India’s Gas Supply Crisis: The Case for a Multipronged Domestic Production Strategy

Structural Crisis, Not a Temporary Disruption

India’s natural gas supply architecture is under structural stress. The most recent cause is geopolitical: the ongoing war in West Asia has disrupted energy supplies, and the shutdown of Qatari natural gas exports has has given rise to a potential gas supply crisis. This has exposed the depth of India’s gas import dependence. 

But this vulnerability itself is not new. India produces less than half of its total gas requirement from domestic fossil sources. The remainder is imported (about half of which from Qatar), leaving industrial supply chains, individual and commercial consumers, and the agricultural sector simultaneously exposed to the same external shock.

The consequences are already visible. The government has ordered supply cuts to industrial consumers — steel, ceramics, glass, paper, and food processing among them — while prioritising piped natural gas for homes and commercial establishments, compressed natural gas for vehicles, and gas feedstock for fertilizer production ahead of the Kharif sowing season. These are triage decisions, not policy choices. They signal a supply position that has moved from tight to precarious.

Meanwhile, domestic demand for clean gas is not static. India is in the midst of a large-scale industrial capacity expansion across steel, cement, thermal power, ceramics, and the nascent semiconductor sector. Urban gas networks are expanding. CNG vehicle penetration is growing. The government has set an ambition to raise gas’s share in the national energy mix from the current 7-8 percent to 15 percent by 2030 — a target that, far from being speculative, may prove conservative if supply can be brought online at scale. The binding constraint is supply, not demand.

The Government’s Current Architecture: Coherent but Partial

The Government of India has not been idle. Two significant industrial programmes, upgraded in the last few months, are already underway that together form the foundation of a domestic gas production strategy. The first is the Coal Gasification Mission, launched in 2020 and scaled up in December 2025 with a target of gasifying 100 million tonnes of coal by 2030, backed by a total outlay of ₹85,000 crore. The second is a comprehensive Carbon Capture, Utilisation and Storage programme, with a total planned investment of ₹38,900 crore, of which ₹20,000 crore was allocated in the Union Budget 2026–27 for deployment across hard-to-abate sectors including power, steel, cement, refineries, and chemicals.

These two programmes are not independent — they are structurally complementary. Coal gasification produces concentrated CO₂ streams that are among the more tractable inputs for carbon capture technology. The utilisation side of CCUS — converting captured carbon into methanol or other chemical feedstocks — closes the loop and generates a product that substitutes for imports India currently sources overwhelmingly from abroad. 

NTPC, India’s largest power producer, demonstrated this loop in practice at its Vindhyachal plant in October 2025, producing methanol from captured CO₂. With NTPC’s R&D arm NETRA and Engineers India Limited actively involved in coal-to-syngas facility development, institutional execution capacity exists.

The architecture is coherent. Its limitation is that surface gasification and industrial CCUS, while important, do not by themselves constitute a comprehensive response to the supply crisis. Both are capital intensive, both face technological and logistical complexity at scale, and CCUS in particular has a narrow scalability envelope relative to the size of the problem. A broader framework is needed.

A Four-Track Diversification Framework

India’s gas supply diversification strategy should be organised across four distinct production pathways, sequenced by technological maturity, capital intensity, speed of deployment, and environmental risk profile.

1. Biogas is the logical first priority. India’s agricultural and biological waste streams are among the largest in the world, and biogas production is technologically simple, distributed in nature, and carries the lowest capital threshold of any option under consideration. Large conglomerates are already moving in this direction — last year Reliance Industries' Anant Ambani announced a plan to establish 500 biogas plants in Andhra Pradesh alone. Scaled nationally, biogas can make a meaningful near-term contribution to gas supply while generating co-benefits in waste management and rural energy access.

2. Green hydrogen is the second track. India's National Green Hydrogen Mission aims to make the country a global hub for green hydrogen (and derivatives) production, usage, and export. Launched in January 2023, it targets 5 million metric tonnes per annum (MMTPA) of production by 2030, supported by ₹19,744 crore in funding. As of early 2026, India achieved its lowest green hydrogen price, nearing the $2/kg goal, with 18 companies awarded 862,000 tonnes/year capacity under incentives. But the companies have aimed to go beyond the incentivized production capacities. Reliance Industries Ltd (RIL), L&T, Greenko, and Welspun are building multi-MMTPA production facilities at Kandla, Gujarat. AM Group is also building a massive facility in Kakinada, Andhra Pradesh. Others (like Adani Group, JSW Group, ACME Group etc) have also committed to large-scale green hydrogen production facilities. 

