Ambani's Rs 2.7 lakh cr underground bet can save India from shocks

Mukesh Ambani's Reliance Industries (RIL) has proposed what could become one of India's largest energy and industrial investments -- about Rs 2.73 lakh crore over 30 years to build an integrated underground coal gasification complex in Andhra Pradesh, as reported by ET today.

The proposal comes as India tries to extract more value from its huge coal resource while reducing dependence on imported gas and chemical feedstocks. For Reliance, it is a striking new move into coal resources, although the company is not proposing to become a conventional coal miner.

Also Read: RIL proposes Rs 2.73 lakh crore investment for India’s first coal gasification complex in Andhra


But can Reliance make underground coal gasification work at commercial scale in Indian conditions and, if it does, will the resulting gas and chemicals can materially reduce India's vulnerability to external energy shocks.

What Reliance has proposed

Reliance has secured the Chintalapudi and Recherla coal blocks in Andhra Pradesh through a coal ministry e-auction and has proposed developing an integrated Underground Coal Gasification, or UCG, complex in Eluru district, as per an ET report based on sources. RIL did not respond to ET's email requesting comment.

The potential investment is pegged at Rs 2.73 lakh crore over 30 years, but it is conditional on exploration establishing that the project is technically and commercially viable.

The proposal has three stages. Exploration and pilot work from Q3 2026 to Q4 2027 would involve up to Rs 3,000 crore. If that succeeds, Reliance proposes Rs 1.2 lakh crore of development spending during 2028-30 and Rs 1.5 lakh crore in the production phase from 2030 onwards. These are figures in the proposal submitted to the Andhra Pradesh government, as reported by ET.

The two blocks are large. Chintalapudi covers about 3,000 acres and is estimated to contain 904.94 million tonnes of G-12 grade coal. Recherla covers 5,500 acres and has an estimated 2,225.67 million tonnes of G-13 coal. The estimates amount to 3.13 billion tonnes. Officials told ET the deposits lie more than half a kilometre underground.

The biggest economic significance lies in the company extracting gas from the coal without conventional mining.

Also Read: Coal gasification key to build long-term resilience against global energy shocks: Experts

How underground coal gasification works

In conventional coal gasification, coal is mined and brought to the surface before being converted into gas. Underground coal gasification (UCG) turns the coal seam itself into the gasification reactor.

Wells are drilled into the underground coal seam. An oxidising agent such as air, oxygen or steam is injected through one well. The coal is partially combusted and undergoes chemical reactions underground. Another well brings the resulting gas to the surface. The main product is syngas, or synthesis gas. It is not the same as natural gas. Syngas typically contains hydrogen and carbon monoxide along with varying quantities of methane and carbon dioxide. Its importance lies in what can be made from it.

Syngas can be processed into hydrogen, methanol, ammonia, synthetic natural gas and synthetic fuels. Government documents also identify applications in fertiliser production and as reducing gas for steelmaking. For example, syngas can be shifted to increase its hydrogen content. That hydrogen can be used to make ammonia, which is a major fertiliser feedstock. Syngas can also be converted into methanol. Through methanation, it can produce synthetic natural gas, or SNG, which is essentially methane-rich gas that can substitute for natural gas in suitable applications.

This means Reliance does not necessarily have to sell the gas as a fuel. It could use the syngas as a platform for producing higher-value industrial products.

Why this matters to India

India's dependence on imported gas is substantial. The government said in May 2026 that more than half of India's LNG, around 20% of its urea, almost all of its ammonia and around 80-90% of its methanol requirements are met through imports. That creates several points of vulnerability.

Domestic gasification could potentially reduce LNG demand through SNG production. It could provide hydrogen for ammonia and fertiliser production. Methanol production could substitute for imports. Syngas-derived reducing gas could also find industrial applications. The value is therefore broader than electricity generation. Coal is being converted into a gaseous feedstock that can enter several industrial chains. India's import bill for key products that coal gasification could potentially substitute, including LNG, urea, ammonium nitrate, ammonia, coking coal and methanol, was approximately Rs 2.77 lakh crore in FY2025, as per a government release.

For Reliance, this downstream flexibility is particularly important because the company already has large refining and petrochemical operations. Its interest is potentially less about becoming a coal producer and more about gaining another domestic source of carbon and energy feedstock.

