The union Cabinet on Wednesday approved a major Rs 37,500 crore scheme to promote surface coal and lignite gasification projects, in a significant push towards reducing India’s dependence on imported fuel and chemical feedstocks while accelerating the country’s clean coal utilisation programme.
Announcing the decision after the Cabinet meeting, union Information and Broadcasting Minister Ashwini Vaishnaw said the scheme is aimed at advancing the national target of gasifying 100 million tonnes of coal by 2030 and strengthening India’s long-term energy security.
“The Scheme marks a major step towards accelerating India’s coal and lignite gasification programme,” Vaishnaw said, adding that it would help reduce dependence on imports of key products such as liquefied natural gas (LNG), urea, ammonia and methanol.
According to him, the scheme seeks to incentivise new surface coal and lignite gasification projects for production of syngas and downstream products, targeting gasification of nearly 75 million tonnes of coal and lignite.
The Minister said that the financial incentives would be provided up to a maximum of 20 per cent of the plant and machinery cost, with projects selected through a “transparent and competitive bidding process” based on parameters including project cost, coal input and syngas output.
He said incentives would be disbursed in four equal instalments linked to project milestones. The financial support for a single project has been capped at Rs 5,000 crore, while incentives for any single product category — except synthetic natural gas and urea — will be capped at Rs 9,000 crore. Any single corporate group can receive a maximum of Rs 12,000 crore across all projects.
In a parallel policy reform aimed at improving investor confidence, the government has also extended coal linkage tenure up to 30 years under the “Production of Syngas leading to Coal Gasification” sub-sector within the Non-Regulated Sector linkage auction framework.
A Cabinet note further said the long-term linkage assurance would provide policy certainty for companies investing in coal gasification infrastructure, which typically involves large capital expenditure and long gestation periods.
The government expects the scheme 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, particularly in coal-bearing regions.
Government officials also projected annual revenue generation of about Rs 6,300 crore through utilisation of 75 million tonnes of coal under the programme, apart from additional GST and related tax revenues from downstream industries.
Highlighting the strategic rationale behind the initiative, the government said India continues to remain heavily dependent on imports for several critical products, including more than 50 per cent of LNG requirements, around 20 per cent of urea, almost the entire ammonia requirement and nearly 80-90 per cent of methanol demand.
India’s import bill for LNG, urea, ammonium nitrate, ammonia, coking coal, methanol, dimethyl ether and other substitutable products stood at around Rs 2.77 lakh crore in FY2025, the government said, adding that geopolitical tensions in West Asia had exposed vulnerabilities in global supply chains and price stability.
Coal gasification converts coal and lignite into synthesis gas, or syngas, which can then be used to manufacture fuels, fertilisers and industrial chemicals domestically.
The Centre said the scheme would also strengthen India’s indigenous coal gasification technology ecosystem and reduce dependence on foreign engineering, procurement and construction contractors.
India currently holds around 401 billion tonnes of coal reserves and about 47 billion tonnes of lignite reserves, with coal accounting for over 55 per cent of the country’s energy mix.
The newly approved programme builds upon the National Coal Gasification Mission launched in 2021 and a previous Rs 8,500 crore support scheme approved in January 2024, under which eight projects worth Rs 6,233 crore are already under implementation.
