Reorienting usage: Coal gasification can reduce energy import dependence

India produced more than 1 billion tonnes of coal in FY25 and possesses one of the world's largest coal reserves

The Union Cabinet’s approval of a ₹37,500 crore incentive scheme for coal gasification marks a significant shift. The revised framework substantially raises state support, up to ₹3,000 crore per project from the earlier ₹1,000 crore for private firms and ₹1,350 crore for public-sector units. For decades, coal in India has largely been treated as a fuel to be burnt for electricity. Gasification changes that logic. Instead of direct combustion, coal is chemically converted into synthesis gas, or syngas, which can then be used to produce methanol, ammonia, urea, synthetic natural gas, and hydrogen. Thus, coal becomes industrial feedstock rather than merely a combustion fuel. This matters because India’s import vulnerability extends beyond crude oil. While the country imports nearly 88 per cent of the crude oil it needs, it also imports over 90 per cent of its methanol and significant quantities of liquefied natural gas and ammonia, which are used in fertiliser production. Coal gasification offers a domestic alternative in sectors where import dependence remains structurally high. Estimates suggest that a scaled-up gasification ecosystem could reduce imports by as much as $15 billion annually. 

India is well positioned for such a transition. The country produced more than 1 billion tonnes of coal in FY25 and possesses one of the world’s largest coal reserves. However, nearly 80 per cent of the mined coal is still directly burnt for power generation. Since much of Indian coal has high ash content and a lower calorific value, direct combustion is relatively inefficient and polluting. Gasification offers a more value-added pathway in this respect. Hard-to-abate sectors (industries where reducing greenhouse gas emissions is technically or economically challenging) such as steel, chemicals and fertilisers require hydrogen, chemical feedstock, and high-temperature fuels. Gasification can produce grey hydrogen immediately and potentially blue hydrogen if integrated with carbon-capture systems. The policy push is now translating into projects. The Odisha plant of Talcher Fertilizers will be India’s first coal gasification-based urea complex and is expected to produce 1.27 million tonnes annually. Private participation is also growing. Jindal Steel’s Angul facility is already among the world’s largest syngas-based steel plants, with additional projects planned in other parts of the country. Joint ventures involving Coal India, Gail and Bharat Heavy Electricals are also attempting to build an integrated gasification ecosystem. 

Still, the challenges are substantial. Gasification projects are capital-intensive, technologically complex, and highly sensitive to global price cycles. China recognised decades ago the value of coal gasification and continued investing through commodity cycles. Today it dominates coal-derived methanol and ammonia production. India, despite similar coal advantages, remained hesitant. There is also the risk that excessive dependence on coal-linked infrastructure could slow the shift to renewable energy and green hydrogen. But the debate should not be framed as a choice between coal and clean energy alone. India’s transition will inevitably differ from that of advanced economies. Coal will remain part of the economy for some time. The more relevant question is whether India continues burning it inefficiently or uses it in cleaner, higher-value industrial pathways. Gasification, if executed strategically, offers the latter possibility.