Bharat Coal Gasification and Chemicals Ltd (BCGCL) has started construction on its ₹25,000-crore coal gasification project in Odisha, marking a significant development in India's efforts to expand domestic chemical manufacturing and reduce dependence on imported industrial feedstocks. The project, backed by Coal India Ltd (CIL) and Bharat Heavy Electricals Ltd (BHEL), aims to produce approximately 0.66 million tonnes of technical-grade ammonium nitrate annually using domestic coal.
The development was announced by BCGCL Managing Director Peeyush Kumar at the 17th edition of Gasification India 2026, organised by Mission Energy Foundation. According to reports published on October 22, 2026, the company has moved into on-site construction, with most major tenders awarded and work packages allocated to key engineering companies.
Of the estimated ₹25,000-crore project cost, contracts worth approximately ₹15,000 crore have already been awarded. BHEL has received contracts worth around ₹10,000 crore, while Larsen & Toubro (L&T) has secured work valued at approximately ₹5,000 crore. The remaining project expenditure includes work yet to be contracted, as well as costs such as interest, depreciation and land-related expenses.
BCGCL is a joint venture in which Coal India holds a 51% stake and BHEL owns the remaining 49%. The project is among India's early commercial-scale initiatives to use domestically developed pressurized fluidised bed gasification technology for chemical production. It is being developed at Lakhanpur in Odisha's Jharsuguda district and has received single-window clearance from the Odisha government's high-level clearance authority.
The project has been divided into four major packages covering coal gasification, synthesis gas purification, ammonia synthesis and ammonium nitrate production. BHEL is responsible for the coal gasification and syngas purification packages, while L&T is executing the ammonia synthesis and ammonium nitrate production units.
The manufacturing process will begin with the conversion of coal into synthesis gas, commonly known as syngas. Following purification, the gas will be processed into ammonia. The ammonia will then be used to produce nitric acid and, subsequently, technical-grade ammonium nitrate. This process creates a route for converting domestic coal resources into higher-value industrial chemicals.
The planned production capacity is significant for India's industrial supply chain. Technical-grade ammonium nitrate is widely used in mining and commercial explosives applications, making domestic availability relevant to mining operations and associated industries. However, the project's eventual impact on imports and market prices will depend on actual production, operating costs, product quality, demand and commercial performance after commissioning.
For India's chemical manufacturing sector, the project could provide an additional domestic source of an important industrial input. Reducing dependence on imported materials is one of the broader objectives behind the country's coal gasification programme. Domestic production may also improve feedstock security and create opportunities for engineering, procurement, construction, process equipment and industrial infrastructure suppliers.
The initiative is aligned with the government's National Coal Gasification Mission, which targets 100 million tonnes of coal gasification capacity by 2030. The program seeks to expand the use of coal as a feedstock for chemicals and other industrial products, including ammonia, methanol and fertilizer-related inputs, while reducing reliance on imported resources and intermediates.
The Ministry of Coal has also announced financial support of ₹1,350 crore for the Lakhanpur project under its coal gasification incentive scheme. In an earlier development in April 2026, BCGCL and Mahanadi Coalfields Ltd (MCL) signed a land-leasing agreement for the project, which is planned across approximately 350 acres. These steps established important groundwork ahead of the current construction phase.
The next stage will involve completing the remaining contract awards, progressing civil and infrastructure works, installing process equipment and integrating the different production units. Coordination between the contractors will be critical because the gasification, purification and chemical synthesis facilities must operate as an integrated industrial system.
The project also carries significance for the domestic engineering industry, given the involvement of BHEL and L&T across its major packages. Successful execution could demonstrate the commercial potential of indigenous coal gasification technology and provide a reference for future coal-to-chemicals developments in India.
Nevertheless, the project's broader economic benefits will depend on timely execution, technology performance, the availability and cost of coal, environmental compliance and the competitiveness of the resulting chemicals. Construction progress is an important milestone, but the actual contribution to domestic supply will become clearer once the facility is commissioned and reaches stable commercial production.
With construction underway and a substantial share of contracts already awarded, BCGCL's Odisha project has entered a more execution-focused phase. Its progress will be closely watched by the coal, chemicals, mining and heavy engineering sectors as India seeks to build domestic manufacturing capacity and extract greater industrial value from its natural resources.