Why in news?
On 13 May 2026 the Union Cabinet approved a ₹37,500 crore incentive scheme to promote coal and lignite gasification projects. The programme aims to convert coal into synthesis gas (syngas) for producing electricity, fertilisers, chemicals and other industrial products. It is seen as a strategy to reduce import dependence on natural gas and to support energy security.
Background
Coal gasification is a process in which coal reacts with oxygen and water at high temperatures and pressures to produce syngas—a mixture of carbon monoxide and hydrogen. Syngas can be used as a fuel or feedstock for producing methanol, ammonia, synthetic natural gas and other chemicals. India has vast reserves of coal (about 401 billion tonnes) and lignite (around 47 billion tonnes). Converting part of this resource into syngas can diversify its use beyond traditional thermal power and support clean‑er energy technologies.
Key elements of the scheme
- Targeted gasification: The scheme plans to gasify about 75 million tonnes of coal and lignite. Projects will be selected through a transparent bidding process.
- Financial incentives: The government will provide up to 20 percent of the cost of plant and machinery as incentives. Support will be disbursed in four equal instalments linked to project milestones. Incentive caps include ₹5,000 crore per project, ₹9,000 crore per product category (excluding synthetic natural gas and urea) and ₹12,000 crore per entity across all projects.
- Extended coal linkage: Coal and lignite linkage tenures for gasification projects will be extended up to 30 years to ensure long‑term fuel security and viability.
- Investment and technology: The government expects the programme to attract investments of about ₹3 lakh crore. Companies will be encouraged to adopt indigenous gasification technologies to build domestic capability in clean coal utilisation.
- Strategic goals: The scheme aligns with India’s goal of reducing imports of fertilisers, chemicals and fuels, while creating industrial opportunities and jobs around coal‑based value addition.