India’s coal gasification push: Cabinet likely to clear ₹37,000 cr incentive scheme

India’s Union Cabinet is likely to clear a fresh round of financial incentives to boost coal gasification projects over the next two to three weeks, with an estimated outlay of ₹35,000–37,000 crore, a top government official told Business Today. The proposed scheme, likely to be titled the V-KALP scheme, is expected to receive final approval in upcoming Cabinet meetings over the next fortnight, according to sources familiar with the matter.

The scheme, proposed by the Ministry of Coal, represents a significant scale-up from the ₹8,500 crore incentive programme approved in January 2024, which laid the foundation for coal gasification in India. The earlier scheme supported seven projects across three categories: Category I, reserved for public sector undertakings (PSUs), with an allocation of ₹4,050 crore; Category II, open to both private players and PSUs, with ₹3,850 crore; and Category III, focused on demonstration projects, with ₹600 crore.

The renewed push reflects the government’s broader strategy to enhance energy security and reduce reliance on imported fuels. Coal gasification technology converts solid coal into syngas (synthetic gas), which can be used as a key feedstock across multiple sectors. In agriculture, it supports domestic production of ammonia and urea, strengthening fertilizer security. In the energy segment, it enables the production of alternative fuels such as methanol, ethanol, and synthetic diesel, helping reduce crude oil imports. Additionally, it opens pathways for producing hydrogen and synthetic natural gas (SNG) with a relatively lower environmental footprint compared to conventional coal combustion.

Despite the aggressive expansion plan, the sector remains in a critical early stage of execution. Under the 2024 framework, approved projects were given a seven-year window for commissioning, with a final deadline extending to 2030–31. While entities such as Bharat Coal Gasification and Chemicals Ltd (a joint venture between Coal India Ltd and BHEL) have been formally incorporated, the transition from project approval to on-ground execution remains complex.

One of the primary challenges lies in the technical characteristics of Indian coal, which typically contains 30–45% ash. This necessitates customised gasification technologies, often requiring adaptation of imported machinery to suit domestic conditions. Combined with long gestation periods and high capital intensity, these factors could impact project timelines.

Even though the 2030 target provides a multi-year runway, achieving the government’s ambition of 100 million tonnes of coal gasification will require faster execution and timely commissioning of projects. The success of the expanded incentive scheme will depend not only on financial support but also on technological readiness, private sector participation, and policy continuity to ensure long-term viability.