Coal Gasification’s ₹37,500-Crore Push Hits A Roadblock: Industry Wants Guaranteed Buyers

India’s energy industry is seeking assured offtake commitments from the government for coal gasification projects, arguing that financial support alone may not be sufficient to make capital-intensive plants commercially viable, Economic Times reported citing industry executives.

Industry executives said developers could remain reluctant to invest thousands of crores in gasification facilities without clarity on who would purchase the resulting products, how much they would buy and at what prices.

The concerns come as the government rolls out a ₹37,500-crore incentive scheme to accelerate surface coal and lignite gasification and build a domestic coal-to-chemicals ecosystem.

The government’s scheme provides financial assistance of up to 20% of the cost of plant and machinery.

However, industry representatives said a capital subsidy does not fully address the demand and market risks attached to projects that require substantial upfront investment and have long gestation periods.

Assured offtake agreements could provide developers greater visibility over future revenues and improve the investment case for gasification plants.

The industry is also seeking freight support or land allocation close to coal mines and ports, particularly for projects supplying fertiliser and steel plants.

Executives said transportation and logistics expenses could further weaken project economics if facilities are located far from consumers or export infrastructure, the report said.

Talcher Highlights Execution Challenges

The experience of the Talcher fertiliser project in Odisha has also highlighted some of the challenges involved in executing coal-gasification projects.

The industry’s concerns come as New Delhi seeks to scale up domestic coal conversion into gas and chemical products, reducing dependence on imported fuels and industrial feedstocks, Economic Times report added.

₹37,500-Crore Push For Coal Gasification

The Centre approved the ₹37,500-crore Scheme for Promotion of Surface Coal/Lignite Gasification in May.

The programme is intended to accelerate India's coal and lignite gasification capacity and support the government's target of gasifying 100 million tonnes of coal by 2030.

The scheme aims to support gasification of approximately 75 million tonnes of coal and lignite through projects across coal-bearing regions.

A key objective is to reduce India's dependence on imported products such as LNG, urea, ammonia, methanol, ammonium nitrate and coking coal. India currently imports more than half of its LNG requirements, around 20% of its urea, almost all of its ammonia and roughly 80-90% of its methanol.

By converting domestic coal into syngas and downstream chemical products, the government expects to reduce exposure to global commodity prices and geopolitical disruptions while strengthening domestic manufacturing.

Jobs, Revenue And Technology

The scheme is expected to support around 25 projects and generate approximately 50,000 direct and indirect jobs, particularly in coal-producing regions.

The government also estimates that gasification of 75 million tonnes of coal and lignite could generate around ₹6,300 crore in annual revenue for governments, in addition to downstream collections through GST and other levies.

Beyond import substitution, the programme is intended to develop a domestic technology ecosystem for surface coal gasification.

The government hopes greater deployment will encourage indigenous technologies and reduce reliance on foreign engineering, procurement and construction contractors.

For the industry, however, the central challenge remains commercial viability. Without predictable demand, offtake arrangements and manageable logistics costs, companies may remain cautious despite the scale of government incentives.