Scheme for Promotion of Surface Coal/Lignite Gasification Projects
Context:
The Union Cabinet chaired by Prime Minister Narendra Modi has approved the “Scheme for Promotion of Surface Coal/Lignite Gasification Projects” with a financial outlay of ₹37,500 crore.
The scheme aims to accelerate India’s coal gasification programme and support the national target of gasifying 100 million tonnes of coal by 2030.
The initiative seeks to strengthen India’s energy security and reduce dependence on imports of products such as LNG, urea, ammonia, methanol, and coking coal.
About Coal Gasification
Coal gasification is a thermochemical process through which coal or lignite is converted into synthesis gas (syngas).
Syngas mainly contains carbon monoxide, hydrogen, methane, and carbon dioxide.
It can be used for producing fertilisers, methanol, synthetic natural gas, chemicals, industrial fuels, and electricity.
The process enables cleaner and more efficient utilisation of domestic coal resources.
Key Features of the Scheme
The scheme has a total financial outlay of ₹37,500 crore for incentivising new surface coal and lignite gasification projects.
It aims to support gasification of around 75 million tonnes of coal and lignite.
Financial incentives of up to 20% of the cost of plant and machinery will be provided to eligible projects.
The financial incentive for a single project will be capped at ₹5,000 crore.
Projects will be selected through a transparent and competitive bidding process.
Incentives will be released in four equal instalments linked to project milestones.
The scheme is technology-agnostic, although the government is encouraging adoption of indigenous technologies.
The government has also extended coal linkage tenure up to 30 years under the Non-Regulated Sector linkage auction framework to provide long-term policy certainty for investors.
Strategic and Economic Significance
The initiative aims to reduce India’s dependence on imports of LNG, urea, ammonia, methanol, ammonium nitrate, and coking coal.
India currently imports more than 50% of its LNG requirements, around 20% of urea, nearly 100% of ammonia, and around 80–90% of methanol requirements.
India’s import bill for these substitutable products stood at around ₹2.77 lakh crore in FY2025.
The scheme will help protect India from global price volatility and geopolitical supply-chain disruptions, particularly amid tensions in West Asia.
Importance for India
India possesses around 401 billion tonnes of coal reserves and nearly 47 billion tonnes of lignite reserves.
Coal accounts for more than 55% of India’s energy mix.
The scheme supports the objectives of:
Energy security,
Import substitution,
Atmanirbhar Bharat,
And Make in India.
It will also strengthen India’s domestic coal gasification technology ecosystem and reduce dependence on foreign EPC contractors.