Rs 37,500 crore coal gasification incentive scheme finds no takers as deadline nears

The government’s ambitious Rs 37,500-crore financial incentive scheme to promote coal gasification has failed to attract any applications so far, according to sources, raising concerns over the commercial viability of its push to substantially expand the use of the technology. With the September 7 deadline approaching, no private or public sector player has submitted an application to set up a project under the programme, sources said. The scheme is intended to support the government’s plan to gasify 75 million tonnes of coal and lignite. A query sent to the coal ministry remained unanswered till the time of filing the story.

Deadline approaches

The coal ministry had issued a Request for Proposal on July 7, 2026, under the Rs 37,500-crore financial incentive scheme for surface coal and lignite gasification projects, setting September 7 as the last date for applications.

The Union Cabinet, chaired by Prime Minister Narendra Modi, had approved the programme as part of efforts to accelerate coal gasification, strengthen energy security and reduce dependence on expensive imports. Gasification converts coal or lignite into synthetic gas, or syngas, which can serve as a feedstock for producing methanol, fertilisers, hydrogen and other chemicals.

The government has argued that greater domestic production of such products could reduce exposure to international price volatility and supply disruptions. India has about 401 billion tonnes of coal reserves and 47 billion tonnes of lignite reserves, while coal accounts for more than 55 per cent of the country’s energy mix.

Import substitution in focus

The economic case for the programme rests partly on reducing India’s substantial import dependence. The country’s import bill for products that could potentially be substituted through coal gasification — including LNG, urea, ammonium nitrate, ammonia, coking coal, methanol and dimethyl ether — stood at approximately Rs 2.77 lakh crore in FY25.

The government sees domestic syngas production as a route to replacing some of these imports and insulating the economy from geopolitical disruptions, including volatility emanating from West Asia. However, the absence of applications under the latest incentive programme could raise questions over whether the financial support on offer is sufficient to overcome the costs and commercial challenges associated with large-scale gasification projects.

The latest initiative builds on the National Coal Gasification Mission launched in 2021 and an earlier Rs 8,500-crore incentive scheme approved in January 2024. Eight projects involving incentives worth Rs 6,233 crore are currently under implementation under the earlier programme.