Cabinet Clears ₹37,500 Crore Push for Coal and Lignite Gasification Projects

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a major new scheme to promote surface coal and lignite gasification projects in India, with a total financial outlay of ₹37,500 crore. The move is aimed at accelerating India’s coal gasification programme, strengthening energy security, reducing import dependence, and supporting the country’s larger target of gasifying 100 million tonnes of coal by 2030.

The scheme is designed to incentivise new surface coal and lignite gasification projects that can produce synthesis gas, commonly known as syngas, and downstream products. Syngas can be used as a key industrial feedstock for producing fuels, chemicals, fertilisers and other high-value products. According to the government, the new scheme targets the gasification of nearly 75 million tonnes of coal and lignite.

A major policy support measure has also been introduced along with the scheme. The government has 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. This is expected to give long-term certainty to investors and make large-scale coal gasification projects more bankable.

Under the scheme, financial incentives will be provided up to a maximum of 20 percent of the cost of plant and machinery. Projects will be selected through a transparent competitive bidding process, with evaluation based on project cost, coal input and syngas output. The incentive will be released in four equal instalments linked to project milestones.

The government has also placed clear caps on incentives to ensure wider distribution of support. Financial assistance for any single project will be capped at ₹5,000 crore. For any single product, except Synthetic Natural Gas and Urea, the cap will be ₹9,000 crore. A single entity group can receive a maximum of ₹12,000 crore across all projects. The scheme is technology-agnostic, while also encouraging the use of indigenous technologies.

The Cabinet decision carries strong strategic importance because India remains dependent on imports for several key products that coal gasification can help substitute. The PIB release notes that India imports more than 50 percent of its LNG, around 20 percent of urea, nearly 100 percent of ammonia, and about 80 to 90 percent of methanol. By converting domestic coal and lignite into syngas and downstream products, the government hopes to reduce exposure to global price volatility and supply-chain disruptions.

The scheme is also expected to mobilise large-scale private and public investment. The government estimates investment mobilisation of ₹2.5 lakh crore to ₹3 lakh crore. It is also projected to generate around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions. In addition, coal and lignite utilisation under the scheme is expected to generate about ₹6,300 crore annually in government revenue from the envisaged 75 million tonnes of gasification, apart from downstream revenue through GST and other levies.

India has significant domestic coal and lignite resources, with coal reserves of about 401 billion tonnes and lignite reserves of around 47 billion tonnes. Coal continues to account for more than 55 percent of India’s energy mix. The government’s push for coal gasification is therefore being positioned not merely as an energy initiative, but as an industrial and import-substitution strategy linked to Atmanirbhar Bharat and Make in India.

The latest scheme builds on the National Coal Gasification Mission launched in 2021 and the earlier ₹8,500 crore scheme approved in January 2024, under which eight projects worth ₹6,233 crore are already under implementation. With the new ₹37,500 crore support package, the Centre is seeking to create a larger domestic ecosystem for coal gasification technology, reduce reliance on foreign EPC contractors, and develop India’s own industrial capability in this strategic sector.

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Source: PIB

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