What a change three months can make. Since Israel and the United States bombed Iran on February 28, and the subsequent blockade of the Strait of Hormuz, global energy markets have been in turmoil.
For India, which is particularly vulnerable since 80% of its crude oil passes through the Strait of Hormuz, the war has led to a fundamental rethinking of the rules of the energy transition.
Coal is no longer a dirty fuel. Instead, as a transition fuel via coal gasification, it is now central to the country’s plans to meet growing industrial energy demand. After all, India has one of the world’s largest coal reserves, estimated at 401 billion tons, along with nearly 47 billion tons of coal reserves. India’s coal reserves are sufficient to last nearly 200 years, making coal gasification an important pillar of long-term energy resilience, Union Minister Ashwani Vaishnao said.
Indeed, for Indian companies, the shift to coal as a bridge fuel has been rapid, especially when immediate electrification is difficult, and industrial operations have been hit by a shortage of liquefied natural gas amid conflict in West Asia.
For example, Jindal Steel recently switched to syngas (syngas) through coal gasification due to shortage of LNG supplies to its steelmaking units. UltraTech is working to increase the share of domestic coal in its energy mix at its cement plants. Mahindra & Mahindra is looking to electrify fossil fuel operations across its ecosystem.
To bolster these efforts, the central government recently announced a Rs 37,500-crore incentive scheme for coal gasification projects aimed at reducing India’s import dependence by Rs 2.77 lakh crore on LNG, ammonia, methanol, fertilizers and other industrial raw materials.
Of course, there is a trade-off here. India’s carbon emissions will increase as it shifts towards fossil fuel-based energy for energy security. This comes at a time when India has strengthened its climate action targets, pledging to achieve 60% of installed energy capacity from non-fossil fuels by 2035. As part of its report to the UN in March this year, the country committed to reducing emissions per unit of GDP by 47% by 2035 compared to 2005 levels.
Coal gasification, one of the solutions now being promoted to offset raw vulnerabilities, produces more carbon dioxide than a conventional coal-fired thermal power plant, according to an assessment by the Center for Science and Environment (CSE).
“This remains a carbon-intensive pathway. Without carbon capture, utilization and storage (CCUS), coal gasification could lead to significant CO2 emissions and secure high-carbon infrastructure,” says Parth Kumar, program director of the Sustainable Manufacturing Unit at the College of Science and Engineering.
Of course, coal is not only explored. There is a renewed focus on enhancing renewable energy capabilities as well, along with a focus on nuclear energy. India added a record 15.3 GW of solar capacity in the first quarter of 2026.
Once you have an electricity-based operation, you can further optimize the cost by switching to renewable energy. Embracing industrial electrification is essential.
-Ankit Todi,Chief Sustainability Officer, Mahindra Group
Companies are getting involved
Jindal Steel Limited was among the first companies to move in this direction. In April, the company announced that it would adopt coal-to-gas technology to promote self-reliance in energy and sustainable steel production.
The company achieved the world’s first position by setting up the first coal gasification-based Direct Reduced Iron (DRI) plant in India. This facility uses synthetic gas instead of traditional fossil fuels to make iron, according to the company.
“Syngas from Swadeshi coal can replace imported methanol, ammonia, ammonium nitrate and liquefied natural gas,” says BK Biju Nair, executive director of Jindal Steel’s facility in Angul, Odisha. “India must use its vast coal reserves to secure low-carbon growth in the future and limit foreign exchange outflow.”
The company also deployed syngas in the furnaces of the galvanizing and color coating line, the first of its kind in the global steel industry, and injected syngas into blast furnaces.
Meanwhile, the company is working on green paths. By 2030, it aims to reduce carbon dioxide intensity by 30%, increase renewable energy to 50%, and ensure full coverage of biodiversity in all sites. In the decade ending 2040, hydrogen recycling and carbon capture and storage (CCS) infrastructure will be scaled up.
Apart from steel, the conflict in West Asia has also affected primary energy supplies to sectors such as ceramics, cement, urea and other high-temperature processing units. Some companies in those sectors also decided to increase the share of coal in the fuel mix.
Atul Daga, CFO, UltraTech Cement, says the company is actively managing its fuel mix, optimizing between coke, coal and alternative fuels, and increasing the share of domestic coal wherever required and possible. About 43% of Ultratech’s energy requirements are met from green sources, which the company plans to increase to about 85% by FY30.
Elsewhere, too, the importance of coal is being appreciated again. In the power sector, although India has temporarily halted adding thermal plant capacity, the country has announced expansion of existing thermal capacity in 2024 to meet growing electricity demand. India’s peak power demand reached 270 gigawatts on May 21, an all-time record as a result of rising temperatures, compared to peak demand of 243 gigawatts in 2025.
SP Khayalia, CEO of Adani Power, the largest private thermal power company, says that the world has come to realize that energy generated by fossil fuels cannot be eliminated merely by wishful thinking.
“It has a critical role to play in balancing the grid with increasing penetration of renewable energy,” he says. “As our energy needs become more intense, it is reliable local energy sources like coal that come to our aid and provide the electricity that runs our air conditioners, factories and data centres.”
India proposes to set up an additional 100 GW of coal-based capacity by 2031-32. State-owned Adani Power, Torrent Power, JSW Energy and NTPC have planned investments of over Rs 5.5 lakh crore.
