Scheme for Promotion of Surface Coal/Lignite Gasification Projects

The Government of India has approved a major scheme to promote coal and lignite gasification projects in order to achieve the target of 100 million tonnes (MT) of coal gasification by 2030 under the National Coal Gasification Mission, 2021.

The scheme aims to strengthen energy security, reduce import dependence, and promote cleaner utilization of coal resources.

What is Coal Gasification?

Definition

Coal gasification is a thermochemical process in which coal is converted into a combustible gaseous mixture called syngas (synthesis gas).

Composition of Syngas

Syngas mainly contains:

• Carbon Monoxide (CO)

• Hydrogen (H₂)

Uses of Syngas

Syngas is used to manufacture:

• Urea

• Methanol

• Synthetic Natural Gas (SNG)

• Ammonia

• Chemicals and fuels

“Coal gasification converts solid fuel into cleaner and more versatile gaseous energy products.”

Status of Coal and Lignite in India

ResourceEstimated ReservesCoal401 billion tonnesLignite47 billion tonnes

India possesses one of the world’s largest coal reserves, making gasification strategically important.

About the Scheme

Objective

To incentivize domestic industries for large-scale coal and lignite gasification.

Target

• Gasification of approximately 75 million tonnes (MT) of coal and lignite.

This contributes toward the broader target of:

• 100 MT coal gasification by 2030

Financial Features of the Scheme

Financial Outlay

Total Allocation

• ₹37,500 crore

Financial Incentives

Incentive Structure

• Maximum incentive:

  • 20% of cost of Plant and Machinery

Disbursement

Provided in:

• Four installments

• Linked to project milestones

Funding Caps

CategoryMaximum FundingSingle Project₹5,000 croreSingle product-centered projects (excluding SNG & urea)₹9,000 croreSingle entity/group across all projects₹12,000 crore

Policy Support Measures

Coal Linkage Support

Government has extended:

• Coal linkage tenure up to 30 years

under:

• Non-Regulated Sector (NRS) linkage auction framework

Purpose

• Provide long-term investment certainty

• Encourage private sector participation

“Long-term policy certainty is essential for capital-intensive energy projects.”

Significance of the Scheme

1. Energy Security

India imports large quantities of:

• Ammonia (~100%)

• Methanol (80–90%)

• LNG (>50%)

• Urea (~20%)

Benefits

• Reduces import dependence

• Protects against global price volatility

2. Environmental Benefits

Coal gasification offers:

• Better emission control

• Lower pollutant release compared to direct coal burning

Reduced Pollutants

• Sulfur dioxide (SO₂)

• Nitrogen oxides (NOₓ)

• Particulate emissions

“Cleaner utilization of coal is important for balancing energy needs with environmental concerns.”

3. Economic Impact

Expected Outcomes

• Major industrial investments

• Estimated annual revenue generation:

  • ₹6,300 crore

Supports National Initiatives

• Atmanirbhar Bharat

• Make in India

4. Employment Generation

Job Creation

• Around 50,000 direct and indirect jobs expected

Strategic Importance

1. Efficient Use of Domestic Resources

• Converts abundant coal reserves into high-value products

2. Industrial Growth

• Promotes petrochemicals and fertilizer industries

3. Import Substitution

• Reduces external dependence on energy and chemicals

4. Technological Advancement

• Encourages adoption of advanced clean coal technologies

Challenges

1. High Capital Cost

• Gasification plants require significant investment

2. Carbon Emissions

• Coal remains a fossil fuel despite cleaner processing

3. Technology Dependence

• Need for advanced gasification technology

4. Water Requirement

• Gasification processes consume large quantities of water

5. Environmental Concerns

• Disposal of by-products and carbon management

Way Forward

1. Promote Clean Coal Technologies

• Carbon capture and storage (CCS)

• Advanced emission control systems

2. Encourage Private Investment

• Stable policies and incentives

3. Strengthen Research & Development

• Indigenous gasification technology

4. Integrate Renewable Energy

• Hybrid industrial energy systems

5. Environmental Safeguards

• Strict pollution monitoring and compliance

“India’s energy transition requires balancing sustainability, affordability, and energy security.”

Conclusion

The Scheme for Promotion of Surface Coal/Lignite Gasification Projects is a significant initiative aimed at utilizing India’s vast coal reserves more efficiently while reducing dependence on imported fuels and chemicals. Through financial incentives, long-term policy support, and promotion of cleaner coal technologies, the scheme strengthens energy security, industrial growth, and economic self-reliance. However, environmental safeguards and technological innovation will remain critical for ensuring sustainable implementation.