Cabinet okays Rs 37,500 cr scheme for coal, lignite gasification; promotes use of indigenous tech

The Union Cabinet approved the Scheme for Promotion of Surface Coal/Lignite Gasification Projects on May 13, 2026, with a total financial outlay of ₹37,500 c...

What Happened

The Union Cabinet approved the Scheme for Promotion of Surface Coal/Lignite Gasification Projects on May 13, 2026, with a total financial outlay of ₹37,500 crore.
The scheme targets gasification of approximately 75 million tonnes (MT) of coal and lignite through new surface gasification projects, contributing to the national goal of gasifying 100 MT of coal by 2030.
Financial incentive is capped at 20% of the cost of Plant and Machinery per project, disbursed in four equal instalments linked to project milestones; projects will be selected through a competitive bidding process.
The scheme is designed to substitute imports of LNG (more than 50% of domestic requirement imported), ammonia (~100% imported), methanol (80–90% imported), and urea (~20% imported) — the combined import bill for these products stood at approximately ₹2.77 lakh crore in FY2025.
The scheme is expected to generate approximately 50,000 direct and indirect jobs, particularly in coal-bearing regions, and yield annual revenues of around ₹6,300 crore from coal and lignite utilisation.

Static Topic Bridges

Coal Gasification: Process and Products

Coal gasification is a thermo-chemical process that converts coal or lignite into synthesis gas (syngas) — a mixture primarily comprising carbon monoxide (CO) and hydrogen (H₂) — by reacting coal with controlled quantities of oxygen and steam at high temperature and pressure, without direct combustion. Unlike burning coal for heat or power, gasification is a chemical conversion that preserves the fuel's hydrogen and carbon content in gaseous form, which can then be used as feedstock for diverse downstream products. The key products derived from syngas include: ammonia (for fertiliser production), urea, methanol, synthetic fuels (via Fischer-Tropsch process), hydrogen, and electricity (in integrated gasification combined cycle, or IGCC, plants).

Syngas composition: primarily CO and H₂, with minor CO₂, CH₄, and water vapour
Gasification is "cleaner" than direct combustion: sulfur, mercury, and particulates can be filtered before use
India's coal: characterised by high ash content (30–45%), which historically posed technical challenges for conventional gasifiers; requires specialised technology
Indian coal reserves: approximately 319 billion tonnes (as per Geological Survey of India estimates) — among the world's largest
Lignite: lower rank coal with higher moisture content; used primarily at pit-head power plants; deposits at Neyveli (Tamil Nadu) are the largest in India

Connection to this news: The ₹37,500 crore scheme directly incentivises investment in surface gasification plants that will convert India's abundant (but high-ash) coal and lignite into import-substituting chemicals and fertilisers.

India's Import Dependence: LNG, Ammonia, Methanol, Urea

One of the key justifications for the coal gasification scheme is import substitution. India is substantially or almost entirely import-dependent for several critical industrial inputs that can be produced from syngas: - LNG (Liquefied Natural Gas): Over 50% of domestic consumption is imported; primary use is as feedstock for fertiliser plants, petrochemicals, and city gas distribution. - Ammonia: ~100% of industrial ammonia requirements are imported; ammonia is the building block for urea and all nitrogenous fertilisers. - Methanol: 80–90% imported; used in chemicals, pharmaceuticals, and as a fuel additive. - Urea: ~20% imported; India's largest fertiliser by consumption (~33 MT/year); government subsidises urea under the Urea Subsidy Scheme.

All four can be produced from coal-derived syngas, making gasification a strategic import-substitution tool with energy security and fiscal implications.

Combined import bill (LNG, ammonia, methanol, urea): ~₹2.77 lakh crore in FY2025
Urea: India imports ~6–7 MT/year out of ~33 MT consumption; subsidised at MRP of ₹242/bag (45 kg)
Ammonia: critical for all nitrogen fertiliser production; currently 100% imported for industrial use
LNG: India's LNG import volume is approximately 20–21 MT/year
Methanol: used in chemicals, fuel blending, and as substitute for petroleum products

Connection to this news: The scheme's central rationale is to replace these high-cost imports with domestically produced substitutes, leveraging India's coal reserves rather than scarce natural gas or foreign exchange.

Clean Coal Technologies and India's Energy Transition

Clean Coal Technologies (CCTs) refer to a family of technologies that reduce the environmental impact of coal use. Gasification is among the most significant CCTs because it enables carbon capture and pre-combustion pollution control more effectively than post-combustion scrubbing. In India's energy transition context, coal gasification occupies a middle-ground position: it is cleaner than direct coal combustion, can produce hydrogen (a clean fuel), and supports energy security — but it is not a zero-carbon technology. The Ministry of Coal's National Coal Gasification Mission (NCGM) targets 100 MT of coal gasification by 2030 as part of India's Atmanirbharta and energy security agenda.

National Coal Gasification Mission (NCGM) target: gasify 100 MT of coal by 2030
The approved scheme targets 75 MT out of the 100 MT national target
Key CCT types: Integrated Gasification Combined Cycle (IGCC), Underground Coal Gasification (UCG), Underground Coal to Liquids (CTL), Coal Bed Methane (CBM)
This scheme covers Surface Coal/Lignite Gasification only (not underground)
Ministry of Coal administers the NCGM; Ministry of New and Renewable Energy (MNRE) handles renewable energy
India's coal reserves: ~319 billion tonnes (GSI); domestic coal production (FY2024-25): ~1 billion tonnes

Connection to this news: The Cabinet scheme accelerates the NCGM by providing ₹37,500 crore in financial incentives to catalyse private sector investment in gasification plants, bridging the gap between India's coal abundance and its import dependence in chemicals and fertilisers.

Competitive Bidding and Incentive Structure

The scheme disburses incentives through a transparent, competitive bidding process — a Public-Private Partnership (PPP) mechanism in which the government acts as financier of last resort rather than operator. Projects are evaluated on benchmarks including project cost per tonne of syngas, coal input efficiency, and syngas output quality. The incentive ceiling of 20% of Plant and Machinery cost means private capital must contribute the remaining 80%, ensuring market discipline. Milestone-linked disbursement in four equal instalments reduces fiscal risk by tying government payments to actual project progress.

Incentive: maximum 20% of Plant and Machinery cost per project
Disbursement: 4 equal instalments, each linked to verified project milestones
Selection: competitive bidding — transparent evaluation on cost, input efficiency, syngas output
Total target: ~75 MT of coal/lignite to be gasified under the scheme
Expected jobs: ~50,000 direct and indirect, particularly in coal-bearing states (Jharkhand, Chhattisgarh, Odisha, West Bengal)
Annual revenue from coal/lignite utilisation: ~₹6,300 crore

Key Facts & Data

Scheme: Scheme for Promotion of Surface Coal/Lignite Gasification Projects
Cabinet approval date: May 13, 2026
Total financial outlay: ₹37,500 crore
Gasification target under scheme: ~75 MT of coal/lignite (of 100 MT national target by 2030)
Incentive structure: 20% of Plant and Machinery cost; 4 milestone-linked instalments
National Coal Gasification Mission (NCGM) overall target: 100 MT by 2030
Import substitution targets: LNG (>50% imported), ammonia (~100%), methanol (80-90%), urea (~20%)
Combined import bill (LNG, ammonia, methanol, urea): ~₹2.77 lakh crore (FY2025)
Expected jobs: ~50,000; expected annual revenue: ~₹6,300 crore
India's coal reserves: ~319 billion tonnes (Geological Survey of India)
High-ash content of Indian coal: 30–45% — a technical challenge for gasification technology