India's coal-gasification mission

India has discussed coal gasification for decades, but government policy has become much more aggressive in recent years. In January 2024, the Union government approved an Rs 8,500 crore financial incentive scheme for coal and lignite gasification projects. The scheme covers government PSUs, private companies and demonstration projects.

The national objective is to reach 100 million tonnes of coal gasification by 2030. The sector is growing but remains well short of that ambition. The government has been supporting projects involving Coal India, BHEL, GAIL, BPCL, Talcher Fertilisers and private companies.

In May 2026, the Cabinet approved a much larger Rs 37,500 crore scheme for surface coal and lignite gasification projects. The government expects the scheme to support projects using about 75 million tonnes of coal and lignite and provide incentives of up to 20% of eligible plant and machinery costs, subject to scheme limits.

This is important for Reliance, but there could be a catch. The Rs 37,500 crore scheme is specifically for surface coal and lignite gasification. Reliance is proposing underground coal gasification. Therefore, it should not be assumed that RIL will automatically qualify for the new surface-gasification subsidy.

UCG does, however, have separate policy support. The government has had a UCG policy since 2016 and has introduced provisions that encourage gasification of coal in commercial mining. In April 2026, the Ministry of Coal announced the first tranche of coal mine development agreements carrying embedded UCG provisions.

The government has also provided a 50% revenue-share rebate for coal used for gasification under specified conditions. That could be economically relevant to Reliance, depending on the terms applicable to its blocks and the eventual project configuration.

So the policy environment is clearly supportive of gasification, but Reliance's UCG project may not be treated as a direct beneficiary of every incentive created for surface gasification.

How big could Reliance's contribution be?

Reliance has not disclosed how much coal it intends to gasify each year or how much syngas it expects to produce. Therefore, there is no company production forecast yet. But the scale can be illustrated.

If the entire 3.13 billion tonnes of underground coal were gasified evenly over 30 years, the average would be about 104 million tonnes of coal a year. That is roughly equivalent to India's entire 100-MT national gasification target for 2030.

That does not mean Reliance will gasify 104 MT a year. It is simply the mathematical implication of spreading the entire geological estimate over the proposed project life.

A more conservative scenario shows why even partial utilisation could matter. If 10% of the estimated resource were gasified over 30 years, the average would be about 10.4 MTPA, or roughly 10% of India's 100-MT target. At 25% utilisation, it would be about 26 MTPA, equivalent to 26% of the national target.

These are just scenarios, and not Reliance guidance. The actual number will depend on exploration, recovery rates, gasification performance and economics.

The biggest risk is underground

UCG's attraction is also its biggest uncertainty. The coal is more than 600 metres deep, which makes conventional mining difficult or uneconomic. But turning that underground seam into a controlled gasifier may create its own technical problems. The coal seam needs suitable thickness, continuity and permeability. The surrounding geology matters. Groundwater conditions matter. Faults and fractures can affect the gasification cavity. Operators must also control gas leakage and potential subsidence. Research on UCG has identified groundwater contamination, gas leakage and subsidence as important risks. Commercial-scale deployment remains highly site-specific.

That is why Reliance's first Rs 3,000 crore is more important than the headline Rs 2.73 lakh crore figure.

The company first needs to prove that it can create and control the underground reaction and produce a sufficiently consistent syngas stream at an acceptable cost. If that works, the larger development investment becomes credible. If it does not, much of the proposed Rs 2.73 lakh crore may never be spent.

Can Ambani's underground bet save India from energy shocks?

India's energy demand is expected to rise as industrialisation and household consumption increase. Renewables can supply an increasing share of electricity, but they cannot eliminate the need for molecules used in fertilisers, chemicals, refining, steel and other industrial processes. That means India will continue to need gas and gas-derived products even as its power system becomes cleaner.

Coal gasification offers one possible domestic source. If UCG produces economically competitive syngas, India could use it to make SNG and reduce some LNG imports. Hydrogen from syngas could support domestic ammonia production. Methanol could replace imports. Industrial gas could support steel and chemical production.

It would not make India completely self-sufficient. Nor would coal gasification eliminate the country's exposure to international energy prices. But it could provide an additional domestic source of critical molecules. That would be a big factor during geopolitical disruptions. A country importing LNG, ammonia and methanol is exposed not just to commodity prices but also to shipping constraints, currency movements and disruptions to major trade routes.

The government's own rationale for coal gasification is partly based on reducing these import dependencies. Its May 2026 announcement explicitly linked the programme to lower dependence on imported LNG, urea, ammonia and methanol.