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In a push to cleaner energy, the Union Cabinet has approved a Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of Rs 37,500 crore. The move will strengthen India’s energy security and reduce dependence on imports of key products such as LNG (more than 50% imported), urea (around 20% imported), ammonia (around 100% imported), and methanol (around 80-90% imported), amid the volatile geopolitical situation due to the ongoing conflict between the United States and Iran.  

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. 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 seeks to incentivise new surface coal and lignite gasification projects for the production of syngas and downstream products, targeting gasification of around 75 million tonnes of coal and lignite. Financial incentives under the scheme will cover up to 20 per cent of the cost of plant and machinery, with project selection to be carried out through a competitive bidding process. Incentives will be disbursed in four equal instalments linked to project milestones. The financial incentive for a single project will be capped at Rs 5,000 crore, while incentives for any single product (except Synthetic Natural Gas and Urea) will be limited to Rs 9,000 crore. The overall cap for a single entity group has been fixed at Rs 12,000 crore across all projects. The scheme is expected to mobilise investments worth Rs 2.5 lakh crore to Rs 3 lakh crore and generate around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions.