Coal gasification may help Indian steelmakers reduce dependence on imported fuels, but its commercial viability depends on how effectively the industry addresses cost, coal quality and technological constraints, industry experts said.

The process has seen increased traction in recent months as India looks to reduce dependence on imported natural gas, ammonia and other products following the US-Iran war that disrupted trade flows from the Mideast Gulf. The Indian government in May approved a 375bn rupee ($3.9bn) incentive package to accelerate coal gasification projects, under which financial support of up to 20pc of plant and machinery costs will be provided.

Coal gasification converts coal to synthesis gas, or syngas, which in turn can be used to produce fuels and chemicals domestically. Scaling up the process would enable India to use its abundant domestic coal reserves — estimated at about 401bn t — to secure energy supply for major industries.

There are different pathways to use syngas in the steel sector, one of which is the production of direct-reduced iron (DRI) — a key feedstock for steelmaking. Indian producer Jindal Steel's nearly 2mn t/yr Angul facility, which was commissioned in 2014, is the first commercial plant globally to use coal gasification-derived syngas for DRI production and is the only such plant operating at a commercial scale in India. The company also started using syngas at its steel galvanizing and colour coating units earlier this year to offset natural gas and propane shortages.

Over time, coal gasification is expected to reduce reliance on imported metallurgical coal by enabling syngas-based DRI production, thereby lowering dependence on coke-intensive blast furnaces. However, industry participants told Argus that fully substituting metallurgical coal remains challenging.

Jindal has also introduced syngas into its blast furnace — something which will help the company cut down on the use of pulverized coal injection (PCI), Jindal Steel's sustainability and decarbonization head Naveen Ahlawat said at a coal ministry roadshow on 28 May.

"We have a very strong view that it will reduce our PCI consumption by 20-30pc as we move forward," Ahlawat said.

Big investments, slow progress

But coal gasification projects require hefty upfront capital investments and significant water consumption. Additionally, Indian domestic coal has 30-45pc ash content, making it less suitable for gasification using imported technologies. This underscores the need to set up coal washeries and to scale up indigenous technologies better tailored to domestic coal.

Government documents show other gasification projects are yet to take off, with Talcher Fertilizers' plant in eastern India's Odisha state facing delays in construction. The plant plans to use coal gasification to produce 1.27mn t/yr of urea.

"We need to develop a business model for coal gasification, by aligning plant location, detailed feedstock assessment, gasification technology, and downstream product mix," gasification and decarbonisation expert Gaurav Verma told Argus.

A technically and commercially viable model can then serve as a "template" for accelerating gasification projects while reducing development risks, Verma added.

The green steel question

The emissions intensity of DRI produced in coal-based rotary kilns and syngas-based DRI is very similar, the steel ministry noted in its green steel roadmap. Lowering the emissions intensity of coal gasification-based DRI will require carbon capture and storage units (CCUS) for CO₂ generated during the process, increasing costs for steelmakers.

For projects which have a CCUS component, companies can approach the ministry of power for additional support under the CCUS scheme announced in the latest union budget, secretary of the coal ministry, Vikram Dev Dutt, said during the roadshow.

Still, industry experts believe that coal gasification does not indicate a detour from steel decarbonization but serves as a stepping stone to advanced technologies such as green hydrogen, which are currently at a nascent stage.

"Coal gasification is a transitional industrial strategy for resource-rich economies like India, where steel demand is growing rapidly while dependence on imported coking coal and LNG remains structurally high," mining and steel sector expert Hridaya Mohan said.

"The objective is not to delay decarbonisation, but to create a practical bridge between today's resource realities and tomorrow's low-carbon steelmaking technologies," Mohan added.