Coal Gasification Scheme Targets ₹4 Lakh Crore Investment

The Union Cabinet approved a ₹37,500 crore scheme on 13 May 2026 to promote surface coal and lignite gasification projects in India. The initiative aims to gasify 100 million tonnes of coal by 2030 and to expand coal-based conversion for industrial feedstock and fuel use.

Coal Gasification: Basic Concept

Coal gasification is a thermochemical process that converts coal into synthesis gas, or syngas, by reacting coal with oxygen, steam, or air at high temperature. Syngas is a mixture of carbon monoxide, hydrogen, carbon dioxide, methane, and other gases, and it can be used to produce methanol, ammonia, synthetic natural gas, and power.

Scheme Features and Incentives

The incentive scheme provides financial support of up to 20% of plant and machinery cost for eligible projects. The support has a ceiling of ₹5,000 crore per project, and the coal linkage tenure for the gasification sub-sector has been extended up to 30 years. The scheme is linked with investment mobilisation of about ₹4 lakh crore, foreign exchange savings of about ₹3 lakh crore, and nearly one lakh jobs. Other estimates place the likely investment range at ₹2.5 lakh crore to ₹3 lakh crore across about 25 projects.

Project Pipeline in India

Coal India Limited is developing three coal gasification projects, including a project at Lakhanpur in Odisha with an estimated cost of around ₹20,000 crore. A separate project in Bardhaman district of West Bengal is being developed with GAIL for the production of synthetic natural gas. India’s first underground coal gasification facility is located at the Kasta West coal block in West Burdwan district, West Bengal, and is operated by Eastern Coalfields Limited. Commercial output from this facility is expected around September 2026.

Import Substitution and Industrial Inputs

The initiative is linked with reduced dependence on imported LNG, urea, ammonia, methanol, and coking coal. These imports were valued at about ₹2.77 lakh crore in FY2025.

Technical and Operational Constraints

Coal gasification projects require high upfront capital, large water use, and technology suited to Indian coal with ash content of 30% to 45%. The development of indigenous technologies and coal washeries remains relevant for project execution.

Important Facts for Exams

• Coal gasification converts solid coal into syngas through partial oxidation at high temperature.
• Underground coal gasification is a method of converting coal into gas in situ, without conventional mining.
• Synthetic natural gas is one of the products that can be derived from coal gasification.
• Coal India Limited and Eastern Coalfields Limited are public sector undertakings under the Ministry of Coal.

Policy Timeline

The Ministry of Coal plans to release draft bidding documents for the incentive scheme by the end of June or early July 2026. Stakeholder roadshows were held in Delhi, Hyderabad, and Mumbai in late May and early June 2026.