted into different products depending on the technology and downstream plant configuration. This opens the possibility of producing fertiliser inputs, chemicals, fuels and synthetic gas from domestic coal.
The government has therefore linked coal gasification to a broader strategy of energy security and import substitution, while also encouraging indigenous technology development.
India's coal gasification programme dates back to the National Coal Gasification Mission launched in 2021. An INR 8,500 crore financial incentive scheme approved in January 2024 supported eight projects, which are under implementation.
The new scheme significantly increases the scale of government support. It offers a financial incentive of up to 20 percent of eligible plant and machinery costs, compared with 15 percent under the earlier scheme, subject to prescribed ceilings.
The maximum incentive for an individual project is INR 5,000 crore, while the cap for a single product is INR 9,000 crore, except for synthetic natural gas and urea. An entity group can receive up to INR 12,000 crore across projects.
The government estimates that the new programme could mobilise INR 2.5 lakh crore to INR 3 lakh crore of investment and generate around 50,000 direct and indirect jobs across coal-bearing regions.
Big Industrial Names Enter the Race
The latest sign of industry interest came in September, when the first round of applications under the INR 37,500 crore scheme closed with seven proposals.
Applicants included NTPC, Adani Enterprises, Gallantt Ispat, Shyam Sel & Power and Talcher Fertilisers.
The proposed products range from synthetic natural gas and urea to direct reduced iron and syngas.
The government has opened a second round of applications and said application windows will continue to open at two-month intervals, giving companies additional opportunities to submit projects.
The participation of large industrial groups marks an important stage for a technology that has historically faced questions around cost, technology selection, feedstock quality and environmental performance.
Atanu Mukherjee, CEO of Dastur Energy, said the participation of companies such as Adani and NTPC indicates that gasification is increasingly being considered as an industrial investment rather than solely as a government-supported initiative.
“The entry of large players such as Adani and NTPC is significant because it indicates that coal gasification is beginning to be evaluated as a serious industrial investment proposition rather than only a policy-led initiative. The strategic case is compelling: India has abundant domestic coal, while continuing to import significant quantities of gas, fertiliser feedstocks and other industrial molecules. Gasification creates an opportunity to convert a domestic resource into higher-value products and reduce part of that external dependence,” said Mukherjee.
“However, the next phase will be determined by project economics. Gasification projects are capital intensive, and their bankability will depend on technology suited to Indian coal, scale, long-term product offtake, competitive financing and effective carbon management. The government’s incentive framework can help absorb some of the early-stage risk, but ultimately these projects will have to demonstrate sustainable returns without being permanently dependent on subsidy. If the first set of projects establishes that economic model, it could unlock a much larger investment cycle around coal-to-chemicals, gas, fertilisers and other industrial feedstocks, while strengthening India’s energy and raw-material security,” he added.
Economics Remain Critical
Gasification projects require large upfront investments and depend on the availability of suitable technology, reliable coal supplies, infrastructure and markets for the products they produce.
Indian coal also presents technical challenges because of its relatively high ash content. Industry and government-backed projects are therefore focusing on adapting gasification processes to Indian feedstock, improving process efficiency, localising critical equipment and strengthening emissions, water and ash management.
Long-term product offtake will be another important factor.
A gasification plant may produce syngas or convert it into products such as urea, methanol, ammonia or synthetic natural gas. The commercial viability of each project will depend partly on the price at which those products can be sold relative to the cost of coal, capital, technology, financing and operations.
The government's extension of coal linkage tenure to as much as 30 years for the “Production of Syngas leading to Coal Gasification” sub-sector is intended to provide greater certainty for investors.
From Demonstration to Commercial Scale
Some coal-to-chemicals projects are already under development.
Talcher Fertilisers is developing a urea project, while Coal India has outlined initiatives involving ammonium nitrate and synthetic natural gas. The projects are also intended to generate operational experience that can help inform future developments.
Coal gasification is not limited to above-ground facilities. Coal India is also pursuing an underground coal gasification pilot at the Kasta West Block of Eastern Coalfields Ltd. The technology seeks to convert deep-seated or otherwise unmineable coal into syngas underground.
