New Delhi, May 13: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a scheme for promoting surface coal and lignite gasification projects with a financial outlay of Rs 37,500 crore.
According to an official statement, the scheme is expected to create around 50,000 direct and indirect jobs across 25 projects located in coal-bearing regions of the country.
The government also announced an accompanying policy reform by extending 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. Officials said the measure is intended to provide long-term policy certainty for investors in coal gasification projects.
The initiative is aimed at accelerating India’s coal and lignite gasification programme while supporting the national target of gasifying 100 million tonnes of coal by 2030.
Scheme seeks to strengthen India’s energy security and reduce dependence on imports of key products such as liquefied natural gas (LNG), urea, ammonia and methanol. Government data cited in the statement noted that India imports more than 50 per cent of its LNG requirements, around 20 per cent of urea, 100 per cent of ammonia and nearly 80 to 90 per cent of methanol demand.
Under the scheme, new surface coal and lignite gasification projects will receive financial incentives for the production of syngas and downstream products. The programme targets the gasification of approximately 75 million tonnes of coal and lignite.
The Cabinet-approved framework includes financial incentives of up to 20 per cent of the cost of plant and machinery. Project selection will take place through a competitive bidding process, with evaluation based on parameters such as project cost, coal input and syngas output.
According to the government, incentives will be released in four equal instalments linked to the achievement of project milestones.
The official statement further said that financial assistance for a single project will be capped at Rs 5,000 crore. Incentives for any single product category, excluding Synthetic Natural Gas and urea, will be limited to Rs 9,000 crore, while the total support available to any single entity group across projects will be capped at Rs 12,000 crore.
Officials said utilisation of coal and lignite under the proposed gasification programme is expected to generate annual revenue of approximately Rs 6,300 crore from the envisaged 75 million tonnes of gasification activity, in addition to revenue generated through GST and other levies from downstream industries.
India currently possesses one of the world’s largest coal reserves estimated at 401 billion tonnes and lignite reserves of around 47 billion tonnes. Coal continues to account for more than 55 per cent of the country’s energy mix.
The government also highlighted concerns over rising import dependence for key industrial and energy products. According to official figures, India’s import bill for products such as LNG, methanol, ammonia, ammonium nitrate, coking coal and dimethyl ether stood at approximately Rs 2.77 lakh crore during FY25.
Ongoing geopolitical tensions in West Asia have further exposed vulnerabilities linked to import dependence and supply disruptions.
The newly approved scheme builds upon the National Coal Gasification Mission launched in 2021 and a separate Rs 8,500 crore scheme approved in January 2024. Under the earlier scheme, eight projects worth Rs 6,233 crore are currently under implementation across the country.
