By Debajit Palit, Centre Head, and Shagun Mamgain, Consultant, Centre for Climate Change and Energy Transition, Chintan Research Foundation
Amid a volatile global energy landscape, the coming summer might be challenging for India with high expected electricity demand. The West Asia conflict has tightened gas supplies and pushed prices upwards, threatening the viability of gas-based generation, used to meet peak demand. Beyond this crisis, gas-based plants, mostly reliant on imported gas, will continue to exacerbate vulnerabilities to geopolitical risks and market fluctuations, not just for power generation but also for imported commodities such as ammonia, urea and methanol. Coal gasification can emerge as a strategic solution by leveraging India’s abundant coal reserves to cut imports and bolster domestic electricity generation.
What is coal gasification?
Coal gasification is the process of converting coal to synthetic gas or syngas (SNG), which is a mixture of carbon monoxide (CO), hydrogen (H2), carbon dioxide (CO2) and other minor constituents such as methane and water vapour. This is done by partial oxidation of coal at high temperature and pressure to produce SNG. SNG is useful for production of hydrogen and various chemicals, as well as a fuel for gas turbine combined cycles for power generation. SNG can thus be positioned as a bridge technology in India’s coal transition pathway towards Net Zero by 2070.
Driving power generation
The government usually relies on gas-based power plants (GBPs) to meet peak demand in summers. However, these GBPs mostly use imported gas, vulnerable to uncertainties and price shocks. Coal gasification could help India produce SNG, which can help meet peak power demand, balance variable renewable energy (VRE) and maintain grid stability.
Currently, the Ministry of Power provides minimum off-take guarantee tenders to procure energy from GBPs for peak demand hours. During the summer crunch periods of 2023, 2024 and 2025, energy procured from the selected GBPs was 317 MU, 482 MU and 1,477 MU, respectively. The average plant load factor of GBPs fluctuated between 12 per cent and 25 per cent during 2019-2024, largely influenced by imported LNG price trends. The total installed capacity of GBPs in India is around 24 GW. With lower utilisation and higher gas prices, electricity prices usually range between Rs 10-Rs 15 per kWh, much higher than coal or renewable-based electricity supply. Prolonged periods of high prices have also forced some GBPs into extended inactivity, rendering several of them no longer technically viable for operation. With India producing only 50 per cent of its annual gas consumption, and domestic gas being primarily allocated for transport and household consumption, GBPs will continue to face vulnerability due to high import price, though their importance in providing flexibility and managing peak demand and grid stability will increase in the coming years with more VRE being integrated with the grid.
Producing hydrogen
Coal gasification can also help in producing hydrogen. The hydrogen derived from coal is called grey hydrogen due to emission of greenhouse gases (GHG). However, if this process is coupled with carbon capture, utilisation and storage (CCUS) systems, the gas is called blue hydrogen, which can be utilised for power generation and heating purposes. Hydrogen also has the potential to be integrated in existing transportation infrastructure, helping reduce GHG emissions. With the recent budgetary announcement of the CCUS mission, the framework and necessary funding for coupling SNG production with CCUS are already in place.
The hydrogen produced through coal gasification can be mixed with nitrogen to produce ammonia, which is then used to manufacture urea. This represents a economically and environmentally viable pathway, as evidenced by China, the world’s largest producer of ammonia, where roughly 78 per cent of production in 2024 was from coal-based process, predominantly using gasification.
Reducing import dependence
Globally, India is among the largest importers of methanol, mainly sourcing from West Asian countries such as Saudi Arabia, Qatar, Oman and Bahrain. Given the current geopolitical tension and conflicts, this heavy dependence places significant pressure on India’s energy security and supply stability. The government has been working on initiatives to boost the local methanol production as part of a broader strategy to enhance India’s energy security and sustainability.
The SNG produced by coal gasification can help in methanol production. SNG undergoes a water-gas shift reaction to achieve the optimal H2/CO ratio ideal for methanol synthesis. Methanol is a relatively cleaner fuel and can replace fossil oil in transportation, and LPG and kerosene as cooking fuel. It burns efficiently in all internal combustion engines, produces almost no particulate matter or soot, and has almost no SOX and NOX emissions.
Around 62–65 per cent of India’s demand for LPG is met through imports. India imported about 23.3 million tonnes of LPG in 2025, up 8.4 per cent from 2024. The SNG derived from coal gasification can also be used to produce Dimethyl Ether, which can be blended with LPG in significant proportions, thus reducing India’s import dependence.
