In order to reduce import dependency for gas, Union Cabinet on Wednesday approved a policy to extract gas from coal. The scheme is expected to deliver gas in next 4-5 years.
“The scheme for promotion of surface coal/lignite gasification projects that has been cleared by the Cabinet will further energy security, boost investment and create job opportunities. It will add strength to our efforts to strengthen the tech and innovation system as well,” Prime Minister Narendra Modi said in a social media post.
Coal gasification refers to the process of converting dry fuel into synthetic gas (syngas), which is used as an alternative fuel and helps reduce carbon emissions. This process supports production of methanol, fertilizers, hydrogen and chemicals, cutting reliance on imports.
Earlier, briefing about the decisions taken by the Cabinet, Union Information & Broadcasting Minister Ashwini Vaishnaw said: “An outlay of ₹37,500 crore has been kept for this scheme, and there will be an investment of around ₹3,000 lakh crore in this, and the projects will be put up for gasifying 75 million tonnes of coal.” Further he said that the country has 401 million tonnes of known coal reserves, which is enough for the next 200 years.
“We all know about the current geopolitical situation. So, we have to take all the decisions to become Atma Nirbhar. In this context, a big decision on coal gasification was taken today,” he said. The scheme marks a major step towards accelerating the country’s coal gasification programme, advancing the national target of gasifying 100 million tonnes of coal by 2030, strengthening energy security, and reducing dependence on imports of key products such as LNG, urea, ammonia and methanol.
“At present, more than 50 per cent of the LNG is currently imported, it will be reduced. The urea which we import will also start manufacturing in India. Ammonia is 100 per cent imported today. With this development, new avenues for ammonia production will open. Methanol is currently 80-90 per cent imported that will also be made in India,” the minister said.
Four instalments
Under the scheme, the financial incentive at a maximum of 20 per cent of the cost of plant and machinery will be provided, the statement said, adding that the selection would be through a transparent and competitive bidding process, with an evaluation framework benchmarking project cost, coal input, and syngas output.
The incentive will be disbursed in four equal instalments and be linked to project milestones. Under the scheme, “financial incentive for any single project (will be) capped at ₹5,000 crore; for any single product (except synthetic natural gas and urea) (will be) capped at ₹9,000 crore; and any single entity group (will be) capped at ₹12,000 crore across all projects.” Due to the scheme, the investment mobilisation is likely to be at ₹2.5-3 lakh crore.
The utilisation of coal and lignite is likely to generate ₹6,300 crore annually from 75 million tonnes of gasification envisaged under the scheme, plus downstream revenue from GST and other levies. The incentive builds on the National Coal Gasification Mission (2021) and an ₹8,500-crore scheme approved in January 2024, under which eight projects worth ₹6,233 crore are under implementation.
Published on May 13, 2026