Union Cabinet Approves INR 37,500 Cr Scheme to Promote Coal and Lignite Gasification Projects
The Union Cabinet has approved an INR 37,500 crore scheme to support surface coal and lignite gasification projects targeting 75 MT coal conversion capacity, with the aim of reducing import dependence and advancing India’s 100 MT coal gasification target by 2030.
May 14, 2026. By Mrinmoy Dey
The scheme aims to accelerate India’s coal gasification programme and support the national target of gasifying 100 million tonnes (MT) of coal by 2030. It is expected to incentivise new projects capable of gasifying nearly 75 MT of coal and lignite for the production of syngas and downstream products.
According to the government, the initiative is designed to strengthen India’s energy security and reduce dependence on imports of key commodities such as LNG, urea, ammonia, methanol, ammonium nitrate, and coking coal. India currently imports more than 50 percent of its LNG requirement, around 20 percent of urea, nearly all ammonia demand, and 80–90 percent of methanol consumption.
As part of the reform package, the government has also extended coal linkage tenure up to 30 years under the “Production of Syngas leading to Coal Gasification” sub-sector within the Non-Regulated Sector (NRS) linkage auction framework, aimed at providing long-term policy certainty to investors.
Under the approved scheme, financial incentives of up to 20 percent of plant and machinery cost will be provided through a transparent competitive bidding process. The incentive for a single project has been capped at INR 5,000 crore, while support for any single product category, except synthetic natural gas and urea, will be capped at INR 9,000 crore. A single entity group can receive incentives up to INR 12,000 crore across projects.
The government stated that incentives under the scheme will be disbursed in four equal instalments linked to project milestones. The scheme is also technology-agnostic, although adoption of indigenous technologies has been encouraged.
The Cabinet noted that the programme is expected to mobilise investments of INR 2.5-3 lakh crore and generate nearly 50,000 direct and indirect jobs across around 25 projects, particularly in coal-bearing regions. Additionally, utilisation of 75 MT of coal through gasification is expected to generate approximately INR 6,300 crore annually in revenue for governments, apart from downstream GST and related levies.
India currently holds around 401 billion tonnes of coal reserves and nearly 47 billion tonnes of lignite reserves, with coal contributing over 55 percent to the country’s energy mix. The government highlighted that India’s import bill for substitutable products such as LNG, ammonia, methanol, and coking coal stood at approximately INR 2.77 lakh crore in FY2025.
The newly approved scheme builds upon the National Coal Gasification Mission launched in 2021 and the earlier INR 8,500 crore coal gasification support scheme approved in January 2024, under which eight projects worth INR 6,233 crore are already under implementation.
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