The Green Coal Transition

India’s march towards energy self-reliance and sustainable industrial growth faces a pivotal test. As global energy regimes pivot from fossil fuels to renewables, the role of coal - still India’s most abundant indigenous energy source - is under increasing scrutiny. Yet dismissing coal as merely an obstacle to climate ambitions would be a strategic error. Through advanced coal gasification technology, India has a rare opportunity to reconcile its economic, strategic, and environmental objectives. But realising this potential demands policies that move beyond declarations, unleashing private sector dynamism with strong, targeted incentives.

The Strategic Case for Coal Gasification

India’s energy and manufacturing ambitions are vast. By 2047, as the country approaches its centenary, it aspires to be a high-income, global manufacturing powerhouse. Achieving this will require a secure, affordable base of high-value feedstocks. Today, coal is mostly burnt in power plants, emitting vast quantities of CO₂ and particulate pollution. However, when coal is gasified—converted into syngas and then processed into chemicals and fuels—it becomes a versatile, low-emission platform for producing methanol, ammonia, synthetic natural gas, fertilisers, and even clean hydrogen.

This technology, already proven in countries like China, South Africa, and the United States, can transform coal from a cause of environmental distress into a lever for economic renewal. Coal gasification offers far cleaner utilisation than combustion, eliminating the uncontrolled release of many pollutants that bedevil old-style coal use. By exploiting this pathway, India can future-proof a legacy resource and help create the backbone of a green manufacturing ecosystem.

Most critically, gasification is a natural partner for carbon capture, utilisation, and storage (CCUS). Because CO₂ emerges in a concentrated stream—before dilution in exhaust—it is cost-effective to trap and store, or reuse, the resulting carbon. This makes coal gasification arguably the only path to continued coal utilisation that is compatible with achieving net zero emissions by 2070. It is the bridge between “black gold” and green growth.

Economic, Strategic, and Industrial Benefits

India’s heavy reliance on chemical, fertiliser, and synthetic fuel imports drains foreign exchange and leaves the country vulnerable to global supply shocks. Methanol, for example, is a versatile chemical used in fuels, plastics, and pharmaceuticals, but nearly all Indian demand is met by imports. The same is true for synthetic ammonia and many petroleum-derived olefins.

By converting even a portion of its vast coal reserves into domestic chemical feedstock, India can embark on a new era of value addition and import substitution. Entire industries—fertilisers, petrochemicals, synthetic fuels, advanced plastics—could shift from input insecurity to competitive advantage. But the scale and complexity of the coal-to-chemicals revolution cannot be achieved through public funding alone. Creation of gigawatt-scale gasification complexes, deployment of cutting-edge CO₂ capture, and process innovation across the value chain all demand the capital, project management, and technical excellence that only private enterprise can deliver at speed.

Yet, private participation in coal gasification faces hurdles: regulatory uncertainty, large upfront costs, long payback periods, and technology risk. Here, the government must act as both enabler and risk-mitigator—creating a climate where investment is not just viable but attractive.

Incentivising the Transition

For India to unlock the full economic and environmental promise of coal gasification, bold government action is not optional—it is essential. Given the long development timelines of gasification plants, the private sector will only enter at scale if the risk-reward equation is fundamentally reshaped by clear, sustained, and ambitious policy signals. There are several reasons why providing strong incentives for coal gasification projects is imperative.

First, coal gasification projects demand far higher initial capital expenditure than traditional uses of coal. The technology is newer, the operational complexity greater, and the learning curve steeper. Returns are often back-loaded, and unlike conventional businesses, regulatory uncertainty or project delays can quickly erode commercial viability. Without targeted incentives, most private players—especially first movers—will simply deploy capital in less risky sectors or internationally competitive locations.

Moreover, the social and environmental gains from coal gasification—lower emissions, secure supply chains, high-quality job creation—are classic examples of positive externalities that markets alone cannot price in or reward in the early years. Only smart state support can “crowd in” private capital, accelerate the demonstration effect, and lay the foundation for cost declines through scale and learning.

Need of the Hour

To spur private investment in coal gasification, the government must consider a mix of robust fiscal and revenue incentives. Lowering or waiving government revenue shares on coal designated specifically for gasification; upfront capital subsidies and production-linked incentives (PLIs); and offering multi-year tax holidays would be especially effective in offsetting high initial risks and catalysing early investment.. Facilitating concessional, long-tenor green financing through public sector banks and multilateral institutions, while leveraging India’s global climate partnerships, can lower capital costs substantially. Complementing this with targeted credit guarantees or viability gap funding would give institutional investors the needed confidence to commit capital.

The government can develop an exclusive, transparent mechanism for streamlined allocation and expedited environmental clearance of coal blocks dedicated to gasification, prioritising those with optimal quality and cost. Furthermore, reserving a fixed portion of future coal auctions specifically for downstream chemical conversion—rather than just power generation—will ensure that private players have dependable access to the coal necessary for diverse industrial applications.

On the demand side, the state can play a catalytic role in anchoring offtake and reducing market risk. Public sector undertakings should serve as long-term buyers by issuing indexed purchase tenders for key gasification outputs like methanol, ammonia, and hydrogen. Introducing “green procurement” requirements into infrastructure, fertiliser, and chemical purchase agreements would provide producers with stable demand and price floors, further mitigating the commercial uncertainties that often stall industrial innovation.

Finally, long-term regulatory clarity is essential for unlocking sustained investment. The government should commit to a transparent, predictable policy roadmap for coal gasification, CCUS, and synthetic chemicals, reducing the regulatory risk that deters private entrants. Simpler, harmonised standards for environmental clearances and carbon accounting must be developed so firms can comply with global best practices efficiently, ensuring both industrial competitiveness and rigorous environmental protection.

Conclusion

Climate commitments are rightly at the heart of India’s industrial strategy. But rather than seeing coal as an immovable obstacle, policymakers should recognise coal gasification as a crucial tool for local manufacturing, green job creation, and decarbonization. No other technology offers such a practical bridge from present energy realities to a low-emission future. India can show the world a new model: harnessing legacy resources with front-line technology to meet the dual imperatives of development and decarbonization. Coal gasification is not a halfway house—it is a catalyst for economic renewal, environmental protection, and industrial self-reliance, if government and business work in tandem.

Every rupee spent to incentivise coal gasification triggers a multiplier effect—reducing petrochemical import bills, generating rural and urban employment, stimulating R&D, and building resilient industrial clusters. Incentives can be designed to sunset as the sector matures, using declining subsidies to nudge companies towards competitiveness. Crucially, these policy moves signal to global and domestic investors that India is serious about a just, green industrial transition—one in which the private sector is a core partner, not a bystander.

With bold incentives and an enabling regulatory framework, India can unleash private investment, scale innovation, and make coal a driver of its next green industrial revolution—turning “black gold” into an engine for sustainable, inclusive growth.

Views expressed are personal. The writer is the President of Chintan Research Foundation