Coal Gasification Scheme: Overview

The Coal Gasification Scheme for promoting surface coal/lignite gasification projects has struggled to attract sufficient private and public sector participation, raising concerns about the commercial viability of large-scale coal gasification projects.

About Coal Gasification

  • Coal gasification converts coal or lignite into synthetic gas (syngas), mainly containing carbon monoxide and hydrogen.
  • Syngas can be used to produce methanol, hydrogen, ammonia, fertilisers and other chemicals.

Objectives & Targets

  • Total allocation: Rs 37,500 crore to incentivize syngas and downstream product production.
  • Target: Gasification of 75 million tonnes (MT) of coal/lignite by 2030, contributing to the 100 MT target for 2030.
  • Builds on the National Coal Gasification Mission (2021) and the Rs 8,500 crore scheme approved in January 2024 (8 projects worth Rs 6,233 crore under implementation).

Incentive Structure

  • Financial support up to 20% of the cost of Plant and Machinery, disbursed in 4 instalments linked to project milestones.
  • Caps:
  • Single project: Rs 5,000 crore
  • Single product (except Synthetic Natural Gas and Urea): Rs 9,000 crore
  • Single entity group (all projects): Rs 12,000 crore

Technology Neutrality

  • The scheme is technology-agnostic but encourages indigenous technologies to reduce reliance on foreign EPC (Engineering, Procurement, Construction) contractors.

Strategic Importance

  • Utilises India's large domestic coal reserves.
  • Reduces import dependence on LNG, urea, ammonia and methanol.
  • Improves energy security amid global supply disruptions.

Resource Advantage

  • India has approximately 401 billion tonnes of coal reserves and 47 billion tonnes of lignite reserves.

Concerns

  • Though cleaner than direct coal combustion, gasification still involves carbon emissions and resource consumption.
  • Adoption of Carbon Capture, Utilisation and Storage (CCUS) is important to reduce environmental impact.