Coal Gasification Scheme 2026: Cabinet Clears ₹37,500 Crore Push to Cut Gas Imports, 50,000 Jobs Expected
Union Cabinet on 13 May 2026 approved a ₹37,500 crore scheme to promote surface coal and lignite gasification — 20% capex incentive (capped at ₹5,000 cr/project), 25 projects, target 100 MT coal gasified by 2030, ~50,000 jobs. Eligibility, incentive limits and bidding process explained.
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Coal Gasification Scheme 2026: Cabinet Clears ₹37,500 Crore Push to Cut Gas Imports, 50,000 Jobs Expected
News brief. The Union Cabinet chaired by Prime Minister Narendra Modi on 13 May 2026 approved the Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of ₹37,500 crore. The scheme offers up to 20% capex incentive (capped at ₹5,000 crore per project, ₹9,000 crore per product category and ₹12,000 crore per entity group) for 25 projects across coal-bearing regions. It is the single biggest push so far towards India’s stated goal of gasifying 100 million tonnes (MT) of coal by 2030, cutting dependence on imported natural gas and chemical feedstocks. The Ministry of Coal expects roughly 50,000 direct and indirect jobs.
Coal gasification converts solid coal or lignite into syngas — a mixture of carbon monoxide and hydrogen — which can then be processed into synthetic natural gas (SNG), methanol, ammonia, urea, hydrogen, and a range of petrochemical intermediates. Globally, China has led commercial deployment; in India, the path to scale has so far been blocked by high capital cost and uncompetitive economics against imported LNG. The 13 May 2026 Cabinet decision is designed to close that economics gap with upfront capex support — not a per-unit production subsidy.
🎯 Why this matters
- India imports nearly 50% of its natural gas and ~85% of crude oil — both are dollar-denominated, balance-of-payments-sensitive bills.
- Coal is abundant domestically (5th largest reserves globally) but underused outside power generation.
- The scheme operates on top of the commercial coal mining regime — winners can stack benefits from coal block auctions and gasification incentives.
- Selection is via transparent competitive bidding evaluated on project cost, coal input efficiency and syngas output.
📊 Scheme at a glance
| Parameter | Detail |
|---|---|
| Scheme name | Promotion of Surface Coal/Lignite Gasification Projects |
| Approving authority | Union Cabinet |
| Approval date | 13 May 2026 |
| Total outlay | ₹37,500 crore |
| Implementing ministry | Ministry of Coal |
| Maximum capex incentive | 20% of plant & machinery cost |
| Disbursement | 4 equal instalments, linked to project milestones |
| Per-project cap | ₹5,000 crore |
| Per-product cap (except SNG and urea) | ₹9,000 crore |
| Per-entity-group cap | ₹12,000 crore |
| Number of projects targeted | 25 |
| Selection mode | Transparent competitive bidding |
| End goal | 100 MT coal gasification by 2030 |
| Expected employment | ~50,000 direct + indirect jobs |
💡 What can be made from gasified coal?
The scheme prioritises a basket of import-substitution products. Per-product caps are deliberately structured to push investment toward urea and SNG:
| Product | Why it matters | Import status today |
|---|---|---|
| Synthetic Natural Gas (SNG) | Pipeline-quality substitute for imported LNG | India imports ~50% of natural gas |
| Urea / Ammonia | Fertiliser — single biggest subsidy bill item | India imports ~25% of urea demand |
| Methanol | Fuel blend / petrochemical feedstock; Methanol Economy mission | Net importer |
| Hydrogen | Feedstock for refineries and steel; foundational to the Green Hydrogen Mission | Mostly produced domestically from natural gas |
| Di-methyl ether (DME) / olefins | LPG and petrochemical alternatives | Growing import bill |
🔔 Note for investors: Per-product caps for SNG and urea have been waived (only the per-project and per-entity-group caps apply), reflecting these two products’ strategic priority.
🛠️ Who can apply and how
The scheme is open to:
- Public Sector Undertakings (PSUs) — Coal India, NLC India, GAIL, IOCL etc., individually or in joint ventures.
- Private sector companies with proven engineering and financial capacity.
- Consortia / Special Purpose Vehicles (SPVs) combining a coal/lignite owner with a downstream chemicals partner.
Process (as outlined in the Cabinet note):
- Notification of detailed scheme guidelines by the Ministry of Coal in the coming weeks (expected within 60 days of Cabinet approval).
- Competitive bid invitation — projects will be ranked on a transparent framework using cost-of-project, coal input efficiency (tonne of coal per tonne of product), and syngas output yield.
- Selection & Letter of Award for up to 25 projects, with each project required to commit to a fixed implementation timeline.
- Disbursement in four equal instalments tied to physical and financial milestones — typically order placement, equipment delivery, mechanical completion, and commercial operation.
Incentive under this scheme is stackable with: commercial coal mining auction premiums, the Green Hydrogen Mission incentives (where applicable), and state-level capital subsidies under industrial promotion policies.
