The newly approved scheme will support projects using nearly 75 million tonnes of coal annually, significantly advancing India’s existing 100 MT coal gasification target.
NEW DELHI (India CSR): The Government of India has approved a new Rs. 37,500 crore financial support scheme to accelerate surface coal and lignite gasification projects, marking a major expansion of the country’s clean coal programme. The scheme, approved on May 13, 2026, is expected to support projects consuming approximately 75 million tonnes per annum (MTPA) of coal. It will complement the earlier Rs. 8,500 crore incentive programme and substantially narrow the gap towards India’s target of achieving 100 million tonnes of coal gasification capacity by 2030. The latest development was disclosed by Union Minister of State for Coal and Mines Satish Chandra Dubey in a written reply in the Rajya Sabha on July 27, 2026.
India is the second largest producer of coal and has the 5th largest coal reserves globally. During the year 2025-26, domestic coal production reached to a level of 1041 million tonne. CIL was the major contributor with a production of about 768 million tonne which is expected to increase to a level of 1000 million tonne, at the earliest, by 2028-29. Despite the significant increase in domestic production during the last five years, the country is consistently importing 200+ MT coal annually to meet the coal demand. Coal demand is projected to peak in the decade 2030-2040 with National coal production reaching to a level of 1.50 billion tonne by 2035.
Coal will remain as the major contributor towards the power generation in India at least for the next decade or two. India’s dependence on coal remains significant as it contributes 55% to the national energy mix and fuelling over 74% of total power generation. Though investments have been increasing for non-renewable sector, the contributory requirements in absolute terms still remain higher for coal.
Financial Support Expanded
The new Rs. 37,500 crore programme represents a significant increase in the scale of government support available for coal gasification. Eligible developers will be able to receive financial incentives of up to 20% of the cost of plant and machinery. The assistance is expected to improve project viability, particularly as commercial coal gasification facilities require substantial investment, specialised technology and long development periods. Combined with the Rs. 8,500 crore scheme approved in January 2024, the government has now announced Rs. 46,000 crore in financial outlays for promoting coal and lignite gasification. Under the earlier scheme, eligible projects can receive financial assistance equivalent to 15% of capital expenditure.
Capacity Reaches 22.6 MTPA
Another important update is that around 22.6 MTPA of coal gasification capacity is either operational or currently under implementation. Jindal Steel Limited operates approximately eight MTPA of capacity, making it the largest operational component of the programme. Talcher Fertilisers Limited is developing another 2.6 MTPA, while eight projects approved under the Rs. 8,500 crore incentive scheme are expected to contribute approximately 12 MTPA. The current operational and under-development capacity accounts for nearly 23% of the national target.
The utilisation of an additional 75 MTPA of coal under the new scheme could bring India considerably closer to the 2030 objective.
Five Projects Break Ground
The government also reported progress on the eight projects approved under the Rs. 8,500 crore scheme. One Jindal Steel Limited project has achieved financial closure and is under construction. Overall, five of the eight approved projects have completed ground-breaking and are progressing through clearances or different stages of implementation. Financial closure is a critical milestone as it indicates that funding arrangements for a project have been finalised, allowing construction and equipment procurement to proceed. The progress reflects the transition of India’s coal gasification strategy from policy planning to physical project implementation.
Coal Supply Reforms
The government has introduced additional coal-linkage measures to provide long-term fuel security to gasification projects. A separate sub-sector—“production of syngas leading to coal gasification”—has been created under the coal linkage auction mechanism. Coal is being offered to eligible projects at a floor price equivalent to that applicable to the power sector. The tenure of coal linkages has also been extended to 30 years, providing greater supply certainty for investors and lenders. Gasification projects owning auctioned coal mines will remain eligible to obtain additional coal linkages beyond the allocated capacity of their mines.
Policy Concessions
Several policy concessions have been introduced to reduce the cost of developing coal gasification projects. A 50% rebate in revenue share is available for coal used in gasification. The government has also issued a framework and operational guidelines for underground coal gasification, along with exemptions for pilot projects. For coal blocks auctioned specifically for underground coal gasification, the floor price has been reduced from 4% to 2%, compared with conventional underground coal mining. Other measures include a waiver of upfront payment and a 50% rebate on the Performance Bank Guarantee.
Import Savings Projected
The most significant projected economic impact is the potential reduction in India’s import bill. Once the projects supported under the Rs. 8,500 crore and Rs. 37,500 crore schemes, along with Talcher Fertilisers Limited, become operational, import substitution benefits are expected to reach approximately Rs. 1.5 lakh crore annually. Coal gasification converts coal into synthesis gas, or syngas, which can be used to manufacture synthetic natural gas, fertilisers, chemicals, methanol, hydrogen and other industrial products. Domestic production of these commodities could reduce India’s dependence on imported natural gas, fertiliser feedstock and chemicals while promoting value-added use of indigenous coal.
Clean Coal Cooperation
India is also expanding international cooperation in clean coal technologies. During its BRICS Chairmanship, the Ministry of Coal organised a special BRICS event on June 24, 2026, focusing on coal gasification. The event facilitated the exchange of technical knowledge and implementation experience among BRICS countries. The latest Rs. 37,500 crore scheme, project-level progress and enhanced policy concessions together signal a stronger government push to translate India’s coal gasification target into commercial capacity, industrial production and measurable import savings.
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