₹37,500 crore scheme for surface coal/lignite gasification approved
On 13 May 2026 the Cabinet approved a ₹37,500 crore scheme for surface coal and lignite gasification. It pays up to 20% of plant and machinery cost through competitive bidding and targets gasifying about 75 million tonnes of coal. The aim is to cut imports of LNG, urea, ammonia and methanol. Coal linkage tenure goes up to 30 years.
- Outlay
- ₹37,500 crore
- Incentive
- up to 20% of plant and machinery cost; four equal milestone instalments
- Caps
- ₹5,000 crore per project; ₹9,000 crore per product (except SNG, urea); ₹12,000 crore per group
- Target
- ~75 MT coal/lignite under the scheme; national goal 100 MT by 2030
- Linkage
- tenure up to 30 years for syngas sub-sector in NRS auctions
- Expected
- ₹2.5 to 3.0 lakh crore investment; ~50,000 jobs; 25 projects
The surface coal and lignite gasification scheme: what happened?
India has huge coal reserves but imports gas, ammonia and methanol. Gasification turns coal into syngas, which can make those products at home. This scheme pays part of the plant cost to get projects built.
- Import shares cited: LNG over 50%, urea about 20%, ammonia about 100%, methanol about 80 to 90%.
- Import bill for substitutable products was about ₹2.77 lakh crore in FY2025.
- The scheme is technology-agnostic; indigenous technology is encouraged.
- Expected State revenue: ₹6,300 crore a year from 75 MT gasification.
What is coal gasification?
- It converts coal or lignite into synthesis gas (syngas). Syngas is a feedstock for fuels and chemicals such as urea, ammonia, methanol and synthetic natural gas.
What came before this scheme?
- National Coal Gasification Mission (2021).
- A ₹8,500 crore scheme approved in January 2024, under which 8 projects worth ₹6,233 crore are being implemented.
How does the incentive structure work?
| Feature | Rule |
|---|---|
| Selection | transparent competitive bidding on project cost, coal input, syngas output |
| Support | max 20% of plant and machinery cost |
| Payment | four equal instalments linked to milestones |
| Per project cap | ₹5,000 crore |
| Per product cap | ₹9,000 crore (not for SNG and urea) |
| Per entity group cap | ₹12,000 crore |
Why does the surface coal and lignite gasification scheme matter?
| Angle | What to note |
|---|---|
| Energy security | Domestic coal replaces imported gas and chemicals. |
| Agriculture | Urea and ammonia from domestic syngas. |
| Industry | Builds an indigenous gasification ecosystem; less reliance on foreign EPC firms. |
| Regional | Projects in coal-bearing regions. |
What are the challenges in the surface coal and lignite gasification scheme?
- Gasification still burns through coal, so emissions must be weighed against climate goals.
- Projects need long-term buyers for syngas products, not just coal supply.
- Projects take years; incentives pay only on milestones.
What should be done next on the surface coal and lignite gasification scheme?
- Run transparent bidding quickly and track milestone delivery.
- Pair projects with emission controls and carbon capture pilots.
What can Prelims ask on the surface coal and lignite gasification scheme?
- Scheme outlay ₹37,500 crore; incentive up to 20% of plant and machinery.
- National target: 100 MT coal gasification by 2030.
- Coal reserves ~401 billion tonnes; lignite ~47 billion tonnes; coal over 55% of energy mix.
How to write about the surface coal and lignite gasification scheme in Mains
Practice question (15 marks, 250 words): Can coal gasification reconcile India’s energy security with its climate commitments? Discuss with reference to the 2026 scheme.
- Intro: ₹37,500 crore scheme.
- Import substitution case.
- Design: bidding, caps, milestones.
- Climate and technology concerns.
- Way forward: carbon capture, indigenous tech.
How to use this in Mains
- As per PIB (2026-05-13): cabinet approved a ₹37,500 crore Scheme for Promotion of Surface Coal/Lignite Gasification Projects toward gasifying 100 MT coal by 2030.
- It aims to use India's own coal more cleanly.
Quotable data pointCabinet approved a ₹37,500 crore Scheme for Promotion of Surface Coal/Lignite Gasification Projects toward gasifying 100 MT coal by 2030.
PIB: Cabinet: coal gasification scheme, 13 May 2026
Exam angle
Prelims: coal gasification target.
Practice MCQs
Original practice questions (not PYQs).
Under the 2026 coal gasification scheme, the maximum incentive is
Answer (b) & explanation
PIB (Cabinet), 13 May 2026.
India's target for coal gasification by 2030 is
Answer (d) & explanation
PIB (Cabinet), 13 May 2026: 100 MT by 2030.
Questions students ask about this
What is the outlay of the coal gasification scheme?
₹37,500 crore.
How much support can a project get?
Up to 20% of plant and machinery cost, capped at ₹5,000 crore per project.
What is India's coal gasification target?
100 million tonnes of coal by 2030.
What linkage reform came with the scheme?
Coal linkage tenure up to 30 years for the syngas sub-sector in NRS auctions.
Keep studying
Go deeper
Official source: PIB: Cabinet: coal gasification scheme, 13 May 2026
facts from cited sources only; faculty review pending