No takers for govt’s ₹37,500-crore coal gasification scheme

Why in the News

The coal ministry’s ₹37,500 crore financial incentive scheme for surface coal and lignite gasification has drawn no application from any private or public player. The last date for submission is 7 September 2026, fixed by a Request for Proposal issued on 7 July 2026. The Union Cabinet had approved the scheme to gasify 75 million tonnes of coal and lignite and to cut imports of liquefied natural gas, urea and methanol. The ministry attributes the absence of bids to the time a project proposal of this scale takes to prepare. An incentive of this size drawing nothing at its first deadline points at the economics of a gasification project rather than at the paperwork.

How does coal gasification work?

1. From solid fuel to gas: Dry fuel is converted into synthetic gas, known as syngas.
2. What syngas is used for: Syngas serves as an alternative fuel and as the feedstock for methanol, fertilisers, hydrogen and chemicals.
3. The stated emissions gain: Converting coal into gas rather than burning it directly is counted as a reduction in carbon emissions.

What was the scheme designed to achieve?

1. A volume target: The programme is built around gasifying 75 million tonnes of coal and lignite.
2. Import substitution: The scheme is aimed at reducing dependence on imports of liquefied natural gas, urea and methanol.
3. Insulation from external shocks: Domestic production of these inputs is intended to shield the country from global price volatility and supply chain disruption.
4. The instrument: A financial outlay of ₹37,500 crore was approved for surface coal and lignite gasification projects.

How has the coal ministry explained the empty first round?

1. Proposal preparation takes time: Given the scale of funds each project involves, the preparation of pre-feasibility reports and project proposals runs long.
2. Interest without applications: Several industries have communicated their interest in participating, and none has filed.
3. The count is not final: The number of applications cannot be stated before the deadline passes, since submission is entirely online.
4. The window reopens: Application rounds are envisaged every two months, giving industry repeated opportunities to enter.

Challenges to the coal gasification incentive scheme

1. High ash domestic coal raises the cost: Indian coal carries a high ash content, which lowers gas yield per tonne and raises the capital cost of the gasifier. Eg. Gasifier designs proven on low ash imported coal need modification before they run on Indian coal.
   The Fix: Tie the incentive to a gasifier configuration demonstrated on high ash domestic coal, rather than to project cost alone.
2. The output price is set by policy, not by the market: Urea sold to farmers carries a maximum retail price fixed by the Centre, so a coal based producer’s revenue depends on the subsidy regime. Eg. Urea remains outside the Nutrient Based Subsidy regime and continues to be sold at a controlled price.
   The Fix: Offer a long term offtake price for coal based urea and methanol, so a project’s revenue is known before financial closure.
3. No assured buyer for the other outputs: Lenders fund a plant only where a committed purchaser exists for its methanol or hydrogen. Eg. India has no binding methanol blending obligation comparable to the dated targets under the ethanol blending programme.
   The Fix: Notify a methanol blending obligation with dated targets, so demand exists independently of the capital subsidy.
4. A coal based route to a fuel sold as clean: The process begins with coal, so the emissions case rests on capturing the carbon dioxide the process concentrates. Eg. Coal to methanol carries higher lifecycle emissions than natural gas based methanol.
   The Fix: Make carbon capture capability a condition of the incentive rather than an optional addition.
5. Clearances have to be assembled before a bid: A promoter needs a coal linkage, land and water in place before a proposal is fileable, and the incentive supplies none of them. Eg. The Talcher Fertilizers coal to urea project in Odisha has run well past its original commissioning timeline.
   The Fix: Bundle a coal linkage and a land allotment with the incentive award, so a bidder is not chasing clearances and funding at the same time.

Conclusion

The obstacle here is not the size of the incentive but the absence of a price and a buyer for what a gasification plant would make. A capital subsidy lowers the cost of building the plant. It does not tell the promoter what the output will sell for, or who is obliged to buy it. The marker to watch is whether the next round is paired with an assured offtake price or a blending obligation, and whether a public sector energy company files before any private promoter does.

Back2Basics: Lignite

1. What it is: Lignite is the lowest rank of coal, high in moisture and low in fixed carbon, also called brown coal.
2. Why it is used near the mine: Its calorific value is lower than that of bituminous coal, so transporting it long distances is uneconomic and it is burned or gasified close to the pithead.
3. Where India’s reserves lie: The bulk of the country’s lignite sits in Tamil Nadu, with further deposits in Rajasthan, Gujarat and Jammu and Kashmir.
4. Who mines it: NLC India Limited, a central public sector enterprise under the Ministry of Coal, is the largest lignite producer in the country.

Matching Previous Year Question

“[2025] Consider the following substances: I. Ethanol II. Nitroglycerine III. Urea Coal gasification technology can be used in the production of how many of them? (a) Only one (b) Only two (c) All three (d) None ANSWER: (b)”