Coal Gasification Incentive Scheme
Why in news?
The Coal Gasification Incentive Scheme (formally the "Scheme for Promotion of Coal/Lignite Gasification Projects") is recently in the news because the Ministry of Coal recently signed the Coal Gasification Plant Development and Production Agreement (CGPDPA) with selected private and public sector companies in April 2026.
Key Information
- Financial Outlay: The current scheme has a total budget of ₹8,500 crore approved by the Union Cabinet on January 24, 2024.
- Target: Aims to achieve 100 million tonnes of coal gasification capacity by 2030.
- Mechanism: Provides financial assistance in the form of Viability Gap Funding (VGF) or lump-sum grants to make capital-intensive projects economically viable.
- Three Project Categories:
- Category I (₹4,050 Cr): Reserved for Government PSUs. Supports up to 3 projects with a grant of ₹1,350 Cr each or 15% of Capex.
- Category II (₹3,850 Cr): Open to both Private Sector and PSUs. Offers a maximum grant of ₹1,000 Cr per project or 15% of Capex.
- Category III (₹600 Cr): For Demonstration Projects using indigenous technology or small-scale plants. Offers up to ₹100 Cr per project.
- Incentives Beyond Cash:
- 50% Revenue Rebate: A 50% rebate in revenue share for coal used in gasification for commercial coal blocks, provided at least 10% of production is gasified.
- NRS Linkage: Created a separate "Syngas" sub-sector under the Non-Regulated Sector (NRS) linkage auctions with favourable floor pricing.
- Selected Projects: Key winners include Jindal Steel and Power Limited, New Era Cleantech, and Greta Energy under Category II.
- Major Joint Ventures: Coal India Limited (CIL) has established JVs with BHEL (BCGCL) and GAIL for large-scale coal-to-chemical projects in Odisha and West Bengal.
- Latest Funding Round: A second round for the remaining ₹2,366 crore of the initial outlay was opened with a bid deadline of January 28, 2026.
Strategic Importance & Utility
- Import Substitution: Converts domestic coal into Syngas, which can be used to produce high-value chemicals like Methanol, Ammonia, Urea, and Ammonium Nitrate, reducing reliance on expensive imports.
- Energy Security: Provides a "bridge" for India’s energy transition by utilizing massive domestic coal reserves (nearly 400 billion tonnes) in a cleaner, non-combustive way.
- Environmental Impact: Gasification is considered cleaner than direct combustion because it allows for easier Carbon Capture, Utilisation, and Storage (CCUS) before emissions occur.
- Self-Reliance: Vital for the "Atmanirbhar Bharat" mission, aiming to build a domestic chemical and fertilizer economy worth up to ₹90,000 crore annually.
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