Why India is pushing coal gasification: Rs 37,500 crore scheme explained

India is making a major push to use coal gasification as a way to reduce import dependence and add value to its large coal reserves. Union Coal and Mines Minister G. Kishan Reddy has said the technology could substitute imports worth up to Rs 3 lakh crore. To boost the sector, the Union Cabinet has approved a Rs 37,500 crore incentive package.

Coal gasification is the process of converting coal into synthetic gas, or syngas. Syngas can then be processed further to make urea, methanol, ammonium nitrate, synthetic natural gas (SNG), hydrogen, ether and dimethyl ether. India has roughly 401 billion tonnes of coal reserves and about 47 billion tonnes of lignite — but it imports a large share of urea, almost all of its ammonia, and 80 to 90 per cent of its methanol. Converting domestic coal into these products is meant to cut this dependence.

The Union Coal Ministry has set a target of gasifying 100 million tonnes of coal by 2030. The new Rs 37,500 crore scheme is designed to support the gasification of about 75 million tonnes of coal and lignite to help meet that target. This adds to an earlier Rs 8,500 crore package approved in January 2024, of which Rs 6,233 crore has already gone to eight projects across public sector and private sector firms.

The projects include joint ventures of Coal India with Bharat Heavy Electricals (BHEL) and GAIL, along with Coal Indias own Western Coalfields project. Private participants include Jindal Steel and Greta Energy and Metal. The Talcher coal-based ammonia-urea complex is expected to start in FY2027-28. Other projects making syngas, ammonium nitrate, direct-reduced iron, ethanol and hydrogen are expected to come up by FY2029-30.

A few technical challenges shape Indias choice of technology. Indian coal has high ash content, variable gross calorific value and complex mineral matter. These features make fluidised-bed gasification the most suitable approach — it uses a gas stream that lifts coal away from the ash before gasification. This is different from China (the global leader in gasification), Australia or the US, which mostly use coals with lower ash content.

Gasification plants are capital-intensive. Research by the Chintan Research Foundation (March 2026) found that capital costs make up about 30 per cent of total syngas production costs in India. That is why financial incentives equal to one-fifth of plant and machinery costs are seen as crucial. BHEL has developed an indigenous pressurised fluidised-bed gasifier suitable for Indian coal, while Jindal Steel and Greta Energy and Metal have indigenised 80 to 90 per cent of their production, which can cut project costs by 30 to 40 per cent.

For exam aspirants, coal gasification ties together energy security, the chemicals sector, atmanirbharta in fertilisers, and the just-transition aspect of coal in Indias climate strategy. It is likely to feature in questions on Indias energy mix, downstream coal products, and the role of central PSUs such as Coal India, BHEL and GAIL.