Key Takeaway:
- ₹37,500 crore outlay to gasify 75 million tonnes of coal, aiming for ₹3 lakh crore in total investment.
- Target is to slash the ₹2.77 lakh crore import bill for LNG, ammonia, and methanol.
- The government will fund up to 20% of plant costs, capped at ₹5,000 crore per project.
The Union Cabinet approved a Rs 37,500-crore incentive scheme on Wednesday to expand coal gasification projects, aiming to boost clean energy production, reduce import dependence, and strengthen India’s energy security amid global supply disruptions.
Cabinet Approves Major Energy Push
The Cabinet, chaired by Prime Minister Narendra Modi, cleared the scheme to promote surface coal and lignite gasification projects, according to an official statement released after the meeting.
Union Information and Broadcasting Minister Ashwini Vaishnaw said the initiative would attract investments of about Rs 3 lakh crore and support projects capable of gasifying 75 million tonnes of coal.
“An outlay of Rs 37,500 crore has been kept for this scheme,” Vaishnaw told reporters. “The projects will be put up for gasifying 75 million tonnes of coal.”
Coal gasification converts coal into synthetic gas, or syngas, which can be used to produce fuels, fertilizers, hydrogen and industrial chemicals. The government said the process would help lower dependence on imported liquefied natural gas, methanol, ammonia, and urea.
India currently imports more than half of its LNG needs, while ammonia imports stand at nearly 100%, Vaishnaw said.
Scheme Targets Import Dependence
The government said the scheme aligns with India’s goal of gasifying 100 million tonnes of coal by 2030 and reducing vulnerability to global price shocks and geopolitical tensions.
“We all know about the current geopolitical situation,” Vaishnaw said. “So we have to make all the decisions to become Atma Nirbhar.”
According to the government, India’s import bill for products such as LNG, urea, ammonium nitrate, and methanol reached about Rs 2.77 lakh crore in the 2024-25 fiscal year.
Officials said the incentive package would provide financial support of up to 20% of plant and machinery costs. Incentives for a single project will be capped at Rs 5,000 crore, while a single entity group can receive up to Rs 12,000 crore across projects.
Projects will be selected through a competitive bidding process based on factors including project cost, coal input, and syngas output. Incentives will be released in four installments linked to project milestones.
Government Extends Coal Linkage Tenure
The government also extended coal linkage tenure for gasification projects in the non-regulated sector from existing terms up to 30 years, a move aimed at providing long-term policy certainty for investors.
Officials said India holds 401 billion tonnes of coal reserves and 47 billion tonnes of lignite reserves, among the largest in the world. Coal currently accounts for more than 55% of the country’s energy mix.
Vaishnaw said the reserves are sufficient for the next 200 years and could help support domestic manufacturing of chemicals and fuels now largely imported.
The new incentive package builds on the National Coal Gasification Mission launched in 2021 and an earlier Rs 8,500-crore support scheme approved in January 2024. The government said eight projects worth Rs 6,233 crore are already under implementation.
Officials estimate the planned gasification capacity could generate annual revenue of about Rs 6,300 crore, excluding additional tax collections and downstream industrial activity.
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