India pushes coal gasification to reduce import risks

By Suryamurthy

Energy security often becomes a national priority only when a crisis erupts. The current conflict spreading across West Asia has once again reminded India how fragile global energy supply chains can be — and how deeply its own economy remains tied to them.

The disruption of tanker routes through the Strait of Hormuz, which normally carries roughly 20 percent of the world’s crude oil, natural gas and liquefied petroleum gas, has exposed the scale of that vulnerability. Nearly half of India’s crude imports historically pass through that narrow corridor, alongside large volumes of LNG and LPG shipments that power industries, fertiliser plants and households.

Even though the government has scrambled to secure alternative cargoes and diversify sourcing, the episode has revived a deeper strategic question: how long can a $3.7 trillion economy remain structurally dependent on imported hydrocarbons?

Quietly, policymakers appear to be reaching for an answer that lies not in new oil fields abroad but beneath India’s own soil. Coal — long treated merely as a power-generation fuel — is now being repositioned as the foundation of a domestic chemical and fuel economy. At the heart of that shift is coal gasification.

The geopolitical context makes the policy shift easier to understand. India imported roughly $98.7 billion worth of goods from West Asia in 2025, much of it energy and industrial feedstocks. Petroleum alone accounted for about $70 billion of that bill, including $50.8 billion worth of crude oil — almost 49 percent of India’s total crude imports.

Natural gas dependence is equally stark. About 68 percent of India’s LNG imports come from the region, while nearly 47 percent of LPG shipments — used by millions of households for cooking — originate in Gulf countries. The exposure extends far beyond fuel. Fertiliser inputs, petrochemical feedstocks, plastics, sulphur, limestone and other industrial raw materials also arrive from the same geography.

When tensions rise in the Gulf, the economic ripple effects spread quickly. Energy prices rise, fertiliser costs climb, and manufacturing supply chains tighten. For an economy that still imports roughly 85 percent of its crude oil, each $10 increase in oil prices can add $12–15 billion to the national import bill.

Against that backdrop, the strategic logic of reducing hydrocarbon imports becomes increasingly compelling. India, paradoxically, is not short of energy resources. The country possesses around 401 billion tonnes of geological coal reserves, with roughly 111 billion tonnes considered extractable. Annual production has already crossed one billion tonnes, making India the world’s second-largest coal producer.

Coal mining itself generates roughly ₹1.96 lakh crore — about $23–24 billion — in annual production value and supports about half a million direct jobs and several million indirect ones. Yet most of this resource is used in the simplest possible way: it is burned to produce electricity. Coal currently accounts for roughly 72 percent of India’s power generation. While that role remains central, it captures only a fraction of the resource’s industrial potential.

Coal is not just a fuel. It is also a carbon-rich chemical feedstock capable of producing hydrogen, fertilisers, synthetic fuels and petrochemicals. Coal gasification unlocks that potential. Gasification converts coal into synthesis gas — or syngas — by reacting it with oxygen and steam at high temperatures. The resulting mixture of hydrogen and carbon monoxide can then be transformed into a wide array of industrial products.

Methanol, ammonia, synthetic natural gas, hydrogen and chemical intermediates can all be produced through this route. These are precisely the commodities India imports heavily.

Methanol alone is used in plastics manufacturing, pharmaceuticals, fuel blending and chemical processing. Ammonia forms the backbone of fertiliser production. Hydrogen is becoming central to both steelmaking and emerging clean-energy technologies. By producing these inputs domestically from coal, India could begin substituting imports currently sourced from volatile international markets.

In strategic terms, gasification turns coal into an industrial platform rather than simply an electricity fuel.

The latest federal budget signals that New Delhi is ready to accelerate this shift. The Ministry of Coal has earmarked ₹3,525 crore — roughly $425 million — in the 2026–27 budget specifically to promote coal and lignite gasification projects. The allocation represents the largest single component of the ministry’s central sector schemes and reflects a deliberate policy push.

Seven major gasification projects are already being supported under the incentive programme. When operational — likely toward the end of the decade — they are expected to collectively utilise about 12 million tonnes of coal annually.

That figure may appear modest relative to India’s billion-tonne coal industry, but policymakers view these projects as foundational infrastructure for a larger coal-to-chemicals ecosystem. The government’s broader National Coal Gasification Mission has set a far more ambitious target: gasifying 100 million tonnes of coal each year by 2030.

If achieved, the scale would begin to reshape the country’s energy and chemical supply chains. The war in West Asia may accelerate this transition. Energy crises historically reshape national strategies. The oil shocks of the 1970s led to the creation of strategic petroleum reserves and new exploration programmes worldwide. Today’s geopolitical turbulence may push India toward a different form of energy self-reliance — one built around domestic coal resources.

If fertilisers, industrial fuels and petrochemical feedstocks can be produced from domestically mined coal rather than imported gas or naphtha, entire segments of the economy become less exposed to geopolitical disruptions. In effect, coal gasification becomes an economic shock absorber.

The current crisis has already illustrated how quickly supply chains can tighten. LNG deliveries from Gulf producers have faced disruptions, LPG cargoes have been rerouted, and shipping insurers have raised premiums for vessels operating in conflict zones. Each disruption translates into higher costs for importing countries.

Domestic gasification infrastructure, by contrast, would operate largely outside those geopolitical chokepoints. Coal gasification also intersects with another emerging priority: hydrogen. Syngas produced from coal contains large quantities of hydrogen that can be separated and used in industrial processes. While renewable “green hydrogen” produced from electrolysis remains the long-term goal, its costs remain high and infrastructure limited. Coal-derived hydrogen could provide an interim pathway. With carbon capture technologies, gasification plants could produce hydrogen at scale while renewable hydrogen production gradually expands.