The Union Cabinet gave the Coal gasification scheme worth Rs 37,500 a green light, making it one of the most significant decisions for India’s energy policy in recent years. This Cabinet, chaired by PM Narendra Modi, approved the plan for this scheme on May 13. Its sole aim will be reducing India’s heavy and vast dependence on imported fuels and chemicals. It will convert our vast domestic coal reserves into synthetic but usable gas. This move comes at a time when the ongoing conflict between the United States and Iran, rattled global energy markets. This conflict has made self-reliance on energy a more urgent demand than ever before.
1. What is Coal Gasification?
Coal gasification is a thermo-chemical process that converts coal or lignite into synthesis gas, commonly known as syngas. Syngas mainly contains hydrogen and carbon monoxide and can be used to manufacture fertilisers, methanol, chemicals, power and synthetic natural gas.
In simpler words, it’s like turning a solid impure coal into a much cleaner and more versatile gas that can be used by our factories and various industries. All this would be done in India without depending or using any imported and expensive fuels from abroad.
2. What is the Coal Gasification Scheme about?
The full name of this initiative is “Scheme for Promotion of New Surface Coal and Lignite Gasification Projects.” The scheme aims to support gasification of about 75 million tonnes of coal and lignite through new projects, targeting investment mobilisation of Rs 2.5 to 3 lakh crore and the creation of about 50,000 jobs. The national target for coal gasification is 100 million tonnes by 2030.
3. Why Did the Government Approve This Now?
The timing is significant and deliberate as well. This move is solely aimed to strengthen India’s energy security and reduce import dependence on LNG, urea and methanol due to ongoing volatile geopolitical conflict between the United States and Iran.
The import numbers tell a stark story. India imports over 50 per cent of its liquefied natural gas, about 20 per cent of its urea, nearly 100 per cent of its ammonia and 80 to 90 per cent of its methanol. These are not minor purchases. India’s import bill for products such as LNG, urea, ammonium nitrate, ammonia, coking coal, methanol and DME stood at nearly Rs 2.77 lakh crore during the financial year 2024 to 2025. Every time global prices spike or a conflict disrupts supply routes, India pays a heavy price.
Union Minister Ashwini Vaishnaw, who briefed the media after the Cabinet meeting, put it plainly. “At present, more than 50 per cent of the LNG is currently imported, it will be reduced. The urea, which we import, will also start manufacturing in India. Ammonia is 100 per cent imported today. With this development, new avenues for ammonia production will open. Methanol is currently 80 to 90 per cent imported and will also be made in India,” the minister said.
4. How Will the Scheme Actually Work?
The government is not simply handing out money. The approach is structured and competitive. Financial incentive at a maximum of 20 per cent of the cost of plant and machinery will be provided, and the selection will be through a transparent and competitive bidding process with an evaluation framework benchmarking project cost, coal input and syngas output.
The incentive caps are set at Rs 5,000 crore per project, Rs 9,000 crore per product category and Rs 12,000 crore per entity or group. The disbursals are milestone-linked, meaning companies receive funds only as they hit specific targets.
In a significant long-term reform, the government has extended coal linkage tenure to 30 years under the Non-Regulated Sector linkage auction framework, which applies to long-term coal supply arrangements for non-regulated industries. This will provide a certainty to investors that they will need a commitment of large sums of capital over the upcoming years.
5. Who will benefit from this coal gasification? And how many jobs will it create?
The benefits emerging from this scheme are multifaceted. Around 25 major projects are expected to emerge under the initiative, particularly in coal-bearing states and industrial regions. Government estimates suggest that nearly 50,000 direct and indirect jobs could be created through project construction, operations, logistics, downstream manufacturing and associated services.
On the revenue side, the utilisation of coal and lignite is likely to generate Rs 6,300 crore annually from 75 million tonnes of gasification envisaged under the scheme, plus downstream revenue from GST and other levies.
6. Does India Have the Coal Reserves to Back This Up?
Absolutely. If we look at the current situation in India then, we possess nearly 401 billion tonnes of coal reserves and around 47 billion tonnes of lignite reserves. Coal continues to account for more than 55 per cent of the country’s total energy mix, making it a critical pillar of India’s energy infrastructure. The country is sitting on an enormous natural resource. The challenge has always been using it more smartly.
Experts have welcomed the scheme but also urged caution. Experts caution that coal gasification should complement, not displace, India’s clean-energy transition. The approval by the government for this scheme, positions coal gasification as a bridge technology rather than a permanent solution for immense energy supply. For now, with global energy markets under pressure and import bills mounting, it is a bridge India urgently needs to build.