The Union Cabinet on Wednesday approved a ₹37,500 crore incentive scheme to promote surface coal and lignite gasification projects, a major initiative aimed at reducing India’s dependence on imported fuels and chemicals while strengthening long-term energy security. Announcing the decision after a Cabinet meeting chaired by Narendra Modi, Ashwini Vaishnaw said the programme is expected to gasify 75 million tonnes of coal and lignite and mobilise investments of ₹2.5 lakh crore to ₹3 lakh crore. The scheme, titled “Scheme for Promotion of Surface Coal/Lignite Gasification Projects”, is designed to accelerate India’s broader goal of gasifying 100 million tonnes of coal by 2030. Reducing dependence on imports Vaishnaw said the initiative would help lower imports of liquefied natural gas (LNG), urea, ammonia, methanol and coking coal, insulating the economy from global price volatility and geopolitical supply disruptions. India holds one of the world’s largest coal reserves, with an estimated 401 billion tonnes of coal and 47 billion tonnes of lignite. Coal currently accounts for more than 55 per cent of the country’s energy mix. According to the government, India’s import bill for LNG, urea, ammonium nitrate, ammonia, coking coal and methanol totalled approximately ₹2.77 lakh crore in FY2025. How coal gasification works Coal gasification converts coal and lignite into synthesis gas, or syngas, which can be used to generate electricity and manufacture fertilisers, chemicals and other downstream products. The scheme is technology-agnostic but encourages the adoption of indigenous technologies to strengthen India’s domestic coal gasification ecosystem and reduce reliance on foreign engineering, procurement and construction contractors. Incentives and project caps The government will provide financial incentives of up to 20 per cent of plant and machinery costs for new projects. Selected proposals will be chosen through a transparent and competitive bidding process, with incentives released in four equal instalments tied to project milestones. The cabinet has set the following caps: Coal linkage extended to 30 years In a parallel reform, the government has extended coal linkage tenure to 30 years under the “Production of Syngas Leading to Coal Gasification” category in the non-regulated sector linkage auction framework. Officials said the move would provide long-term policy certainty and encourage large-scale private investment. Jobs and revenue potential The programme is expected to support around 25 projects and generate approximately 50,000 direct and indirect jobs, particularly in coal-bearing regions. The government estimates that utilisation of 75 million tonnes of coal and lignite under the scheme could generate annual revenues of about ₹6,300 crore, in addition to GST and other taxes from downstream industries. Builds on earlier initiatives The new programme expands on the National Coal Gasification Mission launched in 2021 and the ₹8,500 crore coal gasification scheme approved in January 2024. Under the earlier scheme, eight projects with a combined investment of ₹6,233 crore are already under implementation.
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