---
title: "Cabinet Approves ₹37,500 Crore Scheme to Promote Surface Coal and Lignite Gasification Projects"
date: 2026-06-17
author: "King Stubb & Kasiva"
url: https://ksandk.com/newsletter/coal-and-lignite-gasification-scheme/
---

# Cabinet Approves ₹37,500 Crore Scheme to Promote Surface Coal and Lignite Gasification Projects

Posted On - 17 June, 2026 • By - King Stubb & Kasiva

The Union Cabinet has approved a **₹37,500 crore Scheme for the Promotion of Surface Coal and Lignite Gasification Projects**. The scheme forms part of India’s broader strategy to gasify 100 million tonnes of coal by 2030 and expand the use of domestic coal resources beyond conventional power generation.

## Scheme Overview and Objectives

This significant policy initiative is aimed at strengthening India’s **energy security** and reducing dependence on imported fuels and chemicals. The decision also aligns with the Government’s objectives of achieving greater self-reliance in critical industrial inputs under the Atmanirbhar Bharat initiative.

## Key Developments

The newly approved scheme seeks to incentivize the establishment of coal and lignite gasification projects capable of producing **syngas** and its downstream products. The Government has allocated ₹37,500 crore to support projects that are expected to collectively gasify approximately 75 million tonnes of coal and lignite.

Key downstream products targeted under the scheme include:

- Methanol
- Ammonia
- Synthetic natural gas
- Fertilizers

### Financial Incentives and Coal Linkage Tenure

A key feature of the scheme is the provision of **financial incentives of up to 20% of plant and machinery costs**, with project selection taking place through a competitive bidding process.

To encourage investment certainty, the Government has also extended coal linkage tenures to **30 years** for projects falling under the “Production of Syngas leading to Coal Gasification” category in the Non-Regulated Sector linkage framework.

### Investment, Employment, and Import Reduction

The scheme is expected to deliver substantial economic benefits across multiple dimensions:

- Mobilize investments worth **₹2.5–3 lakh crore**
- Generate nearly **50,000 direct and indirect employment opportunities**, particularly in coal-bearing regions
- Reduce India’s substantial reliance on imports of LNG, methanol, ammonia, and urea — imports that accounted for approximately **₹2.77 lakh crore during FY 2025**, according to government estimates

### Technology-Neutral Approach

Importantly, the scheme adopts a **technology-neutral approach** while encouraging the development and deployment of indigenous gasification technologies. This is expected to strengthen India’s domestic technological capabilities and support the development of a more self-reliant coal gasification ecosystem.

## Conclusion

The approval of the coal and lignite gasification scheme marks a **major milestone in India’s evolving energy policy**. By incentivizing the conversion of abundant domestic coal reserves into value-added fuels and chemicals, the scheme seeks to enhance energy security, reduce import dependence, and stimulate industrial growth.

While the initiative highlights the Government’s commitment to maximizing the economic value of domestic coal resources, its success will ultimately depend on efficient implementation, technological innovation, and the ability of project developers to achieve *commercial viability at scale*.

*Last Updated on 17 June, 2026*

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