Government Approves Rs 37,500 Crore Coal Gasification Initiative Amid Efforts to Reduce Import Dependence on LNG and Urea

Government Set to Approve Rs 37,500 Crore Incentive Scheme for Coal Gasification Projects

The Indian government is likely to soon approve a Rs 37,500 crore incentive scheme aimed at promoting coal gasification projects, in an effort to boost clean energy production and reduce import dependence.

The coal ministry has prepared a Cabinet note on the scheme, which will provide a financial outlay of Rs 37,500 crore. The proposed scheme is designed to accelerate surface coal and lignite gasification projects across the country, promoting self-reliance by reducing import dependence on critical commodities such as LNG, urea, ammonium nitrate, ammonia, coking coal via DRI, methanol, and DME.

Under the scheme, the maximum financial assistance for a single project will be Rs 3,000 crore. This is a unified scheme with no categories, unlike the earlier financial incentive scheme for gasification projects, which provided financial assistance under three categories, including the maximum incentive of Rs 1,000 crore per project for the private sector and Rs 1,350 crore per project for Public Sector Undertakings (PSUs).

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The government's renewed push for coal gasification comes in the wake of recent West Asia tensions, which have exposed the country's vulnerability to disruptions in LNG, LPG, and other hydrocarbon supplies. This has underscored the need to diversify energy feedstock sources and position coal gasification as a strategic lever to convert domestic coal into fuels and chemicals, reduce import dependence, and strengthen energy security.

India has one of the largest coal reserves of 401 billion tonnes, uniquely positioning it to leverage domestic resources for reducing the dependence on imports and building a clean, resilient energy economy. Coal remains the backbone of India's energy sector, accounting for over 55 per cent of the country's energy mix. As the second-largest producer and consumer of coal globally, India's coal consumption is expected to grow significantly as its energy demands continue to rise.

Gasification presents a unique opportunity for India to unlock the full value of its vast domestic reserves through clean and efficient utilisation pathways by converting coal into syngas, enabling the domestic production of syngas or its downstream products such as chemicals, petrochemicals, fertilisers, power, and DRI. The government aims to achieve a national target of 100 million tonnes of coal gasification capacity by 2030.

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