India earmarks Rs 37,500 crore for coal gasification as Iran crisis heightens energy pressure

The Indian government has approved a Rs 37,500 crore coal gasification mission to strengthen India’s energy security amid the volatile geopolitical situation arising from the conflict in West Asia, Union Minister Ashwini Vaishnaw said on Wednesday.

Speaking at the Cabinet briefing, Vaishnaw said that India has enough coal reserves to meet demand for around 200 years, and coal gasification technology would help convert this resource into useful fuel.

The process of coal gasification converts coal into syngas (synthetic gas), which can be used for power generation, fertiliser manufacturing, refinery products and as an LPG equivalent.

Vaishnaw said that the mission would play an important role in achieving “energy aatmanirbharta” by reducing dependence on imported fuel and improving long-term energy security.

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The government believes the move will also support industrial growth and help India better handle global energy disruptions caused by conflicts and supply uncertainties.

Features of the scheme

The scheme has a total financial outlay of Rs 37,500 crore to support new surface coal and lignite gasification projects for the production of syngas and downstream products.

Government said that companies will receive financial incentives of up to 20 per cent of the cost of plant and machinery. Project selection will take place through a transparent and competitive bidding process based on project cost, coal input and syngas output.

The incentives will be released in four equal instalments linked to project milestones. The government said that the scheme is expected to strengthen India’s domestic coal gasification capabilities while encouraging the development of indigenous technologies and reducing dependence on foreign engineering and construction contractors.

Strategic benefits

The government expects the scheme to mobilise investments worth around Rs 2.5 lakh crore to Rs 3 lakh crore across the sector.

The programme would help reduce India’s dependence on imports of LNG, urea, ammonia, methanol and coking coal, protecting the country from global price volatility and geopolitical supply-chain disruptions.

India currently imports more than half of its LNG requirement, nearly all ammonia demand, and around 80 to 90 per cent of methanol consumption. Around 20 per cent of urea demand is also met through imports.

The government said the scheme is expected to create around 50,000 direct and indirect jobs across nearly 25 projects, especially in coal-bearing regions. Coal and lignite utilisation under the programme is also projected to generate annual revenue of around Rs 6,300 crore for governments, apart from additional collections through GST and other taxes.

Vaishnaw said that the initiative supports the broader goals of “Atmanirbhar Bharat” and “Make in India” by strengthening domestic manufacturing, improving energy security and ensuring long-term economic resilience.