Centre likely to nudge next bidders of coal mines to turn some reserves into gases

A coal gasification plant

The Centre is likely to include a provision to promote coal gasification technologies while auctioning coal blocks, a senior government official told Moneycontrol on condition of anonymity, in an effort to turn untapped reserves into usable synthetic gases, thus reducing environmental cost.

“The provision will be included as early as the next (14th) round of commercial and captive coal mine auctions, the dates for which are yet to be decided. The thrust will be to promote underground coal gasification as that is lower on capital cost and environmental impact,” the official said.

Converting coal into a mixture of synthetic gases (syngas), or coal gasification, helps decarbonise by creating a cleaner alternative instead of direct burning coal. Though it cannot be a complete replacement to burning coal which is used in industries and to generate electricity, the syngas produced through coal gasification can be used to produce fuels or chemicals such as as hydrogen, ammonia, methanol and ethanol.

Govt's coal gasification scheme

The Union Cabinet had approved an incentive scheme for coal and lignite gasification projects in January 2024, allocating Rs 8,500 crore to promote syngas in both PSU and private sectors.

While the target is to achieve 100 MT of coal gasification by 2030, so far only a few companies, mostly central public sector undertakings (CPSEs) are working on coal gasification under the scheme. These include Coal India Ltd, NLC India Ltd, BHEL, GAIL and Jindal Steel and Power, New Era Cleantech and Greta Energy.

Why underground coal gasification?

Despite a year since the scheme was launched, coal gasification has seen few takers due to the high costs involved, which is why the government now intends to promote underground coal gasification which is much cheaper than the conventional (surface level) process. Underground coal gasification does not require mining, washing, or large surface gasifiers, and relies on only drilling rigs, injection and production wells.

During the launch of the 13th round of commercial coal mine auction on August 21, Minister for Coal and Mines, G Kishan Reddy had backed the diversification from conventional coal to cleaner use of coal through gasification. “More than 40 percent of India’s coal resources, approximately 370 billion tonnes, are deep-seated and currently un-mineable through conventional methods. Underground coal gasification (UCG) represents a transformative approach, allowing these vast, untapped coal reserves to be converted directly into syngas underground,” the minister had said.

“By harnessing coal in-situ, this technology (coal gasification) not only unlocks immense energy potential but also minimizes surface disturbance, reduces land use, and promotes cleaner, more sustainable coal utilization, marking a significant step forward in India’s energy roadmap,” Reddy said.

In June last year, state-run Eastern Coalfields (ECL) had launched a pilot for underground coal gasification (UCG) at its Kasta coal block in Jamtara district, Jharkhand. This is the first-ever initiative where in-situ coal gasification is being used to convert coal into valuable gases.

Coal miners could take up gasification

From the next round of auction of coal mines, the government is planning to include a clause allowing underground coal gasification on some of the blocks. This will, for the first time, give coal miners and opportunity to take up underground coal gasification, which currently is not happening in India except the pilot project by ECL.

With India's commercial and industrial sector taking up various decarbonisation initiatives to make products more export worthy, the option to take up underground coal gasification provisions for coal blocks will give a new scope to such companies to reduce their carbon emissions. It will also help coal miners who have a presence in hard-to-abate industries.

The Indian government has, so far, auctioned at least 134 coal mines, attracting investments worth Rs 41,600 crore and generating over 3.5 lakh jobs. None have had provisions for coal gasification so far.