- Why in news
- On 8 September 2026 the Ministry of Coal said Round 1 of the ₹37,500 crore coal/lignite gasification scheme closed with seven applications. Round 2 opens the same day.
- What it is
- The Scheme for Promotion of Surface Coal/Lignite Gasification Projects is a Ministry of Coal scheme that backs conversion of domestic coal and lignite into syngas, methanol, ammonia, urea and hydrogen. It builds on the National Coal Gasification Mission and the earlier ₹8,500 crore incentive scheme. Projects are picked through rounds of applications under a Request for Proposal.
- Outlay and approval
- The Union Cabinet approved the scheme on 13 May 2026 with a total outlay of ₹37,500 crore.
- Capacity target
- The national goal is 100 million tonnes of coal gasification capacity by 2030, of which 75 million tonnes is to come under this scheme.
- Import substitution
- LNG, urea, ammonia and methanol imports were about ₹2.77 lakh crore in FY 2024-25. The scheme aims to cut this dependence.
- Earlier scheme
- The ₹8,500 crore scheme approved in January 2024 has eight projects under implementation.
- Implementing ministry
- The scheme is run by the Ministry of Coal.
- Approval and outlay
- The Union Cabinet approved the scheme on 13 May 2026 with an outlay of ₹37,500 crore.
- Products targeted
- The scheme promotes converting coal and lignite into syngas, methanol, ammonia and urea to reduce dependence on imported feedstock.
- Rolling rounds
- Rounds run on a rolling basis. The next round opens the day after one closes and stays open for two months.
- Expected outcomes
- The scheme is expected to catalyse about ₹2.5-3 lakh crore of investment across nearly 25 projects and about 50,000 jobs.
- National target
- The scheme supports the goal of 100 million tonnes of coal gasification capacity by 2030.
- Applicants so far
- Talcher Fertilisers Limited and NTPC Limited have submitted applications through the online portal.
- Incentive rate
- Maximum incentive is 20% of the cost of plant and machinery, paid in four equal milestone-linked instalments.
- Caps
- Rs.5,000 crore per project, Rs.9,000 crore per product (except SNG and urea), Rs.12,000 crore per entity group.
- Selection and technology
- Projects are chosen by competitive bidding. The scheme is technology-agnostic but encourages indigenous technology.
- Linkage reform
- Coal linkage tenure goes up to 30 years under the syngas sub-sector of the Non-Regulated Sector linkage auction.
Don’t confuse with ₹37,500 crore scheme vs ₹8,500 crore scheme: The ₹37,500 crore scheme (approved May 2026) is the new, larger one. The ₹8,500 crore Financial Incentive Scheme (January 2024) is the earlier one, with eight projects under implementation.
Don’t confuse with Surface coal gasification vs Underground coal gasification: This scheme covers surface gasification of coal and lignite. Underground gasification converts coal in the seam without mining, and is a different technology.
Don’t confuse with Surface vs underground gasification: This scheme covers surface gasification in plants. Underground coal gasification converts coal in situ in the seam and is a separate effort.
Don’t confuse with New scheme vs 2024 scheme: The 2024 scheme had Rs.8,500 crore; the new one has Rs.37,500 crore and targets about 75 MT.
Schemes: 52 Prelims questions since 2013, 10 in Prelims 2026 alone. They test features, the period and who funds it. In Mains, 33 news-triggered questions, mostly GS3.
Why it matters
- Gasification turns domestic coal into syngas, urea, methanol and ammonia, which can reduce import dependence and support energy security.
- Investment is estimated at ₹2.5-3 lakh crore, with jobs across the value chain.
- Cuts import dependence for feedstock such as methanol, ammonia and urea, helping energy and economic security.
- Adds value to domestic coal and lignite and supports investment and jobs.
- Cuts import dependence on LNG, urea, ammonia and methanol; the import bill of key substitutable products was about Rs.2.77 lakh crore in FY2025.
- Mobilises an expected Rs.2.5-3.0 lakh crore investment and about 50,000 jobs in coal-bearing regions.
- Builds indigenous technology capability and supports Atmanirbhar Bharat.
Problems
- Projects are capital-intensive and need long preparation: feasibility, technology, environmental and financial planning.