Critically, most of these projects already have contracted offtakes — European and Japanese industrial customers, willing to pay international prices for certified clean hydrogen. Export revenues from these contracts effectively subsidise domestic supply infrastructure, improving capital recovery timelines across the value chain. Green hydrogen is primarily a medium-term supply contributor, but its trajectory is now well established.

3. Coal-derived gas — specifically Coal Bed Methane and Underground Coal Gasification — represents the third and strategically most significant frontier. CBM extracts methane that exists naturally within coal seams, requiring dewatering and well infrastructure but producing pipeline-compatible gas with minimal processing. UCG converts deep or high-ash coal into syngas in situ, without mining, unlocking coal reserves that are currently stranded because they are too deep or too low in quality for conventional extraction. India’s Gondwana coal basins in Jharkhand, West Bengal, Madhya Pradesh, Chhattisgarh, and Maharashtra hold substantial resources suitable for both pathways, often in the same geographic areas without competition between them.

CBM should be the immediate priority within this track, given its lower capital requirements and direct compatibility with existing gas infrastructure. UCG is a longer-term programme, requiring more substantial capital for processing infrastructure and rigorous site-specific geological screening — particularly to ensure that gasification zones are not proximate to aquifers critical to agriculture and drinking water in densely populated coalfield regions. A national CBM/UCG policy must be geographically calibrated rather than uniformly scaled, with site selection driven by hydrogeological data, environmental risk assessment, and proximity to gas transmission infrastructure.

4. Carbon capture from existing industrial emitters is the fourth track. India’s steel, cement, and thermal power industries are large and growing emitters, and CCUS from these point sources can contribute to both gas supply and emissions management simultaneously — particularly where captured CO₂ is converted into methanol or other usable products rather than simply stored geologically. 

However, given the capital intensity and technological complexity of CCUS, the appropriate scale for this track in the near term should be demonstration-level: a limited number of well-designed projects across each sector, generating operational data and building indigenous engineering capability before any broader rollout.

Institutional Architecture and the Role of R&D

Capital allocation alone is insufficient. Each of these four tracks requires a specific enabling environment that financial incentives cannot substitute for. CBM requires resolution of jurisdictional conflicts between block holders and Coal India, alongside investment in pipeline connectivity from production areas to consumption centres. UCG requires pre-competitive geological characterisation of candidate sites and a regulatory framework that does not yet fully exist for in-situ gasification at commercial scale. Biogas requires standardised off-take arrangements and grid connectivity protocols for distributed production. Green hydrogen requires certification frameworks that satisfy export market requirements.

The institutional model that can best serve this framework should include:

Large private conglomerates — which bring patience, capital, execution experience, and market access.

Public sector undertakings like NTPC — which bring domain knowledge, existing infrastructure, and long investment horizons.

Research institutions (including NETRA, CMPDI, and IITs) — which build the indigenous technological capability that reduces dependence on foreign licensing across all four tracks. 

The central government's financial incentive structure can coordinate, calibrate, and de-risk this ecosystem. Simultaneously, large states with significant coal reserves or renewable energy potential should also be nudged to develop specialised programmes aligned to their specific resource endowments, rather than pursuing all four tracks uniformly.

Technology is not static. Advances in directional drilling, real-time subsurface monitoring, AI-assisted reservoir characterisation, and process control are directly relevant to the engineering challenges of both CBM and UCG. The feasibility constraints that apply to these technologies today will not apply uniformly to projects designed and commissioned five years from now. R&D investment across all four tracks is therefore not supplementary to the capital programme — it is a prerequisite for the capital programme to deliver its intended outcomes.

Conclusion

India’s gas supply problem is the product of a structural import dependency meeting a geopolitical disruption of uncertain duration. The government’s existing coal gasification and CCUS programmes are a sound foundation but not a complete response. A comprehensive supply diversification framework — biogas at scale, green hydrogen for medium-term supply and export, coal-derived gas as the domestic production frontier, and CCUS at demonstration scale — addresses the full range of India’s gas supply vulnerability across multiple time horizons simultaneously.

Demand is not the constraint. India’s industrial expansion, urban energy transition, and export market access together guarantee robust offtake for every unit of clean gas that can be brought online. The task is supply — built domestically, diversified across multiple production pathways, and anchored by an institutional architecture that combines private capital, public sector capacity, and indigenous technological development. The current crisis has made this task urgent. It has also, arguably, made it inevitable.