India's Cabinet Approves Rs 37,500 Crore Coal Gasification Scheme
India's Union Cabinet has approved a substantial Rs 37,500 crore scheme to promote coal and lignite gasification projects, aiming to bolster energy security, reduce import dependence, and achieve a target of 100 million tonnes of coal gasification by 2030. The initiative is set to attract significant investment and create jobs.
Key Highlights
- Cabinet clears Rs 37,500 crore for coal and lignite gasification.
- Aims to achieve 100 million tonnes coal gasification by 2030.
- Boosts energy security and reduces imports of LNG, urea, methanol.
- Scheme expects to mobilize Rs 3 lakh crore investment.
- Financial incentives up to 20% of plant and machinery costs.
- Projected to create 50,000 direct and indirect jobs.
The Union Cabinet, under the leadership of Prime Minister Narendra Modi, has given its approval to a comprehensive scheme for the promotion of new surface coal/lignite gasification projects, backed by a significant financial outlay of Rs 37,500 crore. This landmark decision, announced on Wednesday, May 13, 2026, marks a pivotal step in India's strategy to enhance energy security, reduce its reliance on imported fuels and chemicals, and drive economic self-reliance under the 'Atmanirbhar Bharat' initiative.
The scheme's primary objective is to accelerate India's coal and lignite gasification program, with an ambitious national target of gasifying 100 Million Tonnes (MT) of coal by 2030. This process converts coal and lignite into synthesis gas, or 'syngas,' a versatile fuel that can be used for power generation, producing fertilisers, chemicals, and various other downstream industrial products.
Union Minister Ashwini Vaishnaw highlighted the strategic importance of the initiative, stating that it would significantly strengthen India's energy security and reduce dependence on imports of crucial products such as Liquefied Natural Gas (LNG), urea, ammonia, and methanol. India currently imports over 50% of its LNG, about 20% of urea, nearly 100% of ammonia, and 80-90% of its methanol, making the country vulnerable to global supply chain disruptions and price volatility.
The total import bill for these key substitutable products stood at approximately Rs 2.77 lakh crore in FY2025, a vulnerability further exposed by ongoing geopolitical tensions, such as the West Asia war. The push for domestic coal gasification is therefore seen as a crucial measure to build long-term resilience against global energy shocks and conserve foreign exchange reserves, aligning with Prime Minister Modi's broader appeal to save fuel and reduce import dependency.
Under the new scheme, financial incentives of up to 20% of the cost of plant and machinery will be provided for new surface coal and lignite gasification projects. These incentives will be disbursed in four equal instalments, linked to specific project milestones, ensuring a performance-based support mechanism. The selection of projects will be conducted through a transparent and competitive bidding process, with an evaluation framework benchmarking project cost, coal input, and syngas output.
To provide long-term policy certainty for investors, the government has also extended the coal linkage tenure up to 30 years under the "Production of Syngas leading to Coal Gasification" sub-sector within the Non-Regulated Sector (NRS) linkage auction framework. This move aims to attract substantial private and public investment into the sector.
The scheme is projected to mobilize investments worth approximately Rs 3 lakh crore across the entire value chain and is expected to create around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions. Additionally, it is estimated to generate Rs 6,300 crore annually in government revenue from the gasification of 75 million tonnes of coal, along with downstream GST and other levies.
This new Rs 37,500 crore scheme represents a significant scale-up from a previous Rs 8,500 crore incentive program approved in January 2024, which laid the initial groundwork for coal gasification in India. The earlier scheme supported seven projects across three categories. The current scheme, however, is technology-agnostic, encouraging the adoption of indigenous technologies and offering unified support to both public sector undertakings (PSUs) and private companies.
India possesses vast coal reserves, estimated at around 401 billion tonnes of coal and nearly 47 billion tonnes of lignite, with coal currently contributing over 55% to the nation's energy mix. Leveraging these abundant domestic resources through gasification offers a cleaner alternative to direct coal burning, as it allows for the removal of pollutants like sulfur and mercury from syngas before use, thus reducing environmental impact. While coal gasification is energy and water-intensive, it provides a pathway to utilize coal more efficiently and sustainably while complementing the growing renewable energy capacity by offering stable grid support.
The government's holistic approach aims to position coal gasification as a crucial pillar in India's long-term energy transition and industrial self-sufficiency, reducing vulnerabilities exposed by global market fluctuations and ensuring a secure future for critical sectors like fertilizers, pharmaceuticals, and manufacturing.
Frequently Asked Questions
What is coal gasification and why is it important for India?
Coal gasification is a process that converts coal into syngas (a mixture of carbon monoxide, hydrogen, and carbon dioxide) by reacting it with oxygen and steam under high temperatures and pressures. This is crucial for India as it allows the country to utilize its abundant coal reserves more cleanly and efficiently, reduce dependence on imported fuels and chemicals like LNG, urea, ammonia, and methanol, and bolster energy security.
What are the main objectives of the Rs 37,500 crore coal gasification scheme?
The primary objectives are to accelerate India's coal/lignite gasification program, achieve a national target of 100 million tonnes of coal gasification by 2030, strengthen energy security, and significantly reduce import dependence on critical products. It also aims to attract substantial investments (around Rs 3 lakh crore) and create employment opportunities.
How will the government incentivize these coal gasification projects?
The government will provide financial incentives of up to 20% of the plant and machinery cost for new surface coal/lignite gasification projects. These incentives will be disbursed in four equal instalments, tied to project milestones, and projects will be selected through a transparent and competitive bidding process. Additionally, coal linkage tenure has been extended to 30 years to ensure long-term policy certainty.
What products can be made from coal gasification?
Syngas produced from coal gasification can be used to generate electricity and manufacture a wide range of valuable products, including fertilisers (urea, ammonia), chemicals (methanol), synthetic natural gas (SNG), and various downstream industrial products. This diversification helps meet industrial demands domestically.
How does this scheme contribute to India's 'fuel-saving drive' and 'Atmanirbhar Bharat' vision?
By promoting domestic coal gasification, India aims to reduce its reliance on costly imported fuels and chemicals, thereby saving foreign exchange and building economic resilience against global market volatilities. This directly supports Prime Minister Modi's call for fuel saving and aligns with the 'Atmanirbhar Bharat' (self-reliant India) vision by fostering indigenous production and strengthening domestic industries.
