Should India pursue coal gasification to become self-reliant in fertiliser and oil & gas?

India is on the cusp of a critical transition, spurred on by the oil and gas supply shock from the war in West Asia. It is making renewed efforts to make coal gasification work.

The logic is simple. Should these efforts bear fruit, coal will produce fertilisers and oil and gas and make India self-reliant in these resources. Consider this: in FY25, India’s import dependency was 90.5% for crude oil, 50% for LNG, 66% for LPG and 68.6% for fertilisers, a substantial part of which is sourced from the Gulf.

In this latest endeavour, India is taking inspiration from the successful transitions in China and South Africa. Besides, the potential has been evident for some time, since India holds the world’s fifth-largest coal reserves.

Two exciting developments raise this prospect.

On April 1, two public sector undertakings (PSUs), Bharat Coal Gasification and Chemicals Ltd (BCGCL) and Mahanadi Coalfields Ltd (MCL), signed a land agreement for a coal-to-fertiliser plant at Odisha’s Jharsuguda. This facility will use the first indigenous coal gasifier developed by another PSU, Bharat Heavy Electricals Ltd (BHEL).

Earlier, on February 7, private sector giant Adani Group announced a Rs 70,000 crore coal gasification plant at Maharashtra’s Nagpur to produce synthetic gas or syngas (a substitute for liquefied natural gas), ammonia (fertiliser), and hydrogen from coal

.

Unlike burning, gasification of this fossil fuel could not only produce clean energy, nitrogenous fertilisers, syngas and hydrogen but also synthetic petrol, diesel, kerosene, naphtha, liquid petroleum gas (LPG), methanol and more.

Coal gasification could, thus, accelerate India’s path to net-zero emissions.

Indigenous Engine

India’s transition hinges most on the success of BHEL’s indigenous gasifier. The project is expected to produce 660,000 tonnes of ammonium nitrate by FY30. The Centre approved viability gap funding (VGF) of Rs 1,350 crore, or 15% of the project cost, in 2024. BCGCL, a joint venture between Coal India Ltd (51%) and BHEL (49%), was incorporated in 2024 specifically to promote coal gasification.

The choice of BHEL’s gasifier was natural since it is a partner of BCGCL. India has developed two more gasifiers suitable for India’s high-ash coal, all with government support. One is by IIT-Delhi-Thermax Ltd and the other by CSIR-Central Institute of Mining and Fuel Research.

All three gasifiers are pilot-tested; BHEL’s will make the first transition to commercial use.

R.R. Sonde, member of the steering committee for National Coal Gasification Mission 2021, says the chances of success of BHEL’s gasifier are “very high because it is based on a deep understanding of India’s high-ash coal and years of work.” Sonde led the IIT-Delhi-Thermax Ltd gasifier; the National Goal Gasification Mission of 2021 aims to gasify 100 million tonne (MT) coal by 2030.

Jharsuguda’s is one of eight public and private sector projects to receive VGF of Rs 8,500 crore in January 2024 (excluding the Adani project). Together, these are expected to substitute Rs 16,000 crore of imports by 2030.

The industry is abuzz. Ashok Balyan, Secretary General of Coal Gasifiers Association of India (CGAI), says: “The industry is pretty excited considering the abundance of coal, government support and business opportunity in the current energy situation.” The CGAI was set up in 2022 to promote the national mission.

Balyan sees huge potential if the 100 MT coal gasification target is achieved: “It will take care of 15-20% of India’s need for methanol, ammonium nitrate and SNG; liquid fuel and other chemicals can follow.” Although he is not sure if this would indeed happen, he says the stage is set for a take-off.

Why India has trailed

India’s tryst with coal gasification began with fertiliser plants at Sindri, Talcher and Ramagundam in 1970s-’80s using imported gasifiers. But they were shut between 1999 and 2002 due to financial non-viability. The Sindri and Ramagundam plants were rebuilt in 2021-22 using imported LNG. The Talcher plant is being revived using US-based Air Products’ coal gasifier.

With easy availability of cheap imported LNG and LPG, India’s preference changed but coal gasification wasn’t abandoned.

Debajit Palit, who heads the Chintan Research Foundation (CRF), points out that India continued to use the gasification route to power and heat generation, but not for chemicals and liquid fuels. “We never thought of a crisis in supply of LNG and LPG,” he adds.

That scenario changed recently, after two big private players went for coal gasification.

In 2018, Jindal Steel’s Angul plant in Odisha started producing electricity using a South African gasifier. It is now expanding the facility with the Centre’s VGF.

That year, Reliance Industries’ Jamnagar refinery started producing electricity and hydrogen using Houston-based Phillips 66’s gasifier.

But India couldn’t match the miracle of China and South Africa.

China and South Africa also adopted gasification with imported technology in the 1950s. But they innovated and indigenised the technology. China now produces 90% of its own and 30% of global ammonia and 80% of its own and 40% of global urea, some of which is exported to India. It also produces 70% of its methanol and other petrochemicals. South Africa produces 30% of synthetic liquid fuels like petrol, diesel, kerosene, LPG, and naphtha—apart from gas and petrochemicals.

Imagine had India pursued coal gasification as relentlessly. The West Asia war wouldn’t be hurting growth, triggering reverse migration or bringing workers and housekeepers to streets.

Sonde explains that India’s problem with coal gasification in the past was importing technology that was “unsuitable for India’s high ash coal”. Indian coal contains up to 45% ash, while China’s averages 28% and South Africa’s less than 15% (it exports coal to India too). Coal with high ash content requires washing, wasting coal in the process and raising cost.

“It was only in the late ’90s that efforts were reignited to develop the appropriate technology in India and only in early 2010s it was realised that coal gasification is critical for energy and industrial feedstock security and intensive efforts were carried out,” he says.

These efforts eventually led to the development of indigenous coal gasifiers and the National Coal Gasification Mission of 2021.

Mission-mode push

Since the West Asia war, Union Minister for Coal and Mines G. Kishan Reddy has ben consistently pushing the industry, reaffirming the Centre’s commitment to stem import dependence. The Union Cabinet is likely to clear a fresh round of financial incentives to boost coal gasification projects over the next two to three weeks, with an estimated outlay of Rs 35,000–37,000 crore, a senior government official told Business Today.

At present, the Centre offers four incentives: Rs 8,500 crore or 15% VGF; approval for investments by Coal India for coal gasifier projects; auctioning coal blocks at a floor price to keep cost low; and 50% rebate in revenue share for coal use.

However, industry is seeking more. Balasaheb Darade of New Era Cleantech Solution, which received VGF support of Rs 1,100 crore for a five MT coal gasification project at Maharashtra’s Chandrapur, says the industry has made four demands keeping in mind the high capex in such projects: increasing VGF from 15% to 50-70%, in line with that for semiconductor plants; tax holidays till 2047, in line with the Budget 2026 declaration for data centres; 50% guaranteed purchase of products by government agencies; and infrastructure status to ensure priority lending, lower interest rates.

Scientists have other thoughts. Sonde says India needs “a mission-mode approach” and coordinated efforts since “coal gasification is much bigger in scope and covers power, chemicals, fertilisers, fuels and gas, pharmaceuticals and other specialty chemicals”. He says more research is needed to capture and convert residual carbon dioxide generated during coal gasification to achieve near zero emission. Work on this is currently on.

A senior scientist at a government research institution says: “Proven technology exists, the Centre is giving the necessary support. It is for industry to take it forward. It is not so much about capex as about energy security and resilience. It is our strategic need.”

Indeed, India needs the doggedness that China and South Africa have shown and not let up after supply of crude, LNG and LPG is restored.