Cabinet gives nod to Rs 37,500-crore coal gasification scheme: Incentives, jobs, other essential things to know

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday cleared a special scheme to promote the utilisation of abundant coal stocks for gas and chemical feedstock production. With an outlay of Rs 37,500 crore, the scheme -- called the Scheme for Promotion of Surface Coal/Lignite Gasification Projects -- will incentivise companies setting up coal or lignite gasification projects, in line with the government's goal of taking the country's coal gasification capacity to 100 million tonnes by 2030 and its broader push to reduce dependence on natural gas imports. It targets the gasification of approximately 75 million tonnes of coal or lignite.

Zee Business had earlier reported that such a scheme was in the works.

Here are five major things to know about the scheme:

• Incentives: The scheme will provide a financial incentive at a maximum of 20 per cent of the cost of plant and machinery. The incentive will be disbursed in four equal instalments, linked to project milestones. Incentives under this scheme will be in addition to aid disbursed under the commercial coal mining regime or schemes of other central or state government departments.
• Selection: Companies will be selected through a transparent and competitive bidding process. The incentive for any single project will be capped at Rs 5,000 crore.
• Employment: It is projected to create around 50,000 direct and indirect employment opportunities across 25 projects in coal-bearing regions.
• Investments: The scheme is expected to mobilise an estimated Rs 2.5-3.0 lakh crore of investments.
• Government revenue: The utilisation of coal and lignite is expected to generate Rs 6,300 crore annually for the government, plus downstream revenue from GST and other levies.

In an accompanying reform, the government also extended coal linkage tenure up to 30 years in the non-regulated sector (NRS) linkage auction framework, providing long-term policy certainty for investment in coal gasification projects. Under this arrangement, companies setting up coal gasification projects will be able to secure long-term coal supply agreements for as long as three decades.

Until now, shorter linkage periods often created uncertainty around future fuel availability and project viability.

What is coal gasification?

Coal gasification is the process of converting coal or lignite into synthetic gas, a substance that can be used to produce synthetic natural gas (SNG), fertilisers, ethanol, industrial fuels and feedstock for petrochemicals.

Significance of coal gasification in India

India holds one of the world’s largest coal and lignite reserves, estimated at 401 billion tonnes and 47 billion tonnes respectively.

Coal accounts for more than 55 per cent of the country’s energy mix.

The country'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 FY25.

The central government aims to increase domestic coal production, expand commercial and captive mining, and create long-term uses for coal beyond thermal power generation.

In FY26, the country's captive and commercial coal mines crossed the 200 million tonne (MT) production and dispatch mark for the first time, with total production up 10.2 per cent on a year-on-year basis at 210.46 MT.

The coal sector remains central to the country's long-term industrial growth and energy strategy under its broader Viksit Bharat 2047 (Developed India by 2047) ambition.