Cabinet approves Rs 37,500 crore coal gasification scheme to cut import dependence

The Cabinet, chaired by Prime Minister Narendra Modi, approved the "Scheme for Promotion of Surface Coal/Lignite Gasification Projects" with a total financial outlay of Rs 37,500 crore.

Addressing the media after the Cabinet meeting, Vaishnaw said the scheme is intended to accelerate India's coal and lignite gasification programme and support the national target of gasifying 100 million tonnes of coal by 2030.

According to Vaishnaw, "The scheme is aimed at accelerating India's coal/lignite gasification programme and advancing the national target of gasifying 100 million tonnes of coal by 2030." He added that the move would help strengthen India's energy security and reduce dependence on imports of products such as liquefied natural gas (LNG), urea, ammonia and methanol.

India possesses one of the world's largest reserves of coal and lignite, with approximately 401 billion tonnes of coal reserves and around 47 billion tonnes of lignite reserves. Coal currently contributes more than 55 per cent of India's total energy mix.

The government stated that coal gasification is a process through which coal and lignite are converted into synthesis gas, commonly known as syngas. This syngas can then be utilised for generating electricity and manufacturing chemicals, fertilisers and other downstream products.

Under the scheme, financial incentives of up to 20 per cent of the plant and machinery cost will be provided for new surface coal and lignite gasification projects. The selection of projects will take place through a "transparent and competitive bidding process," he stated.

According to the official release by the cabinet, the incentives will be 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," the release said.

The government also announced an accompanying reform under which coal linkage tenure has been extended up to 30 years under the "Production of Syngas leading to Coal Gasification" sub-sector in the Non-Regulated Sector linkage auction framework. The release said the move would provide "long-term policy certainty for investment in coal gasification projects."

Highlighting the economic impact of the scheme, the release said the programme is expected to mobilise investments worth Rs 2.5 lakh crore to Rs 3 lakh crore and create around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions.

The government said the scheme would help reduce India's dependence on imports of LNG, ammonia, urea, methanol and coking coal, while insulating the economy from "global price volatility and geopolitical supply-chain disruptions."

According to the release, India's import bill for products such as LNG, urea, ammonium nitrate, ammonia, coking coal and methanol stood at around Rs 2.77 lakh crore in FY2025. "A vulnerability further exposed by the ongoing geopolitical situation in West Asia," it added.

The release said the scheme is technology-agnostic, while encouraging the adoption of indigenous technologies to strengthen India's domestic coal gasification ecosystem and reduce reliance on foreign EPC contractors.

The government added that coal and lignite utilisation under the scheme is expected to generate around Rs 6,300 crore annually in revenue from the targeted 75 million tonnes of gasification, apart from additional GST and other levies from downstream industries.

The new scheme builds on the National Coal Gasification Mission launched in 2021 and the Rs 8,500 crore coal gasification scheme approved in January 2024, under which eight projects worth Rs 6,233 crore are already under implementation, the release added. (ANI)