**Executive Summary**
The Union Cabinet has approved the "Scheme for Promotion of Surface Coal/Lignite Gasification Projects" with a ₹37,500 crore outlay to achieve a national target of gasifying 100 million tonnes (MT) of coal by 2030. The scheme aims to enhance energy security and reduce import dependency on products like LNG, urea, and methanol by mobilizing investments worth ₹2.5–3.0 lakh crore. A key policy reform includes extending coal linkage tenures to 30 years to provide long-term certainty for investors.
**Key Points / Main Content**
**Financial Incentives and Limits**
* **Total Outlay:** ₹37,500 crore allocated to incentivize new surface coal/lignite gasification projects targeting 75 MT of gasification.
* **Incentive Ceiling:** Support is provided at a maximum of 20% of the cost of plant and machinery.
* **Capping Mechanisms:** Financial incentives are capped at ₹5,000 crore for a single project, ₹9,000 crore for a single product (excluding SNG and Urea), and ₹12,000 crore for a single entity group.
* **Disbursement:** Incentives are released in four equal installments linked to the achievement of specific project milestones.
**Operational and Regulatory Framework**
* **Selection Process:** Projects are selected through a transparent, competitive bidding process benchmarking cost, coal input, and syngas output.
* **Policy Extension:** Coal linkage tenure has been extended to 30 years for the "Production of Syngas leading to Coal Gasification" sub-sector under the Non-Regulated Sector (NRS).
* **Flexibility:** The scheme is technology-agnostic but encourages the adoption of indigenous technologies and does not restrict access to other state or central incentives.
**Strategic and Economic Objectives**
* **Import Substitution:** Aims to substitute high-value imports including LNG (>50% imported), urea (~20% imported), and ammonia (~100% imported).
* **Revenue Generation:** Expected to generate ₹6,300 crore in annual revenue for the government from coal/lignite utilization, plus additional GST and levies.
* **Employment:** Projected to create approximately 50,000 direct and indirect jobs across 25 projects in coal-bearing regions.
**Impact Analysis**
**Industrial Investors and Project Developers**
**Impact**
Investors gain long-term policy certainty through extended 30-year coal linkages and significant capital support (up to 20% of machinery costs), reducing the financial risk of high-capital gasification projects.
**Action Required**
Participate in the competitive bidding process and ensure project execution aligns with the four milestone-linked installments to secure funding.
**Domestic Technology Providers and EPC Contractors**
**Impact**
The scheme's focus on "indigenous technologies" and "Make in India" reduces reliance on foreign contractors and creates a robust domestic ecosystem for surface coal gasification.
**Action Required**
Advance and deploy local gasification technologies to meet the demand generated by the 25 projected projects.
**Central and State Governments**
**Impact**
Governments benefit from increased energy self-reliance, insulation from global price volatility, and an estimated ₹6,300 crore in annual revenue from coal utilization and downstream levies.
**Action Required**
Implement the transparent bidding framework and oversee the progress of the eight projects already under implementation from previous missions.
Key Entities Referenced
Scheme for Promotion of Surface Coal/Lignite Gasification Projects: A flagship incentive scheme with a ₹37,500 crore outlay designed to promote syngas production and reduce import dependency on products like urea, methanol, and ammonia.
National Coal Gasification Mission: A foundational policy mission targeting the gasification of 100 Million Tonnes of coal by 2030 to enhance national energy security.
Non-Regulated Sector (NRS) linkage auction framework: The regulatory framework for coal allocation, which was modified to extend coal linkage tenures to 30 years for gasification sub-sectors.
Atmanirbhar Bharat: The overarching national initiative for self-reliance which this scheme aims to advance through import substitution and indigenous technology adoption.
Cabinet
Cabinet approves Scheme for Promotion of
Surface Coal/Lignite Gasification Projects with a
financial outlay of Rs.37,500 crore
Posted On: 13 MAY 2026 3:29PM by PIB Delhi
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved a Scheme for
Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of Rs.37,500 crore.
The Scheme marks a major step towards accelerating India’s coal/lignite gasification programme,
advancing the national target of gasifying 100 Million Tonnes (MT) of coal by 2030, strengthening energy
security, and reducing dependence on imports of key products such as LNG (more than 50% imported),
urea (~20% imported), ammonia (~100% imported), and methanol (~80–90% imported).
In a significant accompanying reform, the Government has also extended coal linkage tenure up to 30
years under the “Production of Syngas leading to Coal Gasification” sub-sector in the Non-Regulated
Sector (NRS) linkage auction framework, providing long-term policy certainty for investment in coal
gasification projects.
Salient Features of the Scheme:
Total financial outlay of Rs.37,500 crore to incentivize new surface coal/lignite gasification projects for
production of syngas and its downstream products, targeting gasification of approximately 75 Million
Tonne of coal/lignite.
Financial incentive provided at a maximum of 20% of the cost of Plant and Machinery.
Selection through a transparent and competitive bidding process, with an evaluation framework
benchmarking project cost, coal input, and syngas output.
Incentive disbursed in four equal instalments, linked to project milestones.
Financial incentive for any single project capped at Rs.5,000 crore; for any single product (except
Synthetic Natural Gas and Urea) capped at Rs.9,000 crore; and any single entity group capped at
Rs.12,000 crore across all projects.
Incentive under this Scheme is in addition to, and does not restrict access to, incentives under the
commercial coal mining regime or schemes of other Central/State Government ministries.
The Scheme is technology-agnostic; adoption of indigenous technologies is encouraged.
Strategic and Economic Benefits:
Expected Investment Mobilisation: Rs.2.5- 3.0 lakh crore
Energy Security & Import Substitution: Diversified use of coal resources and substitutes imports of
LNG, urea, ammonia, ammonium nitrate, methanol, and coking coal, insulating India from global price
volatility and geopolitical supply-chain disruptions and advancing the Atmanirbhar Bharat and Make in
India objectives.Employment Generation: The Scheme is projected to create around 50,000 (Direct + Indirect) jobs
across 25 projects in coal-bearing regions.
Revenue to Governments: Coal/lignite utilization is expected to generate Rs.6,300 crore annually from
75 Million Tonne of gasification envisaged under the Scheme, plus downstream revenue from GST and
other levies.
Technology Ecosystem: Strengthens India’s domestic surface coal gasification capability by advancing
indigenous technologies and minimising reliance on foreign EPC contractors.
Background:
India holds one of the world’s largest coal reserves (~401 billion tonnes) and lignite reserves (~47 billion
tonnes). Coal accounts for over 55% of the country’s energy mix. Gasification converts coal/lignite into
‘synthesis gas’ (syngas), a versatile feedstock for producing fuels and chemicals domestically, enabling
India to substitute high-value imports and insulate itself from global supply disruptions and price
volatility.
India's import bill for key substitutable products LNG, urea, ammonium nitrate, ammonia, coking coal,
methanol, DME and others stood at approximately Rs.2.77 lakh crore in FY2025, a vulnerability further
exposed by the ongoing geopolitical situation in West Asia.
Building on the National Coal Gasification Mission (2021) and a Rs.8,500 crore scheme approved in
January 2024 (under which 8 projects worth Rs.6,233 crore are under implementation), the new Scheme
builds on this momentum with significantly enhanced support.
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MJPS
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