Cabinet Approves ₹37,500 Crore Coal Gasification Scheme to Boost Energy Security, Cut Imports – Indian PSU

In a major policy push towards energy security and import substitution, the Union Cabinet chaired by Prime Minister Narendra Modi has approved a ₹37,500 crore scheme to promote surface coal and lignite gasification projects across the country.

The scheme is aimed at accelerating India’s coal gasification programme and aligns with the national target of gasifying 100 million tonnes (MT) of coal by 2030. It is expected to significantly reduce reliance on imports of critical commodities such as LNG, urea, ammonia, and methanol.

In a parallel reform, the government has extended coal linkage tenure to 30 years under the “Production of Syngas leading to Coal Gasification” category in the Non-Regulated Sector (NRS), offering long-term policy stability to investors.

Key Features of the Scheme

• Total financial outlay of ₹37,500 crore
• Target: Gasification of ~75 MT of coal/lignite
• Incentive up to 20% of plant and machinery cost
• Maximum incentive:
  • ₹5,000 crore per project
  • ₹9,000 crore per product (except SNG & urea)
  • ₹12,000 crore per entity group
• Incentives released in four milestone-based instalments
• Transparent competitive bidding process
• Technology-agnostic framework encouraging indigenous solutions

Strategic Impact

Massive Investment Push

The scheme is expected to mobilise investments worth ₹2.5–3 lakh crore, giving a strong boost to the coal and energy ecosystem.

Energy Security & Import Reduction

India currently imports:

• Over 50% LNG
• ~20% urea
• Nearly 100% ammonia
• 80–90% methanol

By converting coal into syngas, the scheme will enable domestic production of fuels and chemicals, insulating the economy from global supply shocks.

Employment & Revenue Boost

• Estimated 50,000 jobs (direct + indirect)
• Annual revenue generation of ₹6,300 crore
• Additional GST and downstream economic gains expected

Background

India holds vast reserves of:

• ~401 billion tonnes of coal
• ~47 billion tonnes of lignite

Coal currently contributes over 55% of India’s energy mix.

The new scheme builds on earlier initiatives like the National Coal Gasification Mission (2021) and the ₹8,500 crore scheme approved in 2024, under which several projects are already underway.

Notably, India’s import bill for key coal-substitutable products stood at around ₹2.77 lakh crore in FY2025, highlighting the urgency for domestic alternatives.

The Cabinet’s approval marks a decisive step towards transforming coal from a traditional fuel into a strategic raw material for chemicals and clean energy, strengthening India’s push for Atmanirbhar Bharat and long-term energy resilience.