NEWS: The Union Cabinet approved a major scheme for promoting Surface Coal/Lignite Gasification Projects with a massive financial outlay of ₹37,500 crore.

About The Scheme for Promotion of Surface Coal/Lignite Gasification Projects:

·         This is a central incentive scheme designed to accelerate the adoption of surface coal gasification technology in India.

·         It provides financial support to entities to convert coal or lignite into Synthesis Gas (Syngas), which is then used to produce high-value downstream chemicals and fuels.

·         Ministry: Ministry of Coal, Government of India.

Aim

·         The primary objective is to diversify the use of India’s vast coal reserves, achieve the national target of 100 Million Tonnes (MT) of coal gasification by 2030

·         To strengthen energy security by substituting expensive imports of urea, ammonia, methanol, and natural gas.

Key Features of the Scheme

·         Financial Outlay: A total budget of ₹37,500 crore to incentivize projects targeting the gasification of ~75 MT of coal/lignite.

Incentive Structure:

·         Financial assistance is capped at 20% of the cost of Plant and Machinery.

·         Project Cap: Maximum ₹5,000 crore per project.

·         Product Cap: Maximum ₹9,000 crore for any single product (except Synthetic Natural Gas and Urea).

·         Maximum ₹12,000 crore for a single group across all projects

·         Selection through a transparent, competitive bidding process benchmarking project cost and output efficiency.

·         Incentives are paid in four equal installments based on the successful completion of specific project milestones.

·         The government has extended coal linkage tenure up to 30 years for gasification projects, providing stability for long-term investments.

·         The scheme allows various technologies, it actively encourages the adoption of indigenous gasification technologies.

·         Additive Incentivesà This support can be clubbed with existing incentives under commercial coal mining or other state/central schemes.

Significance

·         India’s import bill for substitutable products like LNG and urea stood at ₹2.77 lakh crore in FY2025.

·         This scheme advances Atmanirbhar Bharat by producing these locally from domestic coal.

·         The scheme is expected to trigger a massive investment of ₹2.5 to ₹3.0 lakh crore in the coal-bearing regions.