Status of gasification in India
The concept of using coal gasification to meet some of India’s fuel needs first emerged in the mid-1950s, when the then director of the Regional Research Laboratory, Hyderabad (now the CSIR-Indian Institute of Chemical Technology) had proposed to the government that the institute be allowed to produce and supply coal SNG through pipelines for domestic and industrial use. The proposal did not find takers in the government, as the policy focus at that time was on finding petroleum reserves. Thereafter, during the mid-2000s, biomass gasifiers were promoted under the Ministry of New and Renewable Energy’s Village Energy Security Programme, as well as under the biomass-for-thermal-use scheme for applications such as rubber drying, institutional cooking and dyeing. Support was also provided through the UNDP-supported Biomass Energy for Rural India project. However, technology management in remote rural sites posed challenges, and the easy availability of natural gas reduced the use of thermal gasifiers. For instance, in the Morbi (Gujarat) ceramic cluster, coal gasifiers were being used in almost all the tile manufacturing units. However, the National Green Tribunal ordered the banning of coal gasifiers in 2019 and advised the units to switch to PNG to control the air and water pollution in the Morbi-Wankaner region. Furthermore, with the growth of the National Solar Mission, the gasifier programme lost importance with policymakers.
However, considering the importance of coal in India’s sustained economic growth, the Government of India launched the National Coal Gasification Mission in 2020 with the target of achieving 100 MT of coal gasification by 2030. Many key industry players have since joined the sector. BHEL had set up a pilot plant in Trichi in 2020, producing 6.2 MW of power. However, they faced issues with handling high-ash coal. Thermax Limited installed a pilot plant for coal-to-methanol production in Pune. In May 2020, Coal India also announced three coal gasification projects for coal-to-methanol production. In 2024, the Union Cabinet further approved the scheme for promotion of Coal Gasification Projects of Indian Public Sector Enterprises and Private Sector with an outlay of Rs 85 billion. Yet, there have been persistent gaps in the successful commissioning of these projects.
The current energy crisis has put gasification again at the centre stage. The Rajya Sabha proceedings on coal gasification projects, on March 23, 2026, listed seven such projects planned across Maharashtra, Odisha and West Bengal with an investment of Rs 640 billion. Among them, the Talcher plant in Odisha – a joint venture (JV) between GAIL, CIL, RCF and FCIL – is expected to be commissioned in 2027–28 and is planned with a capacity of 2,200 MTD of ammonia and 3,850 MTPD of urea production. Other companies, such as New Era Cleantech and the Adani Group, have also begun work on coal-to-chemicals projects in the Vidarbha region of Maharashtra.
Challenges in scaling
Despite the numerous benefits that can be derived from coal gasification, the sector remains limited to a few pilot projects. India’s high-ash coal requires customised gasification technologies, along with CCUS integration to reduce emissions. Coal gasification projects have high CAPEX, and require ash-handling capabilities and environmental compliance. Private sector participation has been constrained by inadequate supply and demand-side incentives. Both access to viability gap funding and assured offtakes are critical for any capital-intensive, long gestation projects. The willingness of industries to invest will improve if buyers promise to buy their gas and chemical products.
Furthermore, India currently lacks a robust business model that supports a complete coal gasification ecosystem. Not aggressively forming JVs with public-sector undertakings such as CIL and BHEL for capex dilution, de-risking of investments, expertise transfer and feedstock access adds to challenges. Furthermore, reduced resource planning and lack of tailored feedstock matching (blending coal with pet coke to reduce ash content) is also hindering in the expansion of these projects. Greater industry participation is essential to identify gaps and calibrate targeted government support.
Strategic policy directions
Policymakers should consider classifying these projects as core infrastructure, enabling access to long-term, affordable coal through transparent auction mechanisms, providing offtake assurances and expediting approvals with active support from state governments – thereby reducing import dependence on fuels such as natural gas.
Industry players should explore cluster-based approaches and partnerships with public sector enterprises, optimise feedstock through blending, initiate pilot-scale projects to develop bankable business models and de-risk investments, and collaborate with research institutions to develop customised technologies for India. Technology providers and research institutions, in turn, should focus on developing solutions tailored to the characteristics of Indian coal, integrating CCUS technologies to mitigate emissions and establishing environmentally sound systems for managing by-products such as wastewater and slag.
It is time to recognise that coal is a versatile fuel. The fuel is not the enemy – the carbon emissions are. The emissions can be captured and used as a resource for producing other products. Coal can strengthen India’s supply chain resilience and enhance energy security amid geopolitical uncertainties, if planned and used properly.