Union Cabinet approves Rs.37,500 Cr scheme to boost coal and lignite gasification projects
New Delhi, May 13 (TNT): The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a new scheme for promotion of surface coal and lignite gasification projects with a financial outlay of Rs.37,500 crore.
The scheme aims to accelerate India’s coal and lignite gasification programme and support the national target of gasifying 100 million tonnes of coal by 2030.
It is also expected to strengthen energy security and reduce dependence on imports of products such as LNG, urea, ammonia and methanol.
As part of the reform measures, the government has extended coal linkage tenure up to 30 years under the “Production of Syngas leading to Coal Gasification” sub-sector in the Non-Regulated Sector linkage auction framework, providing long-term policy certainty for investors.
According to the government, the scheme will incentivise new surface coal and lignite gasification projects for production of syngas and downstream products, targeting gasification of around 75 million tonnes of coal and lignite.
Financial incentives of up to 20 per cent of the cost of plant and machinery will be provided under the scheme. Project selection will be carried out through a transparent and competitive bidding process based on project cost, coal input and syngas output benchmarks.
The incentive will be released in four equal instalments linked to project milestones.
The maximum financial incentive for a single project has been capped at Rs.5,000 crore, while incentives for a single product category, excluding synthetic natural gas and urea, will be capped at Rs.9,000 crore. A single entity group can receive a maximum of Rs.12,000 crore across all projects.
The government said the scheme is technology-agnostic and encourages the adoption of indigenous technologies.
The initiative is expected to mobilise investments worth Rs.2.5 lakh crore to Rs.3 lakh crore and generate around 50,000 direct and indirect jobs across 25 projects, particularly in coal-bearing regions.
The government estimates that coal and lignite utilisation under the scheme will generate annual revenues of around Rs.6,300 crore, apart from downstream revenue through GST and other levies.
India possesses coal reserves of around 401 billion tonnes and lignite reserves of nearly 47 billion tonnes, with coal accounting for over 55 per cent of the country’s energy mix.
The government noted that India’s import bill for products such as LNG, urea, ammonium nitrate, ammonia, coking coal and methanol stood at approximately Rs.2.77 lakh crore in FY2025.
The new scheme builds on the National Coal Gasification Mission launched in 2021 and a Rs.8,500 crore scheme approved in January 2024, under which eight projects worth Rs.6,233 crore are currently under implementation.
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