Reliance Industries lays out a coal gasification programme it puts at about Rs 2.73 lakh crore, anchored on an underground gasification project in Andhra Pradesh
20 Aug, 04:23 IST · Plays out over months · 1 source
Reliance plans to spend a very large sum turning coal into gas underground in Andhra Pradesh instead of importing gas - good for coal producers and for the engineering firms that will build it, but it ties up Reliance's cash for years before it earns anything.
Key facts
What the reporting establishes, before any reading of it.
- Reliance has outlined a coal gasification programme that the Economic Times reports at about Rs 2.73 lakh crore, which would be among the largest private capital commitments ever made in India.
- Independent reporting sizes the specific Andhra Pradesh underground coal gasification project at roughly Rs 1 lakh crore across the Chintalapudi and Recherla blocks, holding an estimated 3,130 million tonnes of coal, targeted for completion by 2029 - so the Rs 2.73 lakh crore figure appears to cover a wider multi-phase build-out and should be treated as indicative.
- Underground coal gasification converts coal into burnable gas in place, more than 600 metres down, without digging it out - which is what makes these deep deposits usable at all.
- This sits alongside the Rs 37,500 crore central coal gasification incentive scheme cleared by the Cabinet in May 2026.
How the news spreads
Step by step — from the first companies it hits to whole sectors.
Who it hits first
- Reliance itself carries the whole cash outlay for years before any gas is produced, against a 2029 target for the Andhra project.
- Coal India and other domestic coal producers gain a new, non-power category of coal demand.
- Engineering and equipment firms - Larsen & Toubro, Thermax, BHEL - gain a large potential order pipeline, though nothing is awarded yet.
- Andhra Pradesh gains a very large single industrial investment in Eluru district.
Who may gain
- Coal India, which supplies most of India's coal and would feed a gasification build-out of this size.
- Larsen & Toubro as the default Indian contractor for process plants of this complexity.
- Thermax and BHEL on the gasification equipment side, both of which have existing technology lines.
- Indian chemical producers over the long run, because gasified coal yields methanol and ammonia feedstock that India currently imports.
Along the supply chain
Downstream
The gas produced would feed Reliance's own refineries and petrochemical plants at Jamnagar, displacing imported LNG. Further downstream, gasified coal is the feedstock for methanol and ammonia, which India imports today - so Indian fertiliser and chemical buyers would eventually have a domestic source.
Upstream
The upstream input is coal from the Chintalapudi and Recherla blocks, an estimated 3,130 million tonnes lying more than 600 metres down - too deep to mine conventionally, which is exactly why gasification is being used. Steel, specialty alloys and heavy fabrication feed the plant build, so domestic steel and fabrication capacity is drawn on through the construction years.
Where demand moves
Business
Reliance replaces imported LNG with gas made from Indian coal, so demand shifts from international LNG suppliers to Coal India and domestic coal logistics. Between announcement and 2029 the demand that is actually created is for engineering, steel-heavy process equipment and construction labour, which flows to L&T, Thermax and BHEL rather than to coal miners.
Capital
Money tends to leave Reliance on mega-capex days - it fell on both prior announcement days - and rotate into the companies that receive the spending, principally the domestic capital goods and coal names. Because the payoff is 2029, long-only investors treat this as a structural story to accumulate rather than a trade, so the rotation is slow rather than sharp.
How it spreads across sectors
Capital Goods
A very large potential order pipeline for gasifiers, boilers and heat-recovery equipment.
Chemicals
Long-term domestic feedstock for methanol and ammonia, which India currently imports.
Construction
Multi-year engineering, procurement and construction work for whoever wins the packages.
Metals & Mining
Coal producers gain a new demand category beyond power generation.
Oil, Gas & Consumable Fuels
Domestic gas substitutes imported LNG over the long run, reducing India's gas import bill but also cutting into LNG trading margins.
Commodity angle
Commodity
coal
Note
This is a long-dated demand event, not a price event: the coal price series reads 0.00% at both one and three months and is one of the flat 'case-twin' series, so no price move can be attributed. Coal India holds a DEPENDS_ON_COMMODITY edge to coal with a positive role (it benefits when coal rises), but with no observed move and no cost weights on the edge, no margin impact in basis points can be computed without inventing a number. Demand from gasification does not begin before about 2029.
Price updated at
2026-08-19T12:11:01Z
Shock type
demand
Unit
USD/tonne
A pattern seen before
Cascade chain
- Reliance commits to large-scale coal gasification
- Domestic coal demand gains a new non-power category
- Engineering and equipment order pipeline builds through to 2029
- Imported LNG is displaced over the long run
- Methanol and ammonia feedstock becomes domestically available
Pattern name
Govt Capex Cascade
Sectors queried
- Oil, Gas & Consumable Fuels
- Capital Goods
- Chemicals
- Metals & Mining
- Construction
When it plays out
Immediate
Expect Reliance to be soft - it fell on both prior mega-capex announcement days - while coal and capital goods names get a sympathetic bid.
Medium term
Nothing produces gas before about 2029. The genuine medium-term question is whether the Rs 37,500 crore central gasification incentive scheme is extended to a project of this size, which would materially change the returns.
Short term
Watch for the actual detail: which blocks, what phasing, and whether Reliance clarifies the gap between the Rs 2.73 lakh crore headline and the roughly Rs 1 lakh crore Andhra project size reported elsewhere. Order awards to contractors are the first real confirmation.