Coal Gasification as a Path to India's Resource Security Amid Decarbonisation Pressures
A report by the Observer Research Foundation (ORF) identified coal gasification as a strategic tool for India to reduce import dependence in the steel sector while navigating uncertain global decarbonisation timelines.
India's steel sector is the fastest-growing steel market globally, with demand projected to expand by 7.4% in 2026 and accelerate to 9.2% in 2027 — but it remains critically dependent on imported coking coal, primarily from Australia.
Nearly 90% of India's coking coal requirements are met through imports, exposing domestic steelmakers to price volatility and geopolitical supply disruptions — a structural vulnerability underscored by recent price spikes triggered by Queensland floods (January 2026) and West Asia conflict-related disruptions (March 2026).
Coal gasification offers a domestic alternative: using India's vast domestic coal reserves to produce syngas (synthetic gas), which can partially substitute coking coal as a reducing agent and fully substitute LNG in gas-based Direct Reduced Iron (DRI) steel production.
The Union Ministry of Coal integrated gasification provisions into production agreements with coal mine bidders in April 2026, and the government approved a Rs 37,500 crore scheme in May 2026 offering financial assistance of up to Rs 5,000 crore per gasification project.
Coal Gasification: Technology and Process
Coal gasification is a thermo-chemical process that partially oxidises coal at high temperatures and pressures in the presence of steam and limited oxygen. The output — syngas — is a mixture primarily comprising carbon monoxide (CO), carbon dioxide (CO₂), and hydrogen (H₂), which can be further processed into multiple industrial inputs.
India's strategy hinges on using coal gasification as a transitional technology — bridging the gap between current import dependence and future clean energy steel production — while keeping the decarbonisation option open through CCUS integration.
India's Coal Endowment and the Coking Coal Gap
India holds approximately 400 billion tonnes of total coal reserves — among the largest in the world — but the vast majority is non-coking thermal coal. Coking coal (also called metallurgical coal), essential for traditional blast furnace steelmaking, is scarce domestically.
Key Details
- India's domestic coking coal reserves are limited and of lower quality (high ash content), making them largely unsuitable for direct use in conventional blast furnaces without significant blending with imported coal.
- As of the latest data, approximately 90% of India's metallurgical (coking) coal requirements are imported, primarily from Australia.
- Australian coking coal price spikes in January 2026 (due to Queensland flooding) and March 2026 (geopolitical disruptions) have quantified the cost of this dependency.
- Coal gasification, by enabling domestic non-coking coal to be converted into a usable syngas reducing agent, effectively unlocks India's abundant thermal coal reserves for steelmaking applications.
- The ORF report estimates that coal gasification could generate Rs 60,000–90,000 crore annually for India through import substitution.
The resource security argument rests precisely on this distinction: India has vast coal but the wrong type for steel. Gasification bridges that gap by making domestic coal economically functional for the steel value chain.
India's Steel Sector: Scale, Growth, and Emissions Profile
India is the world's second-largest steel producer and its fastest-growing major steel market, with the sector playing a central role in the government's infrastructure push and manufacturing growth ambitions.
The scale of India's steel ambitions makes the energy and raw material sourcing question strategically critical — coal gasification is one lever, but its high emission intensity means it may incur CBAM-related costs unless paired with carbon capture.
Decarbonisation Pathways for Steel and Green Hydrogen
The global steel industry's decarbonisation roadmap centres on three main technologies: Green Hydrogen-based DRI (H-DRI), Carbon Capture Utilisation and Storage (CCUS), and Electric Arc Furnaces (EAFs) fed by renewable electricity. India is pursuing all three, but faces cost and scale barriers in the near term.
Key Details
- Green hydrogen production in India remains expensive; the National Green Hydrogen Mission (2023) aims to bring costs down to USD 1 per kg by 2030, enabling viable H-DRI for steel.
- CCUS technology is not yet deployed at commercial scale in India's steel sector; integration with coal gasification would be necessary to make gasification-based steel compatible with net-zero pathways.
- The EU's CBAM (Carbon Border Adjustment Mechanism) creates a financial incentive for Indian exporters to lower their emission intensity to avoid tariff penalties on exports to Europe.
- Coal gasification, per the ORF report, is explicitly described as a transitional technology — valuable for resource security in the current decade but not a long-term decarbonisation solution.
The "decarbonisation uncertainty" in the article's title refers to the gap between long-term green steel ambitions and the near-term reality of a sector still dependent on coal — coal gasification is the pragmatic short-to-medium term response to that gap.
- India's steel demand growth projection: 7.4% in 2026, 9.2% in 2027 — the world's fastest-growing major steel market.
- India holds approximately 400 billion tonnes of total coal reserves, but domestic coking coal is scarce and of lower quality.
- ~90% of India's coking coal requirements are imported, primarily from Australia.
- India's steel emission intensity: ~2.55 tonnes of CO₂ per tonne of crude steel — ~30% higher than the global average.
- The government approved a Rs 37,500 crore coal gasification scheme in May 2026, with up to Rs 5,000 crore assistance per project.
- Coal gasification potential revenue through import substitution: Rs 60,000–90,000 crore annually (ORF estimate).
- Coal gasification process: partial oxidation of coal at high temperature and pressure → syngas (CO, CO₂, H₂).
- EU Carbon Border Adjustment Mechanism (CBAM) entered into force in 2026, applying to high-emission imports including steel.
- National Green Hydrogen Mission (2023) targets green hydrogen production cost of USD 1 per kg by 2030.
- India's steel production target: 300 million tonnes per annum by 2030 (vs. ~143 MT in 2023).