The Union Cabinet has approved a ₹37,500 crore scheme to promote surface coal and lignite gasification projects, with the programme aimed at accelerating India’s coal gasification target and reducing dependence on imports of key products.
The scheme was approved by the Union Cabinet chaired by Prime Minister Narendra Modi, according to a statement issued by the Ministry of Coal on Wednesday, 13 May.
The ministry said the scheme marks a major step towards accelerating India’s coal and lignite gasification programme and advancing the national target of gasifying 100 million tonnes of coal by 2030.
The programme is also aimed at strengthening energy security and reducing dependence on imports of LNG, urea, ammonia and methanol.
According to the ministry, India imports more than 50% of its LNG requirement, around 20% of urea, nearly 100% of ammonia and around 80% to 90% of methanol.
The scheme has a total financial outlay of ₹37,500 crore to incentivise new surface coal and lignite gasification projects for the production of syngas and downstream products.
It targets gasification of around 75 million tonnes of coal and lignite.
Financial incentive under the scheme will be provided up to a maximum of 20% of the cost of plant and machinery.
Projects will be selected through a transparent and competitive bidding process, with an evaluation framework based on project cost, coal input and syngas output.
The incentive will be disbursed in four equal instalments linked to project milestones.
The financial incentive for a single project has been capped at ₹5,000 crore.
For any single product, except Synthetic Natural Gas and urea, the cap has been fixed at ₹9,000 crore, while the cap for any single entity group has been fixed at ₹12,000 crore across all projects.
The ministry said the incentive under the scheme will be in addition to incentives available under the commercial coal mining regime or schemes of other central and state government ministries.
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The scheme is technology-agnostic, though adoption of indigenous technologies has been encouraged.
The government expects the scheme to mobilise investment of ₹2.5 lakh crore to ₹3 lakh crore.
The programme is projected to create around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions.
Coal and lignite utilisation under the scheme is expected to generate ₹6,300 crore annually from the 75 million tonnes of gasification envisaged, along with downstream revenue from GST and other levies.
The ministry said the scheme will diversify the use of coal resources and help substitute imports of LNG, urea, ammonia, ammonium nitrate, methanol and coking coal.
As part of an accompanying reform, 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 linkage auction framework.
The ministry said this will provide long-term policy certainty for investment in coal gasification projects.
India holds coal reserves of around 401 billion tonnes and lignite reserves of around 47 billion tonnes. Coal accounts for more than 55% of the country’s energy mix.
Gasification converts coal and lignite into synthesis gas, or syngas, which can be used as feedstock for producing fuels and chemicals domestically.
The ministry said India’s import bill for key substitutable products, including LNG, urea, ammonium nitrate, ammonia, coking coal, methanol and DME, stood at around ₹2.77 lakh crore in FY2025.
The new scheme builds on the National Coal Gasification Mission of 2021 and a ₹8,500 crore scheme approved in January 2024, under which eight projects worth ₹6,233 crore are under implementation.
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