Scheme for Promotion of Surface Coal/Lignite Gasification Projects Explained

The Ministry of Coal is inviting applications under the Scheme for Promotion of Surface Coal/Lignite Gasification Projects, approved by the Government on 13 May 2026 with a total financial outlay of ₹37,500 crore. The Scheme is a major initiative aimed at promoting Surface Coal/Lignite Gasification Projects thereby enhancing value addition, reducing import dependence, and supporting India's vision of achieving greater self-reliance in the energy and chemical sectors.

With an outlay of Rs 37,500 crore, the Scheme for Promotion of New Surface Coal/Lignite Gasification Projects seeks to incentivize 25 projects for production of syngas and downstream products, targeting gasification of approximately 75 million tonne (mt) of coal/lignite.

• The new scheme is an addition to the existing viability gap funding scheme worth Rs 8,500 crore approved in 2024 for incentivising coal and lignite gasification projects.
• According to the government, the new scheme aims at enhancing energy security and reducing dependence on imports of key products such as LNG, urea, ammonia, and methanol.

Cabinet okays Rs 37,500 crores scheme for coal, lignite gasification; promotes use of indigenous tech

In May 2026, Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved a Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of Rs.37,500 crore.

The Scheme marks a major step towards accelerating India’s coal/lignite gasification programme, advancing the national target of gasifying 100 Million Tonnes (MT) of coal by 2030, strengthening energy security, and reducing dependence on imports of key products such as LNG (more than 50% imported), urea (~20% imported), ammonia (~100% imported), and methanol (~80–90% imported).

Salient Features of the Scheme:

• Total financial outlay of Rs.37,500 crore to incentivize new surface coal/lignite gasification projects for production of syngas and its downstream products, targeting gasification of approximately 75 Million Tonne of coal/lignite.
• Financial incentive provided at a maximum of 20% of the cost of Plant and Machinery.
• Selection through a transparent and competitive bidding process, with an evaluation framework benchmarking project cost, coal input, and syngas output.
• Incentive disbursed in four equal instalments, linked to project milestones.
• Financial incentive for any single project capped at Rs.5,000 crore; for any single product (except Synthetic Natural Gas and Urea) capped at Rs.9,000 crore; and any single entity group capped at Rs.12,000 crore across all projects.

Strategic and Economic Benefits:

• Expected Investment Mobilisation: Rs.2.5- 3.0 lakh crore
• Energy Security & Import Substitution: Diversified use of coal resources and substitutes imports of LNG, urea, ammonia, ammonium nitrate, methanol, and coking coal, insulating India from global price volatility and geopolitical supply-chain disruptions and advancing the Atmanirbhar Bharat and Make in India objectives.
• Employment Generation: The Scheme is projected to create around 50,000 (Direct + Indirect) jobs across 25 projects in coal-bearing regions.
• Revenue to Governments: Coal/lignite utilization is expected to generate Rs.6,300 crore annually from 75 Million Tonne of gasification envisaged under the Scheme, plus downstream revenue from GST and other levies.
• Technology Ecosystem: Strengthens India’s domestic surface coal gasification capability by advancing indigenous technologies and minimising reliance on foreign EPC contractors.

Background:

• India holds one of the world’s largest coal reserves (~401 billion tonnes) and lignite reserves (~47 billion tonnes). Coal accounts for over 55% of the country’s energy mix. 
• Gasification converts coal/lignite into ‘synthesis gas’ (syngas), a versatile feedstock for producing fuels and chemicals domestically, enabling India to substitute high-value imports and insulate itself from global supply disruptions and price volatility.
• India’s import bill for key substitutable products LNG, urea, ammonium nitrate, ammonia, coking coal, methanol, DME and others stood at approximately Rs.2.77 lakh crore in FY2025, a vulnerability further exposed by the ongoing geopolitical situation in West Asia.
• Building on the National Coal Gasification Mission (2021) and a Rs.8,500 crore scheme approved in January 2024 (under which 8 projects worth Rs.6,233 crore are under implementation), the new Scheme builds on this momentum with significantly enhanced support.

About Coal Gasification Process:

Coal is a combustible black or brownish-black sedimentary rock. Chemically, it is composed mostly of carbon, along with varying amounts of hydrogen, sulfur, oxygen, and nitrogen.  

Coal gasification is a thermo-chemical process that converts solid coal into a combustible gas mixture rather than burning it directly. Unlike traditional combustion, which releases energy through fire, gasification uses a controlled amount of oxygen and steam to break down the chemical bonds of coal.  

• Mechanism: Crushed coal is reacted with a controlled amount of oxygen and steam at extreme temperatures (1,000 to 1,600°C) and high pressures (20 to 70 bar).
• Syngas Composition: The resulting synthetic gas is primarily a mixture of carbon monoxide (CO) and hydrogen (H2).
• End Products: Through downstream processes like methanol synthesis, methanation, and Fischer-Tropsch synthesis, syngas is utilized to produce methanol, ammonia, urea, dimethyl ether (DME), hydrogen, and synthetic natural gas (SNG).
• Cleaner Alternative: It is significantly more efficient than direct coal combustion and facilitates easier carbon capture, as CO2 is produced in a concentrated stream.
• Technological Adaptation: Since Indian coal contains exceptionally high ash (30-45%), indigenous fluidised-bed gasifiers are deployed. 

Syngas: Syngas is the primary product of this process. It is a versatile "building block" consisting mainly of Carbon Monoxide (CO), Hydrogen (H2) and Methane (CH4) (in smaller quantities). 

Significance: It is considered "cleaner" than direct coal burning because impurities like sulfur, mercury, and ash can be filtered out of the gas before it is used, rather than trying to "scrub" them from smoke stacks.  

• Since syngas is rich in hydrogen, gasification is a major pathway for producing "Blue Hydrogen" (hydrogen produced from fossil fuels with carbon capture).  

Challenges: While more versatile than burning coal, gasification still faces hurdles:  

• High Capital Cost: Building gasification plants is significantly more expensive than traditional coal power plants. 
• Water Intensity: The process requires large amounts of water for steam and cooling. 
• Carbon Footprint: It still produces CO2. To be truly "green," gasification must be paired with Carbon Capture, Utilization, and Storage (CCUS) technology. 

Types of Coal in India: 

Type	Carbon Content	Characteristics	Key Uses
Anthracite	86%–97%	Hard, brittle, black, and lustrous. Burns very clean with high heat.	Residential heating, metallurgy, and water filtration.
Bituminous	45%–86%	Dense, dark, and often has distinct layers. High heating value.	Electricity generation and Steelmaking (Coking coal).
Sub-Bituminous	35%–45%	Dull black. Usually has lower sulfur content than other coals.	Primarily burned in power plants for electricity.
Lignite	25%–35%	Brown, soft, and crumbly with very high moisture content.	Power generation (often used near the mine site).

Infographics Based on Scheme for Promotion of Surface Coal/Lignite Gasification

Source: PIB 

*****