Union Cabinet Approves Rs 37,500 cr Coal Gasification Scheme – Boost to Syngas Production and Energy Security

<h2>Union Cabinet Approves Major Coal Gasification Scheme</h2> <p>The Union Cabinet on <strong>13 May 2026</strong> cleared a new <span class="key-term" data-definition="Coal Gasification Scheme — A government programme that funds projects converting coal or lignite into synthesis gas (syngas) to improve energy security. (GS3: Economy)">Coal Gasification Scheme</span> with an outlay of <strong>Rs 37,500 crore</strong>. The plan aims to support 25 surface gasification projects and to gasify about <strong>75 million tonnes</strong> of coal/lignite, moving India closer to its target of <strong>100 million tonnes</strong> by 2030.</p> <h3>Key Developments</h3> <ul> <li>Financial incentive of up to <strong>20 % of plant‑and‑machinery cost</strong>, paid in four equal installments.</li> <li>The scheme adds to the earlier <span class="key-term" data-definition="Viability Gap Funding (VGF) — A subsidy mechanism that bridges the financial gap of projects deemed economically viable but financially unviable, encouraging private participation. (GS3: Economy)">VGF</span> programme of <strong>Rs 8,500 crore</strong> approved in 2024, but focuses exclusively on surface projects.</li> <li>Targets reduction of imports of LNG, urea, ammonia and methanol by providing domestic syngas.</li> <li>Supports existing projects such as Jindal Steel’s <strong>1.80 mtpa</strong> plant in Angul, Odisha, and upcoming projects by Coal India Ltd and private players.</li> </ul> <h3>Important Facts on Coal Gasification</h3> <p><span class="key-term" data-definition="Coal gasification — A thermochemical process that converts solid coal into a mixture of gases (syngas) by reacting it with oxygen and steam at high temperature and pressure. (GS3: Economy)">Coal gasification</span> can be carried out in two ways:</p> <ul> <li><span class="key-term" data-definition="Surface gasification — Conversion of mined coal in above‑ground reactors using oxygen, steam and heat to produce syngas. (GS3: Economy)">Surface gasification</span> – coal is extracted first, then processed.</li> <li><span class="key-term" data-definition="Underground coal gasification (UCG) — In‑situ conversion of coal into gas by injecting air/oxygen into the coal seam and extracting the resulting gas. (GS3: Economy)">Underground coal gasification (UCG)</span> – coal remains underground during conversion.</li> </ul> <p>The resulting <span class="key-term" data-definition="Syngas — A mixture of carbon monoxide, hydrogen, carbon dioxide and methane produced from coal gasification, used to make synthetic natural gas, fuels, ammonia and petro‑chemicals. (GS3: Economy)">Syngas</span> can be further processed into synthetic natural gas, methanol, dimethyl ether, ammonia for fertilisers, and other petro‑chemical feedstocks.</p> <h3>UPSC Relevance</h3> <p>Understanding this scheme is vital for GS‑3 (Economy) questions on energy security, import substitution, and public‑private partnership models. It also touches on GS‑1 (Geography) regarding India’s coal reserves – the fourth‑largest globally, with about <strong>389 billion tonnes</strong> (of which <strong>212 billion tonnes</strong> are proven). The policy reflects the government’s strategy to leverage domestic resources to meet growing energy demand, especially during peak summer months when coal‑based power dominates the electricity mix (>70 %).</p> <h3>Way Forward</h3> <p>Successful implementation will depend on timely disbursement of incentives, adherence to environmental norms, and scaling up of downstream industries that can absorb syngas. Monitoring the progress of the 25 projects and evaluating the performance of the earlier VGF scheme will guide future policy refinements. Aspirants should track related developments in the Ministry of Coal and the Ministry of Power for upcoming UPSC questions.</p>