BCGCL, MCL sign land deal for India's first coal gasification project

BCGCL and MCL sign a land agreement for India's first indigenous coal gasification project in Odisha, aimed at boosting energy security and reducing import dependence

Amid the escalating West Asia conflict and resulting volatility in global energy supply chains, India has taken a significant step towards strengthening its energy security and reducing import dependence with a key land leasing agreement for a major coal gasification project in Odisha.

 

In a major push for the coal gasification roadmap, Bharat Coal Gasification and Chemicals Limited (BCGCL) and Mahanadi Coalfields Limited (MCL) have signed an agreement for the country’s first indigenous coal-to-ammonium nitrate project at Lakhanpur in Jharsuguda district.

 

Sources said the project, with a planned capacity of 2,000 tonnes per day (TPD), will be set up at an estimated investment of Rs 25,000 crore. The agreement marks a crucial milestone as it will deploy indigenously developed coal gasification technology by Bharat Heavy Electricals Limited (BHEL).

 

Coal gasification technology converts coal into synthesis gas (syngas), which can then be used to produce a range of value-added products, including ammonia, methanol, urea, hydrogen, synthetic natural gas (SNG), petrochemicals, and liquid fuels. The Lakhanpur facility will specifically focus on producing ammonium nitrate, a key industrial chemical widely used in fertilisers and mining.

 

The Lakhanpur project is among seven coal gasification projects worth Rs 64,000 crore sanctioned for three states by the Ministry of Coal to reduce imports of energy products. Of the seven projects, four are located in Maharashtra, two in Odisha, and one in West Bengal.

 

The project will come up on an area of over 350 acres of MCL land. It has gained momentum following a recent policy tweak by the Coal Ministry that allows the utilisation of coal-bearing area land for gasification projects. The move is expected to unlock new avenues for value-added utilisation of India’s vast coal reserves (around 400 billion tonnes), the fifth largest globally, estimated to last at least 70 years.

 

The Centre has already extended financial support of Rs 1,350 crore to the project under its dedicated coal gasification incentive scheme. Key engineering and construction contracts have already been awarded, with major lump sum turnkey (LSTK) packages — LSTK-1 and LSTK-2 bagged by BHEL, while LSTK-3 and LSTK-4 have been awarded to Larsen & Toubro. Parallel site development activities, including boundary wall construction and tree enumeration, are underway to ensure adherence to timelines.

 

The agreement was signed in the presence of Union Coal and Mines Minister G Kishan Reddy in New Delhi on Wednesday. Emphasising the strategic importance of the project, Reddy said India must move beyond conventional coal usage and adopt large-scale gasification to harness its abundant resources more efficiently.

 

“The Union Cabinet has already approved an outlay of Rs 8,500 crore to promote coal gasification, with seven projects finalised so far, including three where foundation stones have been laid. The government is driving focused initiatives to transform the coal sector in line with the vision of Atmanirbhar Bharat. The land lease agreement between MCL and BCGCL is a significant step forward and it marks the first indigenous project of BCGCL,” he said.

 

Coal gasification, Reddy said, has the potential to be a “game-changer” by reducing import dependency and conserving foreign exchange, especially amid global disruptions. He also stressed the need for coordinated efforts across ministries, including environment, heavy industries, and commerce, to fast-track implementation.

 

Speaking on the occasion, Union Coal Secretary Vikram Dev Dutt termed the agreement a landmark milestone in advancing the coal gasification initiative in the country. “All critical enablers, including statutory clearances, letters of award and tendering processes, are at advanced stages for timely execution of the project. The Lakhanpur project could serve as a model for indigenous development with a competitive cost structure,” he said.

 

The project assumes added significance as India accelerates efforts to diversify its coal sector and promote cleaner, value-added applications of coal. Of the 131 coal blocks allocated under the Commercial Coal Mining Policy, 21 have received mine opening permission and 12 have already commenced production by February 28.