Discuss the potential of surface coal and lignite gasification in reducing India's import dependence for fertilisers and chemicals. What challenges limit private participation?

Coal gasification partially oxidises coal into synthesis gas (CO + H₂). This gas is a feedstock for urea, methanol and Dimethyl Ether (DME). Through the ₹37,500 crore Surface Coal/Lignite Gasification Scheme and the 100 MT-by-2030 target [1], India wants to turn its own coal into import substitutes. The response from investors, however, is still thin.

Potential in reducing import dependence

• Fertilisers: Coal-based urea reduces reliance on imported LNG. The Talcher plant was approved partly to cut the LNG import bill and move towards urea self-sufficiency [2].
• Chemicals and fuels: Methanol is a basic chemical building block, and DME can be blended with LPG. NTPC's Round 2 proposals cover exactly these: one for urea, one for methanol and DME [1].
• Energy security: Coal is abundant at home and its price is less volatile than imported gas [2].
• Wider feedstock: The scheme covers lignite as well as coal [1].
• Accountability: A parliamentary panel has asked for measurable import substitution in methanol and ammonia [3].

Challenges limiting private participation

• Thin response: Round 2 drew only two applications, both from NTPC, a central PSU [1]. So the project risk stays with the state.
• Pricing and offtake risk: Urea is price-controlled. Talcher needed its own exclusive subsidy policy to go ahead [2]. A capital subsidy alone does not tell a private firm who will buy its urea, or at what price.
• Technology risk: Indian coal is high-ash, and most gasifiers are designed for low-ash coal. The Standing Committee asked for indigenous high-ash technology and trials on Indian coal [3].
• Capital intensity: Talcher alone was estimated at ₹13,277 crore [2]. Round 3 closes in January 2027 [1], which leaves about three years before 2030.
• Disbursal bottleneck: Spending was near-nil for most of 2025-26, against a revised estimate of ₹285 crore [3]. Incentives tied to milestones stall when projects do not reach financial closure.
• Climate risk: Without CCUS, gasification stays carbon-intensive. Net-zero 2070 raises the risk that lenders see these plants as future stranded assets.

Gasification can turn India's coal reserves into self-reliance in fertilisers and chemicals, but a bigger budget alone will not draw in private capital. Four steps would lower the risk for investors: a standard pricing rule for coal-gas urea, pilot trials on high-ash coal, the committee's quarterly milestone checks [3], and building in CCUS. Together they would help match Aatmanirbhar Bharat with SDG 7 and India's net-zero commitment.