Coal gasification: India’s ₹37,500 crore push in 2026

Why coal gasification is back in focus

India is stepping up efforts to convert coal into gas as it looks to reduce exposure to imported fuels and industrial feedstock. The push brings India closer to a broader Asian trend, with countries such as China and Indonesia also using coal-to-gas pathways. The Union Cabinet has approved a new financial support programme for surface coal and lignite gasification projects, with an outlay of ₹37,500 crore. The stated policy aim is to strengthen energy security, expand the use of domestic coal, and lower reliance on imports across multiple value chains. The move comes as geopolitical tensions, including conflict-linked disruptions in West Asia, keep global energy markets volatile. The Reserve Bank of India has flagged the risk of rising fuel costs if regional hostilities persist, adding urgency to domestic supply options.

What the Union Cabinet approved

The government cleared the Scheme for Promotion of Surface Coal and Lignite Gasification Projects with a ₹37,500 crore outlay. In public messaging around the decision, officials positioned the programme as a lever to reduce import dependence for fuels, fertilisers, and chemical feedstock. The same policy narrative also frames gasification as an “energy security” tool rather than a substitute for renewable energy. Separately, the coal ministry had earlier approved a ₹8,500 crore financial incentive scheme in January 2024 for coal and lignite gasification projects. Together, these measures signal a sustained policy effort to scale domestic syngas-based production.

How coal gasification works

Coal gasification does not burn coal directly like conventional coal-fired power plants. Instead, it converts coal into synthetic gas (syngas) by reacting it with controlled amounts of oxygen and steam at high temperatures and pressure. The resulting syngas is primarily a mixture of carbon monoxide and hydrogen. This syngas can then be processed into products used across industry, including methanol, ammonia, synthetic natural gas, hydrogen, and other chemicals and fuels. Supporters argue this allows a wider set of industrial outputs from domestic coal than direct combustion.

What India wants to replace through domestic production

A key objective highlighted by officials and policy commentary is import substitution of high-value commodities that have large exposure to global price swings. The programme is framed as a way to reduce dependence on imports of liquefied natural gas (LNG), urea, ammonia, methanol, and other industrial inputs. The government’s messaging also mentions reducing reliance on fertilisers and chemical feedstock, aligning gasification with industrial policy and supply-chain resilience. In some references, diversified use of coal resources is also linked with replacing imports of ammonium nitrate and coking coal. The policy rationale is to reduce vulnerability to external shocks and supply disruptions.

Targets: 100 million tonnes by 2030

In 2021, India launched the National Coal Gasification Mission, setting a target to gasify 100 million tonnes of coal per annum by 2030. The recently approved scheme is presented as a step that supports this national objective. Some market commentary has also referred to a 75 million tonne target in the context of expanding gasification capacity, but the stated national mission target cited is 100 million tonnes by 2030. Policy discussions also note that coal remains central to India’s energy system, including the view that coal may continue to play a role for the next two to three decades in India’s pathway to net-zero by 2070. Within this framing, gasification and carbon capture are often discussed as “cleaner use” options for coal.

Investment expectations and the private capital angle

Government officials have indicated the ₹37,500 crore scheme could help catalyse up to ₹3 lakh crore in private investment. Separately, Atanu Mukherjee, CEO of energy-transition advisory firm Dastur Energy, told CNA that US$15 billion to US$18 billion of coal-gasification investment over 10 to 15 years could reduce India’s import bills by about US$10 billion. Mukherjee described coal gasification as a way to create “optionality” and energy resilience, rather than a route to eliminate import reliance altogether. This distinction matters because the policy narrative is about lowering vulnerability, not claiming complete independence from global markets.

Decarbonisation questions and the role of carbon capture

Coal gasification is repeatedly described as offering better control than direct burning because emissions can be managed at the syngas stage. Policy and expert commentary also highlight the potential to integrate Carbon Capture, Utilisation and Storage (CCUS), including references to underground plants for environmental gains. At the same time, commentary notes “uncertain decarbonisation outcomes”, even as the technology is presented as having economic potential through import substitution. An Observer Research Foundation report cited in the material argues that gasification can strengthen raw material security by reducing dependence on imported coal and natural gas. The approach is therefore positioned as a trade-off: higher domestic optionality and supply resilience, alongside emissions-management challenges.

How it fits alongside India’s renewables agenda

The policy positioning emphasises that gasification is intended to complement, not replace, India’s renewable energy push. The stated use case is to support industrial demand for chemical inputs and gases where import exposure is high. By producing inputs like methanol and ammonia domestically, policymakers argue India can reduce vulnerability to volatile global pricing and supply disruptions. This also aligns with broader “Make in India” and “Atmanirbhar Bharat” messaging referenced in the context. The government’s intent, as described, is to use domestic coal reserves more strategically while continuing renewable expansion.

What officials said about the decision

Prime Minister Narendra Modi said the initiative “will further energy security, boost investment and create job opportunities for the youth,” according to the material provided. Union Minister Ashwini Vaishnaw called the decision “very important and timely” in the context of rising gas demand and the geopolitical situation. He also said India has enough coal reserves to last for about 200 years, and efforts are underway to convert coal into gas. Officials have linked the programme to protection from global price instability and supply-chain disruptions. The emphasis remains on resilience and industrial feedstock security.

Key numbers and facts at a glance

Market impact and why investors are watching

The scheme is significant because it combines direct public outlay with an explicit goal of crowding in private investment. It also ties a domestic coal-based industrial strategy to import substitution at a time when global fuel and chemical markets remain sensitive to geopolitical risk. For investors, the key watchpoints are project execution, technology choices, and whether domestic syngas-based production meaningfully reduces import exposure in the targeted commodities. The programme also intersects with policy discussions around CCUS integration, which could influence project economics and regulatory oversight. The government’s own framing suggests gasification is meant to provide flexibility in supply rather than a complete break from imports.

Conclusion

India’s ₹37,500 crore coal and lignite gasification scheme is being positioned as a major energy-security and industrial-input initiative, aligned with the 100 million tonne by 2030 mission target. The policy intent is to reduce vulnerability to imported LNG and chemicals while using domestic coal more strategically. Alongside earlier incentives and stated plans to attract large private investment, the next milestones will be detailed project rollouts and investment commitments under the approved framework.