The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a Rs 37,500 crore scheme to promote surface coal and lignite gasification projects, aiming to accelerate India’s coal gasification programme and strengthen the country’s energy security.
The scheme is expected to support the national target of gasifying 100 million tonnes of coal by 2030 while reducing dependence on imports of key products such as liquefied natural gas (LNG), urea, ammonia and methanol.
The government has also extended coal linkage tenure up to 30 years under the “Production of Syngas leading to Coal Gasification” sub-sector in the Non-Regulated Sector (NRS) linkage auction framework, providing long-term policy certainty for investment in coal gasification projects.
According to the government, the scheme seeks to incentivise new surface coal and lignite gasification projects for the production of syngas and downstream products, targeting gasification of around 75 million tonnes of coal and lignite.
Financial incentives under the scheme will cover up to 20 per cent of the cost of plant and machinery, with project selection to be carried out through a competitive bidding process. Incentives will be disbursed in four equal instalments linked to project milestones.
According to the government, the financial incentive for a single project will be capped at Rs 5,000 crore, while incentives for any single product category — except synthetic natural gas and urea — will be limited to Rs 9,000 crore. The overall cap for a single entity group across all projects has been fixed at Rs 12,000 crore.
The government said the scheme is expected to mobilise investments worth Rs 2.5 lakh crore to Rs 3 lakh crore and generate around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions.
The Centre also expects annual revenue generation of about Rs 6,300 crore from utilisation of 75 million tonnes of coal under the scheme, apart from downstream revenue through GST and other levies.
India currently holds around 401 billion tonnes of coal reserves and nearly 47 billion tonnes of lignite reserves. Coal contributes more than 55 per cent to the country’s energy mix.
The government said coal gasification would help convert domestic coal and lignite into synthesis gas, or syngas, which can be used for producing fuels and chemicals domestically, thereby reducing exposure to global supply disruptions and price volatility.
According to official estimates, India’s import bill for products such as LNG, urea, ammonia, methanol and coking coal stood at around Rs 2.77 lakh crore in FY2025.
