Cabinet Approves Rs. 37,500 Crore Coal Gasification Scheme

Coal Gasification Latest News

• The Union Cabinet has approved a Rs. 37,500 crore scheme to promote surface coal and lignite gasification projects, aimed at boosting domestic syngas production.

About Coal Gasification

• Coal gasification is a thermo-chemical process that converts coal or lignite into synthesis gas, commonly known as syngas, a mixture primarily composed of carbon monoxide (CO) and hydrogen (H₂). 
• Unlike direct combustion, gasification allows controlled conversion of coal into a clean and versatile industrial feedstock.

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Working of Coal Gasification

• In coal gasification, coal or lignite reacts with oxygen and steam under high temperature and pressure conditions. 
• This controlled reaction breaks down the carbon-rich material into its gaseous components. 
• The syngas produced is then cleaned of impurities such as sulphur and particulates before being processed for industrial use.

Applications of Syngas

• Syngas is a versatile feedstock that can be used to produce:
  • Power and Synthetic Natural Gas (SNG)
  • Fertilisers such as urea and ammonia
  • Chemicals, including methanol, dimethyl ether (DME), and ammonium nitrate
  • Liquid fuels through further conversion processes
  • Hydrogen for industrial and energy applications

Why Coal Gasification is Important

• India holds one of the world’s largest reserves of coal and lignite, approximately 401 billion tonnes of coal and 47 billion tonnes of lignite. 
• Coal currently contributes more than 55% of India’s energy mix. Despite this abundance, India imports large volumes of high-value chemicals and fuels.
• Coal gasification offers several strategic benefits:
  • Cleaner utilisation of coal compared to direct combustion, with lower emissions.
  • Import substitution for LNG, urea, ammonia, methanol, and coking coal.
  • Energy security by reducing exposure to global price volatility and geopolitical disruptions.
  • Industrial diversification in coal-bearing regions, creating new economic opportunities.
  • Alignment with Atmanirbhar Bharat and Make in India initiatives by strengthening domestic capabilities.
• India aims to gasify 100 million tonnes of coal by 2030, and the new scheme is a significant step toward this national target

News Summary

• The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a major scheme to accelerate surface coal and lignite gasification across the country. 
• The scheme, titled “Scheme for Promotion of New Surface Coal/Lignite Gasification Projects for Production of Syngas and Downstream Products,” marks one of the most significant initiatives toward building a domestic syngas ecosystem.

Key Features of the Scheme

• Total Financial Outlay: Rs. 37,500 crore.
• Gasification Target: Approximately 75 million tonnes of coal and lignite.
• Project Selection: Through a transparent and competitive bidding process, with an evaluation framework benchmarking project cost, coal input, and syngas output.
• Financial Incentives: Up to 20% of the cost of plant and machinery, disbursed in four equal instalments linked to project milestones.

Incentive Caps

• To ensure equitable distribution, the scheme has set the following caps:
  • Rs. 5,000 crore per single project.
  • Rs. 9,000 crore per single product category (excluding Synthetic Natural Gas and Urea).
  • Rs. 12,000 crore per single entity or group across all projects.
• The incentives under this scheme are additional and do not restrict access to other Central or State Government schemes, including those under the commercial coal mining regime.

Structural Reforms

• A major accompanying reform is the extension of coal linkage tenure to 30 years under the “Production of Syngas leading to Coal Gasification” sub-sector in the Non-Regulated Sector (NRS) linkage auction framework. 
• This provides long-term policy certainty for investments in coal gasification projects.

Strategic and Economic Benefits

• Investment Mobilisation
  • The scheme is expected to attract investments worth Rs. 2.5-3 lakh crore across the value chain, creating significant industrial activity.
• Import Substitution
  • India’s import bill for key substitutable products, including LNG, urea, ammonium nitrate, ammonia, coking coal, methanol, and DME, stood at approximately Rs. 2.77 lakh crore in FY2025. 
  • The ongoing West Asia geopolitical situation has further exposed vulnerabilities in global supply chains. 
  • Coal gasification will help insulate India from global price volatility and geopolitical supply-chain disruptions.
• Employment Generation
  • The scheme is projected to create around 50,000 direct and indirect jobs across 25 projects in coal-bearing regions, providing significant employment opportunities.
• Revenue Generation
  • Coal and lignite utilisation under the scheme is expected to generate Rs. 6,300 crore annually from 75 million tonnes of gasification, in addition to downstream revenue from GST and other levies.

Source: TH | TOI | PIB