NEW DELHI — The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a massive ₹37,500 crore incentive scheme to promote surface coal and lignite gasification projects. The landmark program aims to accelerate India’s transition toward energy self-reliance and achieve the national target of gasifying 100 million tonnes (MT) of coal by 2030.
Strategic Objectives & Import Substitution
The scheme is designed to insulate the Indian economy from global price volatility and geopolitical supply-chain disruptions, particularly following a staggering ₹2.77 lakh crore import bill for substitutable commodities in FY2025.
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Target Sectors: The program will convert domestic coal into synthesis gas (syngas) to drastically cut imports of LNG (currently >50% imported), urea (~20% imported), ammonia (~100% imported), and methanol (~80–90% imported).
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Policy Security: In a key structural reform, the government has extended the coal linkage tenure up to 30 years for the syngas sub-sector, ensuring long-term fuel security for investors.
Key Features & Financial Caps
The scheme targets the gasification of approximately 75 MT of coal and lignite across 25 projects, utilizing a transparent, milestone-linked subsidy model:
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Incentive Structure: Financial support is capped at 20% of plant and machinery costs, distributed in four equal installments upon reaching project milestones.
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Funding Ceilings: To ensure fair distribution, incentives are capped at ₹5,000 crore for a single project, ₹9,000 crore for a single product category (excluding synthetic natural gas and urea), and ₹12,000 crore for any single corporate entity group.
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Technology Agnostic: While the framework allows all technologies, it strongly incentivizes the adoption of indigenous technologies to reduce reliance on foreign Engineering, Procurement, and Construction (EPC) contractors.
Economic and Employment Impact
The mega-scheme is projected to mobilize massive private and public investments worth ₹2.5 lakh crore to ₹3.0 lakh crore. Beyond industrial modernization, the initiative is expected to create 50,000 direct and indirect jobs in India’s coal-bearing regions. Furthermore, the utilization of 75 MT of coal under this program is estimated to generate ₹6,300 crore in annual revenue for the government, alongside downstream GST and statutory levies.
