**Executive Summary**
The Union Cabinet has approved the "Scheme for Promotion of Surface Coal/Lignite Gasification Projects" with a financial outlay of Rs. 37,500 crore. The scheme aims to gasify 100 Million Tonnes (MT) of coal by 2030 to enhance energy security and reduce import dependence on products like LNG, urea, and methanol. Key reforms include extending coal linkage tenures to 30 years to provide long-term policy certainty for investors.
**Key Points / Main Content**
**Financial Incentives and Framework**
* Total outlay of Rs. 37,500 crore is allocated to incentivize gasification projects targeting approximately 75 MT of coal/lignite.
* Financial support is provided at a maximum of 20% of the cost of Plant and Machinery.
* Incentives are disbursed in four equal installments, strictly linked to the achievement of project milestones.
* Financial caps are set at Rs. 5,000 crore for a single project, Rs. 9,000 crore for a single product (excluding Synthetic Natural Gas and Urea), and Rs. 12,000 crore for a single entity group.
* Incentives are additional to, and do not restrict access to, other Central or State Government schemes or commercial coal mining incentives.
**Operational Requirements**
* Project selection is conducted through a transparent and competitive bidding process.
* Evaluation benchmarks include project cost, coal input, and syngas output.
* The scheme is technology-agnostic, though the adoption of indigenous technologies is encouraged to minimize reliance on foreign EPC contractors.
**Strategic and Economic Objectives**
* **Investment and Revenue:** The scheme seeks to mobilize Rs. 2.5–3.0 lakh crore in investment and generate an estimated Rs. 6,300 crore in annual revenue for the government.
* **Import Substitution:** Aims to substitute high-value imports including LNG, urea, ammonia, ammonium nitrate, methanol, and coking coal.
* **Employment:** Projected creation of 50,000 direct and indirect jobs across 25 projects located in coal-bearing regions.
**Impact Analysis**
**Project Developers and Entity Groups**
**Impact**
They benefit from significant capital subsidies and long-term policy certainty through the 30-year extension of coal linkage tenures.
**Action Required**
Participate in the competitive bidding process and meet specific project milestones to trigger incentive disbursements.
**Central and State Governments**
**Impact**
Expected to see a revenue boost of Rs. 6,300 crore annually from coal/lignite utilization, supplemented by GST and other levies.
**Action Required**
Manage the bidding framework and ensure coordination between various ministerial incentive schemes.
**Indigenous Technology Providers and EPC Contractors**
**Impact**
The scheme encourages the growth of a domestic technology ecosystem, reducing reliance on foreign entities.
**Action Required**
Advance and deploy domestic surface coal gasification technologies to meet the scheme's preferences.
**Industrial Sector (Downstream Producers)**
**Impact**
Will gain access to domestic syngas feedstock for producing fuels and chemicals, insulating them from global price volatility and supply chain disruptions.
**Action Required**
Align production capabilities to utilize syngas and its downstream products.
Key Entities Referenced
Scheme for Promotion of Surface Coal/Lignite Gasification Projects: A government incentive program with a ₹37,500 crore outlay aimed at accelerating the production of syngas and downstream products to reduce import dependence.
Ministry of Coal: The nodal ministry responsible for the implementation of the gasification scheme and overseeing the national target of gasifying 100 Million Tonnes of coal by 2030.
National Coal Gasification Mission (2021): The overarching policy mission upon which the current scheme is built to strengthen India's domestic surface coal gasification capabilities.
Non-Regulated Sector (NRS) linkage auction framework: The regulatory framework for coal allocation under which the government has extended coal linkage tenures to 30 years for the gasification sub-sector.
Ministry of Coal
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 3:31PM 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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