That technology remains at an earlier stage of development, with commercial-scale deployment yet to be established globally.
Coal, Carbon and the Energy Transition
The expansion of coal gasification comes as India seeks to balance energy security, industrial growth and its longer-term transition towards lower-carbon energy systems.
Gasification does not by itself eliminate the carbon emissions associated with coal. Its environmental performance will depend on the technology used, the products produced and the extent to which carbon capture, utilisation and storage is incorporated.
That issue is becoming more relevant as developers explore coal-to-chemicals projects alongside carbon-management technologies.
In Maharashtra, New Era Cleantech Solutions is developing an integrated coal gasification and carbon capture complex in Chandrapur. The project is planned in phases and is expected to produce ammonia, ammonium nitrate and monoethylene glycol initially, followed by products including dimethyl ether, urea, sustainable aviation fuel and ethanol.
The company has said the project, spread over about 1,650 acres, will process more than 5 million tonnes of coal annually, with total investment estimated at INR 20,000 crore across two phases.
The broader industry debate is therefore shifting from whether coal gasification can be developed in India to whether individual projects can demonstrate commercially sustainable and environmentally manageable business models.
For the government, the objective is to reach 100 million tonnes of coal gasification by 2030. For developers and lenders, the immediate test will be whether the first wave of projects can convert policy support and India's domestic coal advantage into competitive products at commercial scale.
As Mukherjee put it, the outcome of the first projects could determine whether coal gasification develops into a much larger investment cycle spanning coal-to-chemicals, gas, fertilisers and other industrial feedstocks.
The push has gained momentum after the government approved an INR 37,500 crore incentive scheme in May to promote surface coal and lignite gasification projects. The scheme aims to support the gasification of about 75 million tonnes of coal and help India move towards its target of gasifying 100 million tonnes by 2030.
Coal gasification is a process in which coal or lignite is converted into a synthesis gas, or “syngas”, rather than being directly burned for power generation. Syngas can then be processed into products including synthetic natural gas, hydrogen, methanol, ammonia, urea, ammonium nitrate and other industrial chemicals.
For India, which has one of the world's largest coal reserves but also relies heavily on imports of several energy and industrial products, the technology is being positioned as a way to extract greater economic value from domestic resources.
The government says imports of products that could potentially be substituted through gasification, including LNG, urea, ammonia, methanol and other industrial feedstocks, amounted to about INR 2.77 lakh crore in fiscal 2024-25.
From Coal to Chemicals
Unlike conventional coal-fired power generation, gasification seeks to use coal as an industrial feedstock.
The resulting syngas can be converted into different products depending on the technology and downstream plant configuration. This opens the possibility of producing fertiliser inputs, chemicals, fuels and synthetic gas from domestic coal.
The government has therefore linked coal gasification to a broader strategy of energy security and import substitution, while also encouraging indigenous technology development.
India's coal gasification programme dates back to the National Coal Gasification Mission launched in 2021. An INR 8,500 crore financial incentive scheme approved in January 2024 supported eight projects, which are under implementation.
The new scheme significantly increases the scale of government support. It offers a financial incentive of up to 20 percent of eligible plant and machinery costs, compared with 15 percent under the earlier scheme, subject to prescribed ceilings.
The maximum incentive for an individual project is INR 5,000 crore, while the cap for a single product is INR 9,000 crore, except for synthetic natural gas and urea. An entity group can receive up to INR 12,000 crore across projects.
The government estimates that the new programme could mobilise INR 2.5 lakh crore to INR 3 lakh crore of investment and generate around 50,000 direct and indirect jobs across coal-bearing regions.
Big Industrial Names Enter the Race
The latest sign of industry interest came in September, when the first round of applications under the INR 37,500 crore scheme closed with seven proposals.
Applicants included NTPC, Adani Enterprises, Gallantt Ispat, Shyam Sel & Power and Talcher Fertilisers.
The proposed products range from synthetic natural gas and urea to direct reduced iron and syngas.
The government has opened a second round of applications and said application windows will continue to open at two-month intervals, giving companies additional opportunities to submit projects.
