₹37,500 crore coal and lignite gasification scheme approved
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
| Limit | Value |
|---|---|
| Share of plant and machinery cost | Up 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.