Cabinet clears Rs 37,500 crore coal gasification incentive scheme

The Union Cabinet on Wednesday approved a Rs 37,500 crore coal gasification incentive scheme to promote surface coal and lignite gasification projects, which is aimed at reducing dependency on imported dry fuel amid growing concerns over energy security and supply disruptions owing to the West Asia crisis.The scheme seeks to accelerate India’s target of gasifying 100 million tonnes of coal by 2030, with the government saying that it will support projects capable of gasifying around 75 million tonnes of coal and lignite and is expected to attract investments between Rs 2.5 lakh crore and Rs 3 lakh crore across nearly 25 projects.

Coal gasification involves converting coal or lignite into synthesis gas or syngas, which can then be used to produce fuels, fertilisers, synthetic natural gas and chemicals domestically.

Official sources said that the scheme would generate around 50,000 direct and indirect jobs, particularly in coal-bearing regions. It also estimated annual revenue generation of around Rs 6,300 crore from coal and lignite utilisation under the scheme, excluding additional downstream revenues from goods and services tax (GST) and other levies.

Under the scheme, financial incentives will be provided at up to 20 per cent of the cost of plant and machinery for eligible projects. However, incentives for a single project will be capped at Rs 5,000 crore, while incentives for any single entity group across projects will be capped at Rs 12,000 crore. The incentive for any single product category, except synthetic natural gas and urea, has been capped at Rs 9,000 crore.

The government said project selection would be carried out through a transparent competitive bidding process based on the benchmarking of project cost, coal input and syngas output. The incentive will be disbursed in four equal instalments linked to project milestones.