The Union Cabinet on Wednesday approved a major ₹37,500 crore incentive scheme aimed at accelerating coal gasification projects across India, marking one of the government’s largest policy pushes toward cleaner utilisation of domestic coal resources and reduced dependence on imported fuel and chemicals.
According to reports, the scheme seeks to promote large-scale coal and lignite gasification projects capable of converting coal into synthetic gas, or “syngas”, which can be used in the production of fuels, fertilisers, petrochemicals and industrial chemicals. Officials believe the move could significantly strengthen India’s long-term energy security amid continuing global supply uncertainties and volatile crude oil markets.
Government sources said the scheme is designed to reduce India’s dependence on imports of critical commodities such as liquefied natural gas (LNG), ammonia, urea, methanol, dimethyl ether and coking coal used in the steel industry. The Cabinet approval comes at a time when geopolitical tensions in West Asia and disruptions in global energy supply chains have intensified concerns over fuel security and import costs.
The newly approved package represents a major expansion over the earlier ₹8,500 crore coal gasification support scheme approved in 2024. Under the revised framework, financial assistance of up to ₹3,000 crore may be provided for a single project, significantly higher than previous limits. The new scheme also replaces the earlier category-based structure with a unified incentive mechanism aimed at encouraging broader participation from both public and private sector companies.
India currently possesses one of the world’s largest coal reserves, estimated at over 400 billion tonnes, with coal continuing to account for more than half of the country’s energy mix. Officials maintain that gasification technology can help utilise these reserves more efficiently by converting coal into cleaner industrial feedstock rather than relying solely on direct combustion for power generation.
The Cabinet decision is also aligned with India’s long-term target of achieving 100 million tonnes of coal gasification capacity by 2030. Several public sector companies, including coal, steel and energy firms, have already announced plans to expand investments in coal-to-chemicals and synthetic fuel technologies over the past year.
Industry experts believe the approval could trigger fresh investment in coal-rich states and create new opportunities in the fertiliser, chemicals and energy sectors. The government has repeatedly projected coal gasification as a strategic component of India’s broader energy transition strategy, balancing industrial growth with efforts to improve energy resilience and reduce import dependence.