Who Pays For India’s Coal Gasification?

India's Rs 65,000 Crore Coal-To-Gas Push Has No Disclosed RoI

By Dev Chandrasekhar

On 27 July, the government told the Rajya Sabha that eight projects have been approved under its Rs 8,500 crore financial incentive scheme, making everything from synthetic gas to steel, including coal gasification. 

A larger scheme had already been introduced in May, and in June the Coal Secretary put projects under execution above Rs 65,000 crore.

Coal gasification is simple. Heat coal with oxygen instead of burning it, and you get a gas that can be made into fertiliser, mining explosives, or a substitute for imported natural gas. 

Coal India has the coal, imports are expensive, and on paper it works.

However, nobody seems to have the answer to what the gas would cost to produce, or who would cover the difference if it turns out to cost more than the gas India already imports.  

What appears to be a technicality will ultimately determine who foots the bill: the exchequer through the urea subsidy, Coal India through lower margins, banks financing the projects, or no one at all if the two plants, still without buyers, never get built.

Four plants account for most of the state's money: Rs 50,327 crore.

Talcher in Odisha, urea, Rs 13,277 crore. Lakhanpur in Odisha, ammonium nitrate, Rs 11,782 crore. Sonepur Bazari in West Bengal, gas, Rs 13,053 crore. Niljai in Maharashtra, also gas, Rs 12,215 crore, a figure fixed before its feasibility study.

Coal India is in all four, but not in the same role. 

It owns 51% of Lakhanpur against BHEL's 49%, partners with GAIL at Sonepur Bazari, and at Niljai has a venture BPCL's board approved in December 2025. At Talcher, it is one of three equal partners, supplying coal rather than running the plant.

The Dates

Talcher is due in December 2027. It was originally due in September 2024.

Coal India's own presentation to investors puts Lakhanpur at 2029 and Sonepur Bazari at 2030, with BHEL's share of Lakhanpur alone scheduled to take 42 months. It gives no date for Niljai.

Set that against the goal. The target is 100 million tonnes of capacity by 2030, and the Coal Ministry says 22.6 million tonnes are operational or under construction.

Those are two different things. Only 8 million tonnes of the 22.6 is operating, and all of it is Jindal's. Talcher's 2.6 million and the scheme projects' 12 million are still under construction.

Four years from the deadline, less than a tenth of the target is running, and it belongs to a company that built it a decade before the scheme. 

What Will It Cost? 

The basic facts are scattered across Cabinet press releases, Coal India's investor presentation and Talcher's website. 

What will not be found is the return the projects expect, the gas price below which they stop earning, or how often they are designed to run.

That last one governs the other two. The capital is spent whether the plant runs or not, so an expected return means nothing until the assumed running rate is known.

None of the four ventures is separately listed, and as joint ventures they are under no obligation to disclose project-level earnings. 

Their financials are folded into their parent companies' accounts as investments rather than standalone businesses, making independent assessment difficult. 

That's by design, not by omission, as the disclosure was never required, so it was never made.

The money is public at both ends, and each lender has underwritten a number nobody has published.

One number does get published, though. The Coal Ministry says that once both schemes and Talcher are commissioned, gasification will replace about Rs 1.5 lakh crore of imports a year.

Imports of what, it does not say. The same reply lists synthetic natural gas, chemicals, fertilisers and hydrogen as what gasification produces, so the figure bundles imported LNG, urea and industrial chemicals into a single line with no breakdown behind it.

That is the benefit. The cost is not published anywhere, and a saving means nothing until you take away what it costs to make. So the Rs 1.5 lakh crore is a hope with a rupee sign in front.

What Next? 

When Talcher starts, it will be the first state-owned plant of its kind to run. After eight years of argument, it should settle something.

Yet it might not. Nobody said in advance what it was supposed to earn, how often it was supposed to run, or what Coal India would charge it for coal. Whatever it produces will be called a success, because there is nothing to compare it against.

What does the silence cost? Almost all of it is still ahead.

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The drop is a sharp reversal from the previous quarter, when demand rose 10% to 151 tonnes, the highest in recent years, driven by a surge in investment buying.

Context: A seasonally slow period and a customs duty hike to 15% in May were among the reasons for this slowdown.

Jewellery bore the brunt, falling 15% to 75.1 tonnes. In value terms, though, consumption actually hit a record, rising 50% to Rs 1,98,100 crore, as gold prices averaged $4,506 per ounce, up from $3,280 in the same period last year.

Forecast: The duty hike is already stoking a grey market revival. According to Reuters, illegal gold imports could exceed 100 tonnes in 2026, with smugglers offering discounts of over $200 per ounce that legitimate importers simply cannot match. WGC's Sachin Jain flagged this as the industry's biggest risk.

On the brighter side, bar and coin demand grew 9%, and gold ETFs attracted 4.2 tonnes in net inflows, pointing to steady investor appetite even as jewellery buyers held back.

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The Shift: Previously, the Cockroach Janata Party had said that the government had agreed to withdraw all FIRs against protesters, release detainees, and give a written guarantee of no future action, and that this was why they called off the agitation “in good faith.”

And, the Delhi government has directed police not to take further legal action against CJP protesters while reviewing all protest-related arrests and FIRs. 

The Scoop: But Frontline's tracker shows the legal fallout is far from over: dozens of protesters remain in custody across multiple states, while many more continue to face FIRs, underscoring the gap between the Centre's assurances and the situation on the ground.

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Setting: India has two operational 1-gigawatt reactors at Kudankulam, with four more due by March 2030. Costs for additional 700-megawatt domestic reactors at Kaiga and Gorakhpur are also being revised.

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Why US Federal Reserve Moves Matter To India

On Episode 936 of The Core Report, financial journalist Govindraj Ethiraj talks to Amit Pabari, Managing Director at CR Forex as well as Amit Mittal, Director at AeroIntellect Aviation.

• Why US Federal Reserve Moves Matter To India

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• Despite Some $32 Billion Of Inflows, Including NRI Deposits, Why The INR Has Barely Moved

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