Reliance’s Underground Coal Gamble: Can It Turn 3.1 Billion Tonnes Into Fuel?

Reliance Industries has proposed a Rs 2.73 lakh crore, 30-year investment to build an integrated underground coal gasification (UCG) complex in Andhra Pradesh's Eluru district.

The project aims to convert deep coal into syngas for hydrogen, methanol, ammonia and synthetic natural gas, helping India reduce its dependence on imported fuels.

The conglomerate secured the Chintalapudi and Recherla coal blocks through a coal ministry e-auction. The proposal outlines a strict three-stage timeline to establish commercial viability, the Andhra Pradesh government stated in the document reported by Economic Times.

Under this plan, the company will spend Rs 3,000 crore on exploration and pilot operations between the third quarter of 2026 and the final quarter of 2027. If successful, development work from 2028 to 2030 will require Rs 1.2 lakh crore.

The final production phase will begin from 2030, spending the remaining Rs 1.5 lakh crore. Reliance Industries did not respond to an email from the publication requesting comment.

The Technology Behind UCG

The two allotted coal blocks cover massive underground areas, containing an estimated 3.13 billion tonnes of coal.

The Chintalapudi block spans 3,000 acres and holds 904.94 million tonnes of G-12 grade coal. The Recherla site covers 5,500 acres with an estimated 2,225.67 million tonnes of G-13 coal.

These reserves lie more than 500 metres below ground, officials told the publication.

The biggest economic significance lies in extracting gas from the coal without conventional mining.

In conventional coal gasification, coal is mined and brought to the surface before being converted into gas. UCG instead transforms the subterranean coal bed directly into a gasification reactor.

Operators drill wells directly into the seam and inject oxidising agents—such as air, oxygen or steam—to partially combust the coal. A separate well extracts the resulting gases to the surface.

This continuous reaction produces syngas, which contains hydrogen, carbon monoxide, methane and carbon dioxide.

Producers can process syngas into multiple industrial commodities, including methanol, ammonia, synthetic natural gas (SNG) and synthetic fuels.

Government documents also identify applications in fertiliser production and as a reducing gas for steelmaking.

Reducing India's Import Bill

Syngas offers a domestic alternative to costly foreign energy supplies. A government release stated that India recorded an import bill of approximately Rs 2.77 lakh crore in financial year 2025 for LNG, urea, ammonium nitrate, ammonia, coking coal and methanol.

Government data released in May 2026 highlights this heavy foreign reliance. India currently imports more than 50 per cent of its LNG and around 20 per cent of its urea.

The country also buys almost all its ammonia and 80 to 90 per cent of its methanol from overseas markets.

Federal policy aims to expand domestic alternatives to lower external energy shocks. The national policy objective, approved in January 2024, targets 100 million tonnes of coal gasification by 2030.

The government backed this ambition with an Rs 8,500 crore financial incentive scheme.

For Reliance, this downstream flexibility is crucial because the company already operates massive refining and petrochemical facilities, making syngas an attractive domestic source of carbon and energy feedstock.

Navigating Risks and Policy

Extracting gas from depths exceeding 600 metres presents distinct technical and environmental hazards.

Operators face severe risks involving groundwater contamination, gas leakage and land subsidence. They must also maintain strict control over the underground gasification cavity.

State subsidies may bypass the Reliance project. The Union Cabinet approved an Rs 37,500 crore incentive scheme in May 2026.

This programme, however, strictly covers surface gasification projects, meaning the proposed underground complex will not directly qualify.

Separate regulatory structures offer alternative support. The government provides a 50 per cent revenue-share rebate for UCG.

The coal ministry also introduced specific coal mine development agreements carrying embedded underground gasification provisions in April 2026.

Mathematical scenarios indicate massive potential scale. Gasifying the entire 3.13 billion tonnes evenly over 30 years averages 104 million tonnes per annum (MTPA), which matches the 2030 national target.

A conservative 10 per cent utilisation rate yields an average of 10.4 MTPA, while a 25 per cent utilisation rate would be about 26 MTPA.

These are scenarios rather than Reliance guidance, as actual numbers depend on exploration, recovery rates and economics.

This makes the initial Rs 3,000 crore pilot phase more critical than the headline Rs 2.73 lakh crore figure, as the company must first prove it can control the underground reaction at an acceptable cost.