Centre’s coal gasification scheme to attract Rs 3 lakh crore investment, create 50,000 jobs

The Union Cabinet on Wednesday approved a Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of Rs 37,500 crore.

The Scheme aims at 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).

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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.

The scheme envisages a total financial outlay of Rs 37,500 crore to promote new surface coal and lignite gasification projects for the production of syngas and its downstream products. It aims to facilitate the gasification of nearly 75 million tonnes of coal and lignite, supporting India’s efforts to enhance energy security, reduce dependence on imports, and encourage value-added utilisation of domestic coal resources.

Under the scheme, financial incentives of up to 20 per cent of the cost of plant and machinery will be provided to eligible projects. The selection of projects will be carried out through a transparent and competitive bidding process, with an evaluation framework based on project cost, coal input efficiency, and syngas output.

The incentive amount will be released in four equal instalments linked to the achievement of specific project milestones. To ensure balanced distribution of benefits, the scheme caps financial incentives at Rs 5,000 crore for any single project, Rs 9,000 crore for any single product category except Synthetic Natural Gas (SNG) and urea and Rs 12,000 crore for any single entity group across all projects.

The scheme also clarifies that the incentives offered under it are in addition to benefits available under the commercial coal mining regime and other central or state government schemes. Further, the initiative is technology-agnostic, allowing developers flexibility in technology adoption, while encouraging the use of indigenous technologies to strengthen domestic capabilities in coal gasification.

The scheme is expected to mobilise investments worth nearly Rs 2.5 lakh crore to Rs 3 lakh crore, giving a major push to India’s coal gasification ecosystem and associated downstream industries. The large-scale investments are likely to spur industrial development in coal-bearing regions and strengthen the country’s energy infrastructure.