Transition trip
Syngas, complemented by carbon capture technology, is expected to be a potential transitional fuel for hard-to-mitigate sectors. Although some players are working on CCUS technology in India, none of them have been commercially successful so far.
JSW Steel has implemented CCUS technology at JSW Salav Works in Maharashtra to produce low-emission steel from natural gas, DRI, and renewable energy, with an eye toward exports.
It is also part of an industry consortium looking to establish carbon capture and storage centers in Asia. “As one of India’s leading steel producers, JSW Steel is taking a leadership role in developing CCS technology as a critical enabler for hard-to-mitigate sectors, alongside renewable energy, efficiency and process innovation,” says Prabodha Acharya, Chief Sustainability Officer, JSW Group.
The energy transition is accelerating as a strategic risk hedge rather than a purely economic option for Indian companies.
M&M operates more than 50 resorts with extensive commercial kitchens. However, it has only faced limited disruption due to the LPG crisis caused by the blockade of the Strait of Hormuz.
Ankit Todi, Chief Sustainability Officer at M&M Group, says the current energy crisis has provided a strong validation for the company’s strategy of transitioning to green energy across the group’s companies.
“For example, at Mahindra Holidays, we have completely eliminated the use of fossil fuels in about 20 countries. They were running entirely on electricity-based systems for cooking, including complex processes such as tandoors,” Todi says.
The company is now looking to scale similar measures across the entire ecosystem.
“There are many industrial processes that require temperatures below 400°C and can be largely electrified in a financially viable way,” he explains. “Once you have an electricity-based process, you can optimize the cost further by switching to renewable energy. Embracing the electrification of industry is essential to building energy resilience.”
Indeed, if there is one key lesson to be learned from the current crisis, it is that for developing countries like India, balancing energy security, industrial competitiveness, and climate goals requires practical transition paths, not binary options. “Climate compliance of coal gasification will depend on technology efficiency, adaptation to the characteristics of Indian coal, deployment of carbon management solutions and supporting policy and innovation ecosystems,” says Vibha Dhawan, director general of the non-profit Energy and Resources Institute (TERI).
Coal gasification is likely to be viewed as a strategy for energy security and industrial resilience rather than an alternative to renewable energy expansion.
“In the near to medium term, there will be a greater policy focus on allocating coal for gasification and coal-to-chemicals projects,” says Pritish Raj, coal pricing analyst at S&P Global Energy. “Over time, this could lead to greater diversification in coal consumption patterns, with a significant share going toward chemicals, synthetic fuels and industrial feedstocks alongside conventional power generation.”
Experts are unanimous in the view that coal gasification should not be seen as an alternative to solar or wind energy, or to long-term decarbonisation. Industries must continue to build non-fossil energy capacity.
Trade restrictions
As India strives to confront the immediate impact of the West Asian war, there is another external challenge it must confront. Increasingly, global trading partners are requiring exporters to reduce their emissions by moving towards a low-carbon roadmap. This is primarily led by the European Union through its Carbon Border Adjustment Mechanism (CBAM), which integrates carbon costs directly into market access conditions. The European Union accounts for 17% of India’s exports and was its third largest trading partner in 2025.
For India, the impact will be most severe in carbon-intensive and trade-exposed sectors such as steel, aluminium, cement and fertilisers. Exporters must comply with mandatory emissions disclosures; Certificates of purchase are compatible with EU ETS prices and are themselves subject to strict verification.
The first annual CBAM announcement for 2026 imports is scheduled to be issued on September 30, 2027, marking the beginning of full financial compliance under the final regime.
In a step forward, the European Union plans to impose a CBAM tax on 180 new steel and aluminum-based products from January 2028. This will affect medium and small enterprises dealing in manufacturing and industrial goods.
The Global Trade Research Initiative (GTRI), a trade think-tank, says the Indian industry no longer views CBAM as a regulation that only affects steel and aluminium. GTRI estimates that by 2030, most industrial products entering the EU will likely face some form of carbon tax exposure.
As one of India’s leading steel producers, we are playing a leadership role in developing CCS technology as a critical enabler for hard-to-mitigate sectors, alongside renewable energy.
-Prabuda Acharya,Chief Sustainability Officer, JSW Group
“It is a very difficult situation. Everything has to be calculated on a product-by-product basis,” says Anil Bhardwaj, secretary general, Federation of Indian Small and Medium Enterprises (FISME).
Bhardwaj explains that SMEs are completely dependent on grid power, with coal-based thermal power making up 80-85% of supply. This is not the case for large industries, because the latter can set up their own power plant and have green energy transported to their factories.
“We are talking to the government about how to provide green energy to groups exporting to the EU,” says Bhardwaj, adding that the sector largely lacks data on emissions.
In April, the European Parliament also opposed allowing international carbon credits to comply with the CBAM agreement. Therefore, companies exporting to the EU must actually reduce emissions at source or operate under a domestic carbon pricing system accepted by the EU.
India has notified the Carbon Credit Trading Scheme (CCTS) with the aim of reducing, eliminating or avoiding greenhouse gas emissions from the Indian economy by pricing these emissions through trading of carbon credit certificates. However, the market has not yet started issuing credit under the compliance mechanism.
Hence, India’s immediate solution, which is to adopt coal again, may complicate the energy transition path. Multiple fuels will likely coexist for decades. The country must look beyond the immediate challenge to focus on clean alternatives that will make it less vulnerable to external shocks.
@richajourno
