Cabinet approves ₹37,500 cr. package to boost coal gasification

ECONOMY – ENERGY

14 MAY 2026

• Providing a fillip to India’s pursuit of coal gasification, the Union Cabinet approved a ₹37,500-crore package to boost the sustainable alternate mining method.
• The package seeking to promote surface coal gasification entails conversion of coal into syngas or synthetic gas, which could also be further used to produce downstream products like urea – about one-fifth of whose requirement is met through imports.
• “India’s import bill for key substitutable products LNG, urea, ammonium nitrate, ammonia, coking coal, methanol, DME and others stood at approximately ₹2.77 lakh crore in FY2025, a vulnerability further exposed by the ongoing geopolitical situation in West Asia,” according to a Cabinet announcement.
• With the scheme, India is targeting gasification of approximately 75 million tonnes of coal and lignite.
• This would contribute to the 100 MT target set for 2030.
• Further seeking to provide long-term certainty for investment in this sector, the government also extended the coal linkage tenure up to 30 years within an accompanying component of the scheme entailing production of syngas leading to coal gasification.
• More importantly though, the scheme would accord a financial incentive of up to one-fifth of the cost of plant and machinery.
• In terms of project size, the scheme caps a financial incentive of ₹5,000 crore for a single project, and for any single product-centred project, except that for SNG and urea, it extends up to ₹9,000 crore.
• A single entity would be able to avail a maximum of ₹12,000 crore across all project categorisations.