- Early reports of 'no takers' show doubts about commercial viability; only seven applications came in Round 1.
- Projects are large and complex, needing long preparation: feasibility reports, technology choice and feedstock tie-ups.
- Project economics and high capital needs may deter early applicants.
- Gasification is capital-intensive and technology-heavy, and high-ash Indian coal complicates it.
- Coal use conflicts with climate commitments and net-zero goals; gasification has high emissions and water needs unless paired with carbon capture.
- Product cost may not compete with imports without continued subsidy.
Way forward
- Evaluate applications transparently under the RFP and move selected projects to commissioning on time.
- Keep rounds open at two-month intervals to draw more bidders and technology partners.
- Use rolling rounds and outreach to bring in more developers and technology providers.
- Assess participation after the full rounds close, and back projects with finance and feedstock linkages.
- Pair gasification with carbon capture and use, and track emissions and water use.
- Invest in R&D and pilots for indigenous technology suited to high-ash coal.
- Ensure assured coal supply, offtake and pricing certainty for downstream products.
Put in your answer
Import bill: Imports of LNG, urea, ammonia and methanol were about ₹2.77 lakh crore in FY 2024-25. Use this to argue the case for gasification.
2030 target: The target is 100 million tonnes of gasification capacity by 2030, with 75 million tonnes under the scheme.
Scheme outlay: ₹37,500 crore scheme to promote coal and lignite gasification, approved on 13 May 2026.
Import dependence: Ammonia is about 100% imported, methanol 80-90%, and LNG over 50%.
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UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statements
Ours, not from a UPSC paper
Consider the following statements:
- 1.The Scheme for Promotion of Surface Coal/Lignite Gasification Projects was approved by the Union Cabinet with an outlay of ₹37,500 crore.
- 2.Under the scheme, each application round remains open for two months, and the next round opens on the day after one round closes.
- 3.The scheme is expected to catalyse investment across nearly 50 projects.
Which of the statements given above is/are correct?
True or false?
1 of 13
Statements the way Prelims prints them. Say first, then see the fact.
1.The scheme was approved by the Union Cabinet with a total outlay of ₹37,500 crore.
True. The Cabinet approved it on 13 May 2026 with an outlay of ₹37,500 crore.
2.The scheme is implemented by the Ministry of New and Renewable Energy.
False. It is run by the Ministry of Coal.
3.The scheme promotes conversion of coal and lignite into products such as methanol, ammonia and urea.
True. Syngas, methanol, ammonia and urea are the targeted products.
4.Under the scheme, application rounds are held once a year, with a fixed single window.
False. Rounds are rolling; the next opens the day after one closes and stays open for two months.
5.Each application round remains open for two months.
True. The subsequent round stays open for two months.
6.The scheme is linked to the target of 100 million tonnes of coal gasification capacity by 2030.
True. The target is 100 million tonnes by 2030.
7.The scheme provides a financial incentive of up to 20% of the cost of plant and machinery.
True. Maximum incentive is 20% of plant and machinery cost.
8.The incentive is paid as a single upfront grant at project approval.
False. It is paid in four equal instalments linked to project milestones.
9.Incentive for any single project under the scheme is capped at Rs.5,000 crore.
True. Single project cap is Rs.5,000 crore.
10.The scheme mandates the use of indigenous gasification technology only.
False. It is technology-agnostic; indigenous technology is only encouraged.
11.Incentives under the scheme are in addition to incentives under the commercial coal mining regime.
True. The incentive is additional and does not restrict other incentives.
12.Projects under the scheme are selected through transparent competitive bidding.
True. Selection is by competitive bidding benchmarking project cost, coal input and syngas output.
13.The National Coal Gasification Mission aims at 100 MT of coal gasification by 2030.
True. The national target is 100 MT by 2030.
Written by us from the release, not by UPSC; checked by a second model.
Mains practice
10 marks · 150 words
The Union Cabinet has approved a Rs.37,500 crore scheme to promote surface coal and lignite gasification and has extended coal linkage tenure for syngas projects to up to 30 years. Discuss the significance of coal gasification for India's energy security and import substitution, and examine the challenges in scaling it up.
Worth revising until Prelims 2028: most news questions come within two years of the event.