India approved a new Scheme for Promotion of Surface Coal and Lignite Gasification Projects with a total financial outlay of Rs 37,500 crore.
The scheme aims to speed up India’s coal gasification program and help achieve the target of gasifying 100 million tonnes of coal by 2030. It is expected to improve energy security and reduce dependence on imports.
India currently imports over 50% of LNG, around 20% of urea, nearly 100% of ammonia, and about 80% to 90% of methanol. The government said coal gasification can help replace many of these imports.
Under the scheme, incentives will be provided for new coal and lignite gasification projects producing syngas and downstream products. Around 75 million tonnes of coal and lignite gasification is targeted under the plan.
Companies will get financial support of up to 20% of the plant and machinery cost. The incentive for a single project will be capped at Rs 5,000 crore. A single product category can receive a maximum of Rs 9,000 crore, while one business group can receive up to Rs 12,000 crore across all projects.
Projects will be selected through a competitive bidding process. Incentives will be released in four equal installments linked to project milestones. The scheme is technology agnostic, though the use of indigenous technology is encouraged.
The government has also extended coal linkage tenure to 30 years under the Non Regulated Sector linkage auction framework for coal gasification projects. This is aimed at providing long term policy certainty for investors.
The scheme is expected to attract investments worth Rs 2.5 lakh crore to Rs 3 lakh crore and create around 50,000 direct and indirect jobs across 25 projects in coal bearing regions.
The government estimates annual revenue generation of around Rs 6,300 crore from utilization of 75 million tonnes of coal and lignite under the scheme, apart from GST and other taxes from downstream industries.
India has around 401 billion tonnes of coal reserves and nearly 47 billion tonnes of lignite reserves. Coal currently contributes more than 55% to India’s energy mix.
The government said India’s import bill for LNG, urea, ammonia, methanol, coking coal, DME and related products stood at around Rs 2.77 lakh crore in FY2025. The new scheme builds on the National Coal Gasification Mission launched in 2021 and the earlier Rs 8,500 crore gasification scheme approved in January 2024, under which 8 projects worth Rs 6,233 crore are already under implementation.
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