New Delhi: The government is set to offer coal blocks with potential for underground coal gasification (UCG) for auction very soon. Speaking to the media on the sidelines of the Ministry of Coal’s roadshow on coal gasification on Friday, Additional Coal Secretary Rupinder Brar said, “Very soon we will be putting up coal blocks with potential for underground coal gasification up for auction.” This will be the first-ever auction of UCG coal blocks in India. These coal blocks will be put up for auction under the commercial coal mine auction regime, said another official.
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An inter-ministerial committee has been formed to integrate coal gasification into the auction regime and draft mining plan guidelines for underground coal gasification. The committee includes members from the Coal Ministry, Directorate General of Hydrocarbons (DGH), Director of the Directorate General of Mines Safety (DGMS), Director (Central Ground Water Board), Director and an ex-Director of CMPDIL and representatives from the Coal Controller Organisation (CCO).
India, which holds the world’s fifth-largest coal reserves, is banking on gasification to continue using coal in a cleaner way over the coming decades. Government officials estimate that nearly 43 percent of India’s reserves lie at depths greater than 300 metres, making them suitable for underground gasification rather than conventional mining. UCG involves converting unmineable coal seams in-situ into syngas using oxidants such as air, oxygen or steam. The process can produce hydrogen and liquid fuels such as methanol, ethanol, synthetic diesel and sustainable aviation fuel (SAF), as well as feedstock for chemicals, fertilisers and petrochemicals. India plans to achieve gasification of 100 MT of coal by 2030.
The first-ever pilot project for underground coal gasification (UCG) in the country was launched in June 2024 at the Kasta coal block in Jharkhand. The project is being executed by Eastern Coalfields Limited (ECL), a subsidiary of Coal India Limited (CIL), along with the Canadian firm Ergo Exergy Technologies Inc (EETI).
Brar also said that the ministry will float a Request for Proposal (RfP) next week to allocate the remaining Rs 2,500 crore under its coal gasification financial incentive scheme. The scheme was announced last year with a total financial outlay of Rs 8,500 crore. Of the Rs 8,500 crore, about Rs 6,000 crore has already been allocated across three categories of projects.
Under Category I, which includes PSUs / joint ventures of PSUs, Bharat Coal Gasification and Chemicals Limited (BCGCL), a joint venture of CIL-BHEL has been awarded Rs 1,350 crore for its coal gasification project in Lakhanpur, Orissa. Another JV formed between CIL and GAIL for setting up a coal gasification project in Sonepur Bazari, West Bengal, has been awarded Rs 1,350 crore of financial incentive under the scheme.
New Era Cleantech Solution Private Limited, Jindal Steel and Power Limited (JSPL) and Greta Energy Limited are the three companies that have been selected by the Ministry of Coal under Category-II, which includes coal gasification projects being undertaken by both private sector and government PSUs.
Under category III, which includes demonstration projects, small-scale product-based plants, New Era Cleantech’s coal-to-ethanol demonstration project in Chandrapur, Maharashtra, has been awarded Rs 100 crore of financial incentive under the scheme.
While the government is positioning gasification as a bridge to cleaner coal utilisation, industry observers note that UCG remains technologically challenging and capital-intensive. India has yet to demonstrate a commercial-scale UCG project, though countries like South Africa and China have undertaken pilot and operational ventures.
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Officials, however, insist that auctioning UCG blocks will provide the right framework for private players to experiment with the technology at scale and help India diversify its coal usage into fuels and chemicals.