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₹37,500 crore coal and lignite gasification scheme approved

16 May 20262 min read
GOVERNMENT SCHEMES₹37,500 crore coaland lignitegasificationscheme approved16 May 2026safalsetu.com

Why in the news

In May 2026 the Cabinet backed a large incentive plan to turn domestic coal and lignite into gas-based products, hoping to cut imports of LNG, urea and methanol.

Key facts

  • Outlay: ₹37,500 crore; approved by the Union Cabinet under PM Modi.
  • Base: National Coal Gasification Mission (NCGM), 2021, aiming at 100 MT by 2030.
  • Linkage tenure can stretch to 30 years; the NRS (Non-Regulated Sector) auction route gets a fresh sub-sector named ‘Production of Syngas leading to Coal Gasification’.
  • Selection: competitive bidding based on project cost and output efficiency; technology-agnostic, but indigenous technology is encouraged.

Incentive caps

LimitValue
Share of plant and machinery costUp to 20%
Per project₹5,000 crore
Per product (SNG and urea excepted)₹9,000 crore
Per group or entity, all projects₹12,000 crore

How funds flow

  • Released in four equal instalments tied to project milestones, so payment follows performance.
  • SNG and urea are outside the per-product cap because they are the most import-sensitive products.

About coal gasification

  • Partial oxidation of coal with controlled oxygen and steam at high temperature gives syngas, a mix of carbon monoxide and hydrogen.
  • Syngas feeds methanol, ammonia, urea, SNG, hydrogen, DME and, via Fischer-Tropsch, liquid fuels.
  • Surface gasification uses industrial reactors above ground; underground gasification works in-situ on unmined seams. This scheme targets the surface type.
  • Lignite is a low-rank, moist coal; its higher reactivity suits gasification. Reserves are in Neyveli (Tamil Nadu), Gujarat, Rajasthan and Jammu and Kashmir.
  • NRS covers cement, sponge iron, steel, captive power, aluminium and now gasification; power is served mainly through Fuel Supply Agreements.

Significance

  • LNG is about 50% of gas consumption, urea imports strain the current account and subsidy bill, and methanol is about 90% imported.
  • Gasification can be cleaner than burning coal, especially with CCUS for ‘blue’ hydrogen, but must fit the Net-Zero-by-2070 goal alongside the National Green Hydrogen Mission.

Exam angle

  • Mission ministry: Coal; mission year: 2021; target: 100 MT by 2030.
  • Numbers: ₹37,500 crore, 30 years, 20%, ₹5,000 / ₹9,000 / ₹12,000 crore.
  • Related terms: syngas, SNG, NRS, CCUS, Fischer-Tropsch.

Test yourself

1. What is the total outlay of the Scheme for Promotion of Surface Coal/Lignite Gasification Projects?

The Cabinet approved a total outlay of ₹37,500 crore.

2. What is the maximum coal linkage tenure allowed under the gasification scheme?

The linkage tenure was extended to a maximum of 30 years.

3. The National Coal Gasification Mission, on which the scheme is built, targets how much gasification by 2030?

NCGM, launched in 2021, targets 100 MT of coal gasification by 2030.