Coal gasification: Coal still supplies more than 70% of India’s electricity. Yet its share will fall as renewable generation expands and pressure grows to curb emissions. That leaves the government with a question: what use should India make of its large coal reserves when burning coal for power becomes less attractive?
The Coal Ministry’s answer is gasification. It has issued the first request for proposals under a ₹37,500 crore scheme for surface coal and lignite gasification projects. Applications close on September 7. The ministry expects to select the first applicants by October 21, issue letters of award in November and sign project agreements by January 2027. The dates are tentative.
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The scheme seeks to turn coal from a power-station fuel into an industrial raw material.
Coal gasification targets chemicals and fertilisers
Gasification converts coal into synthesis gas, or syngas, which consists mainly of carbon monoxide and hydrogen. Syngas can be processed into methanol, ammonia, urea, synthetic natural gas and other chemicals.
This is the economic case for the scheme. India has large coal reserves but relies on imported crude oil, liquefied natural gas, fertiliser inputs and petrochemical feedstocks. Domestic coal-based production could replace part of these imports, though the amount will depend on costs and the quality of the final products.
The government wants 100 million tonnes of coal to be gasified by 2030. This is a target for coal used in gasification, not an additional coal-production target. The new scheme follows an ₹8,500 crore programme approved in January 2024, under which incentives worth ₹6,233 crore have been earmarked for eight projects.
The ₹37,500 crore outlay can meet up to 20% of a project’s plant and machinery cost. Support for one project is capped at ₹5,000 crore, while one applicant and its group companies cannot receive more than ₹12,000 crore. The incentive will be paid in four instalments against specified milestones. Project developers must arrange buyers for their output.
That last condition is important. A subsidy may help build a plant, but it does not guarantee that coal-derived methanol, ammonia or gas will compete with imported products through changes in oil, gas and coal prices.
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Coal gasification projects face a technology test
Commercial coal gasification requires large plants, specialised gasifiers and extensive treatment of the raw gas. Indian coal’s high ash content adds to the engineering difficulty.
China built a large coal-to-chemicals industry because it had abundant coal and limited domestic oil and gas. Its plants make methanol, olefins, synthetic gas and fuels. Cheap coal and state support have kept the industry expanding, but its emissions remain high and its economics can weaken when oil prices fall.
India has begun to build its own projects. Coal India and Bharat Heavy Electricals Ltd have formed Bharat Coal Gasification and Chemicals Ltd to establish a coal-to-ammonium nitrate plant at Lakhanpur in Odisha. The proposed plant will use BHEL’s technology and produce 2,000 tonnes of ammonium nitrate a day. Its estimated cost is ₹11,782 crore.
The project will show whether Indian technology can process high-ash coal reliably at commercial scale. It will also test whether the product can compete with ammonium nitrate made through conventional routes.
Capital has held back the industry. Gasification plants require heavy investment before production begins, take years to build and expose investors to technology and commodity-price risks. The government is taking part of that risk onto its budget.
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Coal gasification does not settle the emissions question
Gasification can remove sulphur, particulates and some contaminants from syngas before it is used. Carbon dioxide is also produced in a concentrated stream, which can make capture easier than at a conventional coal-fired power station.
That does not make the process low-carbon. Converting coal into gas or chemicals can produce substantial emissions unless the project captures and stores the carbon dioxide. China’s expansion of coal-to-gas and coal-to-chemicals has drawn criticism for this reason.
Gasification plants also consume large quantities of water. Pithead locations may lower coal transport costs, but several coal-bearing regions already face competition for water from households, farming, mines and power stations. The project appraisal process will have to account for the source and cost of that water.
Coal gasification therefore has a narrower purpose than the language of “clean coal” sometimes suggests. It may produce more valuable industrial inputs from domestic coal and cut selected imports. It cannot replace renewable power or remove the carbon cost of coal.
The ₹37,500 crore scheme will be judged by the plants that reach production, the imports they replace and the public money required for each tonne of output. Without those tests, India may exchange dependence on imported feedstocks for an expensive domestic industry protected by subsidies.