Coal gasification scheme receives only 2 applications in second round

The government's ₹37,500-crore coal gasification scheme attracted only two applications in its second round, with experts citing financing constraints, uncertain demand and logistical costs.

The government's ₹37,500 crore scheme to promote coal and lignite gasification received only two applications in its second round, both from state-run NTPC Ltd, compared with seven applications in the first round. The two applications from NTPC envisage the production of urea in one project and methanol and dimethyl ether (DME) in another, the Ministry of Coal said on Tuesday.

 

The ministry has also opened the third round of the scheme, with January 11, 2027, as the deadline for submission of applications.

 

Industry experts said the lack of assured buyers for gasification products, difficulties in securing financing, uncertainty over coal supply, and logistical costs were among the factors affecting investment decisions.

  

High capital expenditure (capex) involved in setting up these projects makes assured demand for their products essential for commercial viability, according to Amrit Lal Meena, chairman of the Gasification Technology and Research Council (GTRC), an industry body.

 

“Coal gasification projects require substantial investment. Capital grants help, but long-term offtake arrangements for syngas and downstream products are critical, particularly for producers selling in the open market,” Meena told Business Standard, adding that lower international gas and chemical prices could weaken their competitiveness.

 

He also said that public sector companies could provide offtake assurances for products manufactured through coal gasification. “Public sector energy, fertiliser and chemical companies could anchor demand through long-term purchase agreements. The ethanol programme illustrates how blending targets, supported by oil marketing companies’ procurement, can create a predictable market,” Meena said.

 

According to Atanu Mukherjee, chief executive officer (CEO) of Dastur Energy that provides consultancy for coal gasification projects, NTPC’s continued participation is encouraging but financial incentives need to be complemented with other schemes for creating commercially viable and bankable gasification projects. He proposed a government-supported partial credit guarantee mechanism to share a defined portion of lenders' risks. “Such a framework could improve access to debt, lower financing costs, and encourage greater private investment,” Mukerjee said.

 

Meena said that coal gasification projects should be included in the harmonised list of infrastructure. “Explicit inclusion in the Department of Economic Affairs’ Harmonised Master List of Infrastructure Sub-sectors could improve access to suitable financing,” he said.

 

Logistical costs and dependence on imported plant machinery and technology, particularly from China, are other concerns. “Efficient coal and product logistics, alongside clear procedures for overseas technology and equipment sourcing, including from China, and support for indigenous technologies, would further strengthen project viability,” Meena said.

 

The first round of the scheme had attracted seven applications from five companies: NTPC, Adani Enterprises, Talcher Fertilisers, Gallantt Ispat, and Shyam Sel & Power. Adani Enterprises had submitted three project applications, all targeting urea production, while Talcher Fertilisers proposed another urea project. NTPC had applied for a synthetic natural gas project, Gallantt Ispat for direct reduced iron (DRI) and syngas, and Shyam Sel & Power for syngas production.

 

The scheme was approved by the Union Cabinet in May 2026 with a financial outlay of ₹37,500 crore. It aims to support the development of 75 million tonnes (mt) of coal gasification capacity by 2030, contributing to the country's broader target of achieving 100 mt of such capacity by the same year. Coal gasification involves converting coal into syngas, which can subsequently be used to manufacture products such as methanol, ammonia, urea, hydrogen, and synthetic natural gas.

 

The government intends to use the programme to reduce India's dependence on imports of liquefied natural gas (LNG), urea, ammonia, and methanol. Imports of these products together amounted to approximately ₹2.77 trillion in financial year 2024-25 (FY25), according to official data.

 

The scheme is expected to catalyse investments of ₹2.5-3 trillion and generate direct and indirect employment opportunities across the value chain. It builds on an earlier financial incentive scheme worth ₹8,500 crore, approved in January 2024, under which eight coal gasification projects are already being implemented.