The second round of India’s coal gasification scheme has exposed a central problem in converting policy ambition into industrial infrastructure: financial incentives alone have not persuaded private companies to commit capital. The round received applications only from state-run NTPC, even as the Union Coal Ministry seeks to expand coal gasification capacity to 100 million tonnes by 2030.
The outcome is significant because the scheme is intended to move coal beyond conventional power generation and into products such as urea, methanol, dimethyl ether and synthetic natural gas. It also reflects a broader challenge facing large infrastructure projects that depend on unfamiliar technologies, high upfront costs and lenders willing to accept construction and operating risks.
The second round concluded on November 10, according to The Hindu BusinessLine’s report citing the Coal Ministry. NTPC submitted two applications. The projects envisage the production of urea, methanol and dimethyl ether, indicating that the public-sector company is positioning coal gasification as a route to domestic production of industrial inputs.
However, no private-sector company participated in the round. That contrasts with the first round, which concluded in September 2026 and received seven applications from NTPC, Adani Enterprises, Gallantt Ispat, Shyam Sel & Power and Talcher Fertilisers. Those proposals involve the production of synthetic natural gas, urea and direct reduced iron, and remain under review.
The difference between the two rounds is not simply a question of the number of applications. It shows that interest in a government-backed programme does not automatically translate into investable projects. Companies may express interest during an initial phase, but participation in subsequent rounds depends on whether projects can secure financing, manage technology risk and establish a credible route to commercial operation.
Atanu Mukherjee, chief executive officer of Dastur Energy, told BusinessLine that NTPC’s continued participation was encouraging but said the limited response highlighted the need to supplement financial incentives with measures that could make projects commercially viable and bankable. His comments identify the gap between a scheme’s formal support structure and the conditions required by lenders and private investors.
The scheme provides viability-gap funding, but Mukherjee said that this may not be sufficient. Even projects that appear commercially sound can face difficulty in securing debt when lenders are uncertain about the technology, construction process and operating performance. The challenge is more pronounced where domestic commercial precedents are limited, because lenders have fewer completed projects against which to assess costs, timelines and operational reliability.
This is an institutional issue as much as a financial one. A viability-gap grant can reduce the amount of capital that a project sponsor must raise, but it does not eliminate the risks associated with construction delays, technology performance or future operating costs. Nor does it necessarily give lenders confidence that a project will generate stable cash flows over its repayment period.
Mukherjee suggested a government-supported partial credit guarantee mechanism as one possible way to address this problem. Under such a framework, the government would share a defined portion of lenders’ risks, subject to rigorous project appraisal and adequate sponsor participation. The objective would be to improve access to debt and reduce financing costs without removing the requirement for private sponsors to demonstrate the underlying strength of their projects.
The distinction matters. A guarantee that absorbs all risk could weaken project discipline and transfer commercial losses to the public balance sheet. A partial guarantee, as described by Mukherjee, would instead seek to make risk more manageable for lenders while retaining due diligence and sponsor accountability. The report does not indicate that such a mechanism has been adopted by the Ministry; it presents it as a suggested policy measure.
Technology adaptation is the other major constraint. India’s coal resources include high-ash coal, and gasification technologies must be able to operate reliably under those conditions. Mukherjee said India needs to assimilate proven technologies and adapt them to high-ash coal. He also called for standardised modular designs that could enable faster and wider commercial implementation.
That proposal points to a scale problem within the programme. If every project is designed as a highly customised facility, each developer and lender may have to assess a separate technology configuration, supply chain and operating model. Standardised modular designs could reduce some of that uncertainty, but the supplied report does not establish how such standardisation would be implemented or which technology platforms would qualify.
The proposed output mix also shows why the programme has relevance beyond coal use. Urea, methanol, dimethyl ether, synthetic natural gas and direct reduced iron are linked to fertiliser, chemicals, fuel and metals production. By encouraging coal conversion into these products, the scheme is intended to diversify the use of India’s indigenous resources and support domestic production of critical industrial goods.
At the same time, the diversity of proposed products makes project appraisal more complicated. A urea plant, a methanol facility and a direct-reduced-iron project would face different markets, technology requirements, operating conditions and revenue risks. The report does not provide project-level investment values, production capacities, offtake agreements or cost estimates, so it is not possible to determine which configurations are closest to commercial viability.
The policy architecture is therefore still developing through successive application rounds. The Ministry launched the third round on November 10, the same day the second round closed. Eligible entities can submit proposals until January 11, 2027. The third round creates another opportunity for private-sector participation, but the second round’s outcome raises questions about whether the terms have changed enough to alter investor behaviour.
The Ministry’s stated objective is to encourage wider industry participation, attract investment and accelerate the adoption of coal gasification technologies. The 100-million-tonne capacity target for 2030 provides the programme with a clear national ambition. However, the applications received so far do not establish that the target is on track. The first round’s seven applications are still under review, while the second round produced two applications from one state-owned company.
This difference between applications and operating capacity is crucial. An application represents intent, not a commissioned plant. Before projects can contribute to the 2030 target, they must pass evaluation, secure financing, complete construction, demonstrate technology performance and sustain operations. The supplied material confirms none of those later milestones for the projects submitted in the first two rounds.
For infrastructure policymakers, the immediate lesson is that project pipelines need more than headline capacity targets. They require a chain of institutions capable of evaluating technology, allocating public support, limiting lender exposure and coordinating with industrial offtakers. The Coal Ministry can invite proposals, but the eventual outcome will also depend on developers, technology providers, banks and the markets for the products being proposed.
For private companies, the second-round response highlights the difficulty of entering a sector where the policy case may be strong but the commercial evidence base remains limited. Public-sector participation can provide an early demonstration effect, but it may not be enough to establish the financing conditions required for broad private investment. The report does not identify any specific private company that declined to participate or explain the individual decisions of potential applicants.
The next test will be whether the third round produces a wider mix of applicants and whether the first-round proposals move beyond review. The January 11, 2027 application deadline is the programme’s immediate milestone. Alongside participation, the more consequential indicators will be whether projects secure debt, complete appraisal and demonstrate that coal gasification can be adapted to Indian feedstock and deployed at commercial scale.
The second round does not end India’s coal gasification effort, but it does show that the programme’s central constraint is not only technological ambition. It is the conversion of that ambition into projects that lenders, developers and industrial users consider bankable. Until that gap is addressed, successive rounds may continue to generate policy activity without delivering the private investment needed to meet the 2030 capacity objective.
