Reliance Industries has begun a pilot project for underground coal gasification (UCG) in Andhra Pradesh’s Eluru district. This initiative is the first step in a potential 30-year, ₹2.73 lakh crore plan to produce synthetic gas. For investors, the immediate focus is on the pilot's success, as future multi-lakh crore investments are conditional on proving the technology's commercial viability.
Reliance Industries Limited (RIL) is initiating a significant energy project in Andhra Pradesh focused on Underground Coal Gasification (UCG). The company has outlined a long-term vision that could see an investment of approximately ₹2.73 lakh crore over 30 years to develop an integrated complex. However, the company is starting with a focused pilot phase requiring an initial capital expenditure of ₹3,000 crore, which is scheduled to run from the third quarter of 2026 through the end of 2027.
Technology and Strategic Goal
Underground Coal Gasification is an in-situ process, meaning the coal is converted directly into synthetic gas (syngas) while still deep underground, rather than being extracted through traditional surface mining. The project targets deep coal reserves located over 600 meters below the surface in the Chintalapudi and Recherla coal blocks. RIL acquired the rights to these blocks during government auctions held in April 2026. The produced syngas can serve as a raw material, or feedstock, for the production of chemicals such as hydrogen, methanol, urea, and ammonia. This aligns with the company’s broader strategy to reduce India's dependence on imported industrial raw materials.
Phased Investment Structure
Investors should note that the massive ₹2.73 lakh crore figure is a long-term proposal rather than an immediate financial commitment. RIL has structured this initiative in distinct phases. The current initial phase is purely for exploration and pilot testing to verify the technology's performance in Indian geological conditions. Development and production phases, which would account for the majority of the projected investment, are strictly conditional. These future stages will only proceed if the pilot phase successfully meets internal benchmarks for technical efficiency and commercial viability.
Risks and Execution Factors
While the project aims to establish a large energy hub, it faces notable execution and operational risks. UCG technology at a large commercial scale is relatively unproven in India, and the project's success depends heavily on specific underground geological characteristics that are currently being assessed. Furthermore, the massive capital outlay is back-ended. If the pilot fails to yield the expected results, RIL has the flexibility to limit its exposure, though this would mean pausing or abandoning the long-term plan. Additionally, the project will require stringent environmental and safety compliance, which are subject to long-term government oversight.
For shareholders, the primary monitorable will be the progress of the pilot phase over the next year. The company’s management will likely provide updates on the pilot’s viability, which will be the key indicator of whether the company moves toward the larger development and production stages of this energy strategy.