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India to Auction Coal Blocks for Underground Gasification for First Time, Boosts Rs 8,500 Crore Incentive Scheme

Government to invite new proposals next week as part of coal gasification roadmap; underground coal gasification seen as key to clean energy transition
Indian Masterminds Stories

New Delhi: In a landmark move to advance clean coal technologies, the Government of India is set to launch the first-ever auction of coal blocks earmarked for Underground Coal Gasification (UCG). The announcement was made during a roadshow hosted by the Ministry of Coal on Friday, aimed at promoting coal gasification as a cleaner alternative to conventional coal use.

“Very soon we will be putting up coal blocks with potential for underground coal gasification up for auction,” said Additional Coal Secretary Rupinder Brar, highlighting the government’s intent to integrate UCG into India’s commercial coal mining ecosystem.

These blocks will be offered under the Commercial Coal Mine Auction regime, marking a significant policy shift towards enabling in-situ gasification of deep-seated coal reserves.

UCG: A Cleaner Way to Tap Deep Coal Reserves

With nearly 43% of India’s coal reserves located at depths greater than 300 meters, UCG presents a viable method to convert otherwise unmineable coal into syngas, which can be processed into hydrogen, methanol, ethanol, synthetic diesel, SAF (Sustainable Aviation Fuel), and petrochemical feedstocks.

UCG involves the controlled combustion of coal seams underground using oxidants like air or oxygen, eliminating the need for traditional mining. The government is targeting gasification of 100 million tonnes of coal by 2030, positioning UCG as a cornerstone of its energy strategy.

Read also: Mission Coking Coal: Ministry of Coal Lifts Output to 66.47 MT; 8 New Washeries of 21.5 MTPA Underway

Inter-Ministerial Committee to Oversee UCG Guidelines

To facilitate this transformation, an inter-ministerial committee has been established to draft mining guidelines and integrate UCG into the auction process. The committee comprises experts from the Coal Ministry, DGH, DGMS, Central Ground Water Board, CMPDIL, and the Coal Controller Organisation (CCO).

Coal Gasification Incentive Scheme: Rs 2,500 Cr RfP to be Issued

In parallel, the Ministry of Coal will issue a Request for Proposal (RfP) next week to allocate the remaining Rs 2,500 crore under its Rs 8,500 crore coal gasification incentive scheme. The scheme, launched in 2023, has already allocated around Rs 6,000 crore across three project categories:

Category I (PSU/JVs):

  • Bharat Coal Gasification and Chemicals Ltd (CIL-BHEL JV) – Rs 1,350 crore for Lakhanpur, Odisha
  • CIL-GAIL JV – Rs 1,350 crore for Sonepur Bazari, West Bengal

Category II (Private and PSU Projects):

  • New Era Cleantech Solution Pvt Ltd
  • Jindal Steel and Power Ltd (JSPL)
  • Greta Energy Ltd

Category III (Demonstration Projects):

  • New Era Cleantech’s coal-to-ethanol project in Chandrapur, Maharashtra – Rs 100 crore

Challenges Remain, But Opportunities Expand

While underground coal gasification remains technologically complex and capital-intensive, the government believes the auction of UCG-designated blocks will unlock private sector innovation and investments in large-scale gasification technologies.

Though India has yet to commission a commercial-scale UCG plant, the recent pilot project at Kasta coal block in Jharkhand—executed by Eastern Coalfields Ltd (ECL) in collaboration with Canada’s Ergo Exergy Technologies Inc (EETI)—is a key step in demonstrating UCG’s feasibility.

Read also: Star Rating Awards 2025: Ministry of Coal to Recognise Excellence in Coal and Lignite Mines in Mumbai


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