Cabinet to soon approve Rs 37,500 cr incentive scheme to promote coal gasification projects

The Cabinet is likely to approve soon a Rs 37,500 crore incentive scheme to promote coal gasification projects, aimed at boosting clean energy production and reducing import dependence, sources said. The coal ministry has already prepared a Cabinet note on the scheme to promote coal gasification projects, with a financial outlay of Rs 37,500 crore, they said.

The proposed scheme is aimed at accelerating surface coal and lignite gasification projects across the country, promoting self-reliance by reducing import dependence on critical commodities such as LNG, urea, ammonium nitrate, ammonia, coking coal via DRI, methanol and DME, while enabling enhanced utilisation of domestic coal and lignite resources for fuels and chemicals production, and supporting the national target of 100 million tonnes coal gasification capacity by 2030.

This is a unified scheme with no categories, and the maximum financial assistance for a single project is Rs 3,000 crore, they said. In the earlier financial incentive scheme for gasification projects, the Government has provided financial under three categories, which included the maximum incentive of Rs 1,000 crore per project for the private sector and Rs 1,350 crore per project for the PSUs, sources said.

According to an industry analyst, the Government’s renewed push for coal gasification comes in the wake of recent West Asia tensions that have exposed the country’s vulnerability to disruptions in LNG, LPG and other hydrocarbon supplies, underscoring the need to diversify energy feedstock sources.

The Government is now positioning coal gasification as a strategic lever to convert domestic coal into fuels and chemicals, reduce import dependence, and strengthen energy security at a time when global supply chains remain fragile.

India has one of the largest coal reserves of 401 billion tonnes, uniquely positioning it to leverage domestic resources for reducing the dependence on imports and building a clean, resilient energy economy.

Coal remains the backbone of India’s energy sector, accounting for over 55 per cent of the country’s energy mix. As the second-largest producer and consumer of coal globally, India’s coal consumption is expected to grow significantly as its energy demands continue to rise.

Gasification presents a unique opportunity for India to unlock the full value of its vast domestic reserves through clean and efficient utilisation pathways by converting coal into syngas, enabling the domestic production of syngas or its downstream products such as chemicals, petrochemicals, fertilisers, power and DRI.