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India’s Scheme for Promotion of Surface Coal and Lignite Gasification Projects Approved in 2026

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On 18 June 2026, the Union Cabinet approved a ₹37,500 crore scheme to promote surface coal and lignite gasification projects in India. This initiative advances the national target to gasify 100 million tonnes of coal by 2030, aiming to reduce dependence on imports of LNG, urea, ammonia, and methanol. The scheme incentivizes projects converting coal into synthesis gas (syngas), used for producing chemicals and fuels domestically. It follows an earlier ₹8,500 crore scheme launched in January 2024 and supports long-term energy security, import substitution, technological self-reliance, and employment generation, with estimated investments of ₹2.5–3 trillion and around 50,000 jobs expected in coal regions.

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Key Facts

  • The Union Cabinet approved the Scheme for Promotion of Surface Coal and Lignite Gasification Projects on 18 June 2026.
  • The total financial outlay for the scheme is ₹37,500 crore, aimed at incentivizing new gasification projects.
  • The scheme targets gasification of approximately 75 million tonnes of coal and lignite under this incentive.
  • This initiative supports the broader national goal of gasifying 100 million tonnes of coal by 2030.
  • The scheme provides financial incentives up to 20% of the cost of plant and machinery, disbursed in four equal instalments linked to project milestones.
  • There are caps on the financial incentive: ₹5,000 crore per project; ₹9,000 crore for any single product except synthetic natural gas and urea; and ₹12,000 crore for any single entity group across all projects.
  • It builds on an earlier incentive scheme of ₹8,500 crore approved in January 2024, under which 8 projects with incentives totaling ₹6,233 crore are under implementation.
  • Coal gasification projects worth over ₹65,000 crore are already under execution in India, with projections of nearly 25 projects by 2030 involving investments of about ₹2.5–3 trillion.
  • India has coal reserves exceeding 400 billion tonnes and lignite reserves of about 47 billion tonnes.
  • The government has extended the coal linkage tenure to 30 years for coal gasification projects, providing long-term policy certainty.
  • Imports in FY2025 of LNG (>50% imported), urea (~20% imported), ammonia (~100% imported), and methanol (80-90% imported) were valued at about ₹2.77 lakh crore, motivating import substitution.
  • The scheme encourages the adoption of indigenous technologies and aims to reduce reliance on foreign EPC contractors.
  • It is projected to generate around 50,000 direct and indirect jobs in coal-bearing regions.

Background & Context

Surface coal gasification is an industrial process that converts coal and lignite into synthesis gas (syngas), primarily a mixture of hydrogen and carbon monoxide. Syngas serves as a key feedstock for producing methanol, hydrogen, synthetic natural gas, ammonia, urea, and sustainable aviation fuel domestically.

The scheme aligns with India's National Coal Gasification Mission (2021) and enhances the country’s energy security by converting abundant indigenous coal resources into value-added chemicals and fuels, thus reducing dependence on imports and insulating the economy from global price volatility and geopolitical supply disruptions.

The Cabinet’s recent approval also includes measures such as a transparent and competitive bidding process for selection of projects and links the incentives with project milestones to ensure effective implementation.

Why This Matters for Exams

This scheme reflects India’s strategic approach to energy security, import substitution, and industrial development. Understanding the scheme’s financial structure, targets for coal gasification, incentives, and expected outcomes is crucial for students preparing for civil services and other competitive exams, especially under topics related to energy policies, economic planning, and sustainable industrial development.

Points to Remember

  • Date of Scheme Approval: 18 June 2026
  • Financial Outlay: ₹37,500 crore
  • Coal Gasification Target by 2030: 100 million tonnes
  • Incentive: Up to 20% of plant and machinery cost, paid in four instalments
  • Caps on Incentives: ₹5,000 crore per project; ₹9,000 crore per product (except Synthetic Natural Gas and Urea); ₹12,000 crore per entity group
  • Previous Scheme: ₹8,500 crore in January 2024 with 8 projects underway
  • Coal Reserves in India: Over 400 billion tonnes coal, around 47 billion tonnes lignite
  • Expected Investment Mobilisation: ₹2.5–3.0 trillion
  • Employment Generation: Approx. 50,000 direct and indirect jobs
  • Long-term Coal Linkage Tenure Extended to 30 Years
  • Import Substitution Focus on LNG, Urea, Ammonia, Methanol
  • Promotion of Indigenous Technologies to Minimize Reliance on Foreign EPC Contractors
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