The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the Scheme for Promotion of Surface Coal or Lignite Gasification Projects with a financial outlay of Rs 37,500 crore.
The scheme targets gasification of 75 million tonnes of coal/lignite, mobilising up to Rs 3 lakh crore in investment and cutting India's Rs 2.77 lakh crore annual import bill on LNG, urea, ammonia and methanol.
The scheme caps financial incentive at a maximum of 20% of plant and machinery cost, disbursed in four milestone-linked instalments.
For a single project cap, it is Rs 5,000 crore; for single product cap, it is Rs 9,000 crore; and single entity group cap is placed at Rs 12,000 crore, according to an official release.
The coal linkage tenure extended to 30 years, providing long-term policy certainty for investors.
The scheme is projected to create 50,000 direct and indirect jobs across 25 projects in coal-bearing regions, and generate Rs 6,300 crore annually in government revenue from 75 million tonnes of gasification, plus downstream GST and other levies.
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Major Scale-Up From 2024 Scheme
The coal gasification scheme represents a significant scale-up from the Rs 8,500-crore incentive programme approved in January 2024, which laid the foundation for coal gasification in India. The earlier scheme supported seven projects across three categories — Category I reserved for PSUs with Rs 4,050 crore, Category II open to private players and PSUs with Rs 3,850 crore, and Category III focused on demonstration projects with Rs 600 crore.
India imports approximately 83% of its oil, over 90% of its methanol and 13–15% of its ammonia. Coal gasification — a thermo-chemical process that converts coal/lignite into synthesis gas or "syngas" — offers an opportunity to reduce this reliance on imports and conserve foreign exchange. The syngas produced is then used for generating electricity, producing chemicals, fertilisers and a range of downstream products, spanning the oil, gas and petrochemical sectors.
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India's Coal Advantage
India holds one of the world's largest reserves of coal — approximately 401 billion tonnes — along with around 75 billion tonnes of lignite, uniquely positioning it to leverage domestic resources for energy security. Coal currently contributes over 55% of India's energy mix.
The new scheme seeks to diversify that use — channelling coal into fertilisers, petrochemicals, synthetic gas and steel inputs, rather than burning it exclusively for power.
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