Govt Approves Rs 37,500 Crore Scheme To Boost Coal Gasification

The Union Cabinet on Wednesday approved a Rs 37,500 crore incentive scheme to promote coal and lignite gasification projects , aimed at boosting domestic production of fuels and chemicals and reducing dependence on imports of key energy-linked products.

The scheme, cleared under the chairmanship of Prime Minister Narendra Modi, is intended to accelerate the production of synthetic gas (syngas) from coal and lignite, which can be further used to manufacture methanol, ammonia, urea, hydrogen and other chemicals , the government said.

Union Information and Broadcasting Minister Ashwini Vaishnaw said the initiative is part of India’s push towards energy self-reliance (Atmanirbhar Bharat) , particularly in the context of global geopolitical uncertainties and supply chain disruptions.

Under the scheme, financial incentives of up to 20 per cent of plant and machinery cost will be provided. The support will be distributed through a transparent competitive bidding process and released in four milestone-based instalments .

The scheme sets caps of Rs 5,000 crore per project , Rs 9,000 crore per product (excluding synthetic natural gas and urea) , and Rs 12,000 crore per entity group across projects. The government expects the programme to mobilise investments worth Rs 2.5–3 lakh crore , enabling gasification of around 75 million tonnes of coal .

Officials said the initiative will help reduce India’s heavy dependence on imports, including liquefied natural gas (LNG), ammonia, methanol and fertiliser inputs . At present, more than 50 per cent of LNG, nearly 100 per cent of ammonia, and up to 90 per cent of methanol are imported.

The scheme is also expected to generate significant domestic value addition, as India currently imports goods worth about Rs 2.77 lakh crore annually in categories that can potentially be substituted through gasification.

The government said the programme builds on the National Coal Gasification Mission (2021) and an earlier Rs 8,500 crore incentive scheme approved in 2024 , under which multiple projects are already under implementation.

In a parallel reform, coal linkage tenure under the production of syngas sub-sector has been extended up to 30 years , providing long-term policy stability for investors.

India, which holds one of the world’s largest coal reserves, aims to gasify 100 million tonnes of coal by 2030 , strengthening domestic energy security and reducing exposure to global price volatility.