Cabinet approves ₹37,500-crore coal gasification scheme

The Union Cabinet approved a ₹37,500 crore Scheme for Promotion of Surface Coal/Lignite Gasification Projects on 13 May 2026. The scheme covers coal and lignite gasification projects and includes financial incentives, project selection through competitive bidding, and milestone-linked disbursal.

Coal gasification

Coal gasification is a process that converts coal or lignite into synthesis gas, also called syngas, which mainly contains carbon monoxide, hydrogen, carbon dioxide, methane, and water vapour. Syngas is used as an intermediate feedstock for chemicals, fertilisers, fuels, and industrial gases.

Scheme features

The scheme aims to support gasification of about 75 million tonnes of coal and lignite through new projects. It targets investment mobilisation of ₹2.5–3 lakh crore and the creation of about 50,000 jobs. The national target for coal gasification is 100 million tonnes by 2030.

• The financial incentive is capped at 20% of the plant and machinery cost.
• The incentive limit is ₹5,000 crore per project.
• The incentive limit is ₹9,000 crore per product, excluding synthetic natural gas and urea.
• The incentive limit is ₹12,000 crore per entity group.

Energy and fertiliser linkages

India imports over 50% of its liquefied natural gas, about 20% of its urea, nearly 100% of its ammonia, and 80–90% of its methanol. Coal gasification projects can produce feedstock for methanol, ammonia, and synthetic natural gas, which are used in the fertiliser, chemical, and energy sectors.

Policy framework

The scheme is technology-agnostic and supports indigenous technologies for coal gasification. The government has extended coal linkage tenure to 30 years under the Non-Regulated Sector linkage auction framework, which applies to long-term coal supply arrangements for non-regulated industries.

Important Facts for Exams

• Coal gasification converts solid coal into syngas through partial oxidation at high temperature.
• Lignite is a low-rank coal with higher moisture content than bituminous coal.
• Synthetic natural gas is a substitute for natural gas and can be produced from coal gasification.
• India’s coal gasification target of 100 million tonnes by 2030 is part of its industrial fuel strategy.

Exam-relevant context

Coal gasification projects are used in integrated gasification combined cycle systems, fertiliser production, and chemical manufacturing. The scheme uses milestone-based incentives and competitive bidding for project allocation.