Cabinet Clears ₹37,500 Cr Coal Gasification Scheme

Synopsis: The Cabinet approves a ₹37,500 crore coal gasification scheme to reduce import dependence, strengthen energy security, and boost domestic production of synthetic fuels and industrial chemicals.

The Union Cabinet has approved a ₹37,500 crore incentive scheme to promote coal and lignite gasification projects as part of India’s broader strategy to reduce dependence on imported fuels and strengthen energy security. The scheme, cleared by the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi, aims to accelerate domestic production of synthetic gas and critical industrial feedstocks using India’s vast coal reserves.

The initiative is designed to support surface coal and lignite gasification projects across the country and help India achieve its target of developing 100 million tonnes of coal gasification capacity by 2030. Coal gasification converts coal into synthesis gas, or syngas, which can be used to produce chemicals, fertilisers, methanol, ammonia, synthetic natural gas, and cleaner industrial fuels.

According to Union Minister Ashwini Vaishnaw, the new scheme could attract investments worth nearly ₹3 lakh crore while enabling the gasification of around 75 million tonnes of coal. The government will provide financial incentives covering up to 20 percent of plant and machinery costs, with assistance linked to project milestones through phased disbursement.

Also Read: RBI Warns Fuel Prices May Rise if Conflict Continues

Officials stated that the move is intended to reduce India’s import dependence on commodities such as LNG, urea, ammonia, methanol, ammonium nitrate, dimethyl ether, and coking coal. The decision comes amid rising geopolitical tensions in West Asia that have exposed vulnerabilities in global energy supply chains and increased concerns over fuel security and foreign exchange outflows.

The latest package significantly expands the government’s earlier ₹8,500 crore coal gasification incentive programme launched in 2024. Unlike the previous scheme, the new framework follows a unified structure with higher financial support for projects and a simplified implementation process aimed at accelerating execution.

Industry experts believe the initiative could strengthen India’s long-term energy resilience by leveraging its estimated 401 billion tonnes of coal reserves while supporting downstream industries such as fertilisers, petrochemicals, steel, and power generation. The government also views coal gasification as a cleaner utilisation pathway compared to direct coal combustion, helping improve efficiency and reduce emissions intensity in industrial operations.