India has launched a major scheme to expand coal gasification, aiming to reduce fuel and fertilizer imports using its vast coal reserves. However, high costs, technical hurdles, and policy issues could slow progress.
India has approved a US$3.9 billion scheme to expand its coal gasification capabilities, aiming to convert its vast domestic coal reserves into synthetic gas. This move aligns India with other Asian nations like China and Indonesia, which are also revisiting the centuries-old technology to reduce reliance on imported fuels.
The initiative has become more urgent due to recent shipping disruptions in the Strait of Hormuz during the US-Israel conflict with Iran, which threatened the supply of crude oil, liquefied petroleum gas (LPG), and fertilizer feedstocks to import-dependent economies such as India. However, experts warn that India may face the steepest challenges among its regional peers, citing issues including the high ash content of Indian coal, the water-intensive nature of gasification, financing difficulties, and fragmented policymaking.
Coal gasification involves converting coal into synthesis gas, a mixture primarily composed of carbon monoxide and hydrogen. This syngas can be further processed into fertilizers, methanol, dimethyl ether (DME), synthetic natural gas, and hydrogen. DME, for instance, serves as a substitute for LPG. While coal gasification can offset some imports, it is unlikely to fully replace them due to the large and varied demand for these products, according to Atanu Mukherjee, CEO of energy-transition advisory firm Dastur Energy.
He describes the technology as a means to create "optionality" and bolster energy resilience rather than a complete solution to import dependence. The technology has remained niche globally because projects are expensive, technically complex, and slow to scale. Mukherjee points to China, where coal-gasification deployment took 10 to 15 years to reach significant scale, calling it a "long haul.
" Despite the hurdles, renewed interest in coal gasification is growing among oil- and gas-importing nations seeking a buffer against fossil-fuel price shocks. India's scheme offers incentives covering up to 20 per cent of plant and machinery costs for new projects and expects to attract large-scale private investment through competitive bidding. The government frames the program as a way to enhance energy security, utilize domestic coal more effectively, and cut imports of fuels, fertilizers, and chemical feedstocks.
India holds the world's fifth-largest coal reserves but imports about 88 per cent of its crude oil and roughly half its natural gas. The country's National Coal Gasification Mission, launched in 2021, aims to gasify 100 million tonnes of coal annually by 2030. Dastur Energy estimates that an investment of US$55 billion to US$78 billion over 10 to 15 years could reduce India's import bill by about US$20 billion.
Nevertheless, analysts highlight substantial obstacles: Indian coal often contains 30 to 45 per cent ash, making it less suitable for gasification, and the process requires significant water resources. These factors, combined with financing constraints and policy fragmentation, may limit large-scale deployment despite the government's ambitious targets
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