Promotion of Surface Coal/Lignite Gasification Projects
Why in News?
On May 13, 2026, the Union Cabinet approved the landmark Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a massive financial outlay of ₹37,500 crore.
What is Coal Gasification?
- Process: It is a thermo-chemical process where coal is partially oxidized using air, oxygen, steam, or carbon dioxide under high temperatures.
- The Output (Syngas): It produces Synthesis Gas (Syngas), which is a rich mixture of carbon monoxide, hydrogen, methane, carbon dioxide, and water vapor.
- Downstream Uses: Syngas acts as a key industrial feedstock to manufacture fertilizers, synthetic natural gas (SNG), fuels, and chemical solvents.
Core Specifications & Financial Outlay
- Target Volume: The expanded scheme specifically targets the gasification of 75 million Tonnes of domestic coal/lignite.
- Investment Mobilization: The policy expects to catalyse private and public sector investments worth ₹2.5 lakh crore to ₹3 lakh crore.
- Subsidy Capping: Financial incentives are provided up to a maximum of 20% of the Plant and Machinery cost.
Key Financial Incentive Caps
- Per-Project Cap: Financial aid for an individual gasification plant is restricted to ₹5,000 crore.
- Per-Product Cap: Aid for a single product category (excluding synthetic natural gas and urea) is capped at ₹9,000 crore.
- Per-Entity Cap: The highest total incentive allowed for a single corporate entity group across all projects is ₹12,000 crore.
Structural & Regulatory Reforms
- Bidding Mechanism: Entity selection will take place via a transparent, competitive process benchmarked against project costs and gas outputs.
- Milestone Disbursements: The government will release the financial incentives in four equal instalments linked directly to construction milestones.
- Coal Linkage Extension: Coal linkage tenures are extended up to 30 years under the Non-Regulated Sector linkage auction framework.
- Policy Flexibility: The scheme functions as technology-agnostic, keeping options open for both international and indigenous technologies.
- Additivity of Incentives: Benefits under this plan do not restrict operators from accessing commercial coal mining or state-level subsidy schemes.
Economic & Strategic Benefits
- Job Creation: The project plans to generate nearly 50,000 direct and indirect jobs across 25 upcoming projects in coal-bearing regions.
- State Revenue: The utilization of 75 MT of coal will fetch an estimated ₹6,300 crore annually in direct coal revenues plus additional GST.
- Energy Security: By converting solid coal into syngas, India can locally produce heavily imported chemicals like methanol, urea, and ammonia.
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