The participation of large industrial groups marks an important stage for a technology that has historically faced questions around cost, technology selection, feedstock quality and environmental performance.
Atanu Mukherjee, CEO of Dastur Energy, said the participation of companies such as Adani and NTPC indicates that gasification is increasingly being considered as an industrial investment rather than solely as a government-supported initiative.
“The entry of large players such as Adani and NTPC is significant because it indicates that coal gasification is beginning to be evaluated as a serious industrial investment proposition rather than only a policy-led initiative. The strategic case is compelling: India has abundant domestic coal, while continuing to import significant quantities of gas, fertiliser feedstocks and other industrial molecules. Gasification creates an opportunity to convert a domestic resource into higher-value products and reduce part of that external dependence,” said Mukherjee.
“However, the next phase will be determined by project economics. Gasification projects are capital intensive, and their bankability will depend on technology suited to Indian coal, scale, long-term product offtake, competitive financing and effective carbon management. The government’s incentive framework can help absorb some of the early-stage risk, but ultimately these projects will have to demonstrate sustainable returns without being permanently dependent on subsidy. If the first set of projects establishes that economic model, it could unlock a much larger investment cycle around coal-to-chemicals, gas, fertilisers and other industrial feedstocks, while strengthening India’s energy and raw-material security,” he added.
Economics Remain Critical
Gasification projects require large upfront investments and depend on the availability of suitable technology, reliable coal supplies, infrastructure and markets for the products they produce.
Indian coal also presents technical challenges because of its relatively high ash content. Industry and government-backed projects are therefore focusing on adapting gasification processes to Indian feedstock, improving process efficiency, localising critical equipment and strengthening emissions, water and ash management.
Long-term product offtake will be another important factor.
A gasification plant may produce syngas or convert it into products such as urea, methanol, ammonia or synthetic natural gas. The commercial viability of each project will depend partly on the price at which those products can be sold relative to the cost of coal, capital, technology, financing and operations.
The government's extension of coal linkage tenure to as much as 30 years for the “Production of Syngas leading to Coal Gasification” sub-sector is intended to provide greater certainty for investors.
From Demonstration to Commercial Scale
Some coal-to-chemicals projects are already under development.
Talcher Fertilisers is developing a urea project, while Coal India has outlined initiatives involving ammonium nitrate and synthetic natural gas. The projects are also intended to generate operational experience that can help inform future developments.
Coal gasification is not limited to above-ground facilities. Coal India is also pursuing an underground coal gasification pilot at the Kasta West Block of Eastern Coalfields Ltd. The technology seeks to convert deep-seated or otherwise unmineable coal into syngas underground.
That technology remains at an earlier stage of development, with commercial-scale deployment yet to be established globally.
Coal, Carbon and the Energy Transition
The expansion of coal gasification comes as India seeks to balance energy security, industrial growth and its longer-term transition towards lower-carbon energy systems.
Gasification does not by itself eliminate the carbon emissions associated with coal. Its environmental performance will depend on the technology used, the products produced and the extent to which carbon capture, utilisation and storage is incorporated.
That issue is becoming more relevant as developers explore coal-to-chemicals projects alongside carbon-management technologies.
In Maharashtra, New Era Cleantech Solutions is developing an integrated coal gasification and carbon capture complex in Chandrapur. The project is planned in phases and is expected to produce ammonia, ammonium nitrate and monoethylene glycol initially, followed by products including dimethyl ether, urea, sustainable aviation fuel and ethanol.
The company has said the project, spread over about 1,650 acres, will process more than 5 million tonnes of coal annually, with total investment estimated at INR 20,000 crore across two phases.
The broader industry debate is therefore shifting from whether coal gasification can be developed in India to whether individual projects can demonstrate commercially sustainable and environmentally manageable business models.
For the government, the objective is to reach 100 million tonnes of coal gasification by 2030. For developers and lenders, the immediate test will be whether the first wave of projects can convert policy support and India's domestic coal advantage into competitive products at commercial scale.
As Mukherjee put it, the outcome of the first projects could determine whether coal gasification develops into a much larger investment cycle spanning coal-to-chemicals, gas, fertilisers and other industrial feedstocks.
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