Govt seeks proposals for coal gasification projects under Rs 37,500-cr incentive scheme
The Ministry of Coal has invited project proposals under the Scheme for Promotion of Surface Coal/Lignite Gasification Projects, which carries a total financial outlay of Rs 37,500 crore and was approved in May 2026.
The scheme aims to incentivise gasification of surface coal and lignite to produce syngas and downstream value-added products, including synthetic natural gas (SNG), urea, ammonium nitrate, methanol, and dimethyl ether (DME).
Selection of projects will follow a transparent, competitive bidding process, with financial incentives capped at a maximum of 20% of plant and machinery cost, disbursed in four instalments linked to project milestones.
The scheme targets gasification of approximately 75 million tonnes of coal/lignite, forming part of the broader National Coal Gasification Mission's goal of 100 million tonnes of coal gasification by 2030.
Coal/Lignite Gasification and Syngas
Gasification is a thermochemical process that converts carbon-based feedstock such as coal or lignite into "synthesis gas" (syngas) — a mixture chiefly of carbon monoxide and hydrogen — under controlled oxygen/steam conditions rather than combustion. Syngas is a versatile feedstock that can be converted into fuels and chemicals such as synthetic natural gas, methanol, ammonia/urea, and dimethyl ether, enabling substitution of imports and reducing India's exposure to global price volatility, especially for methanol and ammonia which India currently imports in large volumes.
Key Details
- Gasification differs from combustion: it is a controlled, partial-oxidation process (limited oxygen/steam), not full burning, producing syngas rather than only heat and ash
- Key syngas derivatives: Synthetic Natural Gas (SNG), urea, ammonium nitrate, methanol, dimethyl ether (DME)
- The Scheme for Promotion of Surface Coal/Lignite Gasification Projects is technology-agnostic, encouraging indigenous technology adoption
- Target: ~75 million tonnes of coal/lignite gasification under this scheme
The proposal-invitation stage operationalises the Rs 37,500 crore scheme, moving from policy approval to project selection via competitive bidding, with the syngas route offering a domestic alternative to imported urea, methanol, and natural gas feedstock.
National Coal Gasification Mission and Energy Security
India launched the National Coal Gasification Mission with a target of 100 million tonnes of coal gasification by 2030, as part of a wider strategy to enhance energy self-reliance (Atmanirbhar Bharat in the energy sector) and better utilise the country's large domestic coal/lignite reserves, which are otherwise constrained by coal's declining role as a straightforward thermal-power fuel amid decarbonisation goals. Coal mining and associated activities function under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) framework, which governs licensing and regulation of mineral concessions, including coal blocks allocated for gasification-linked end use.
Key Details
- National Coal Gasification Mission target: 100 million tonnes of coal gasification by 2030
- MMDR Act, 1957 provides the overarching legal framework for coal/lignite mining and mineral concessions in India
- The Rs 37,500 crore scheme is a specific incentive instrument under the broader gasification mission, distinct from an earlier Rs 8,500 crore incentive framework announced for the mission in 2021
- Objectives: energy security, import substitution (particularly urea, methanol, and natural gas), and utilisation of domestic coal reserves amid the broader energy transition
By inviting proposals now, the scheme converts the mission-level 100 MT-by-2030 target into concrete, competitively-selected projects, with incentive amounts and instalment-linked disbursement designed to de-risk private investment in a capital-intensive, historically underdeveloped technology pathway in India.
Employment and Economic Impact
Coal gasification projects are capital- and infrastructure-intensive, and the scheme is projected to generate substantial direct and indirect employment while creating downstream revenue through GST and other levies on value-added chemical products, concentrated in coal-bearing regions — linking energy policy to regional industrial development.
Key Details
- Scheme projected to create around 50,000 direct and indirect jobs across roughly 25 projects in coal-bearing regions
- Estimated annual value from 75 million tonnes of gasification: approximately Rs 6,300 crore, plus downstream revenue from GST and other levies
- Incentive for any individual downstream product capped at Rs 9,000 crore, except urea and synthetic natural gas projects
These employment and revenue projections form part of the economic rationale the government has cited while inviting bids, tying the scheme to regional development goals in coal-producing states.
- Total financial outlay: Rs 37,500 crore; scheme approved May 2026
- Target: ~75 million tonnes of coal/lignite gasification under this scheme; National Coal Gasification Mission's broader target: 100 million tonnes by 2030
- Maximum incentive: 20% of plant and machinery cost, disbursed in four milestone-linked instalments
- Incentive cap per downstream product: Rs 9,000 crore (except urea and SNG projects)
- Projected employment: ~50,000 direct and indirect jobs across ~25 projects
- Key downstream products: SNG, urea, ammonium nitrate, methanol, DME
- Governing legal framework for coal mining: Mines and Minerals (Development and Regulation) Act, 1957