Government Launches 3rd Round of Coal Gasification Incentives Scheme with ₹2,266.94 Crore

The government has opened the third round of financial incentives for coal and lignite gasification projects, with ₹2,266.94 crore remaining under the ₹8,500 crore scheme, as per The Moneycontrol news report.  

The Coal Ministry issued two separate RFPs on August 13, covering private and PSU projects as well as smaller demonstration facilities. 

₹1,866.94 Crore Available Under Category II 

Category II covers projects from private-sector companies and government PSUs. The current round has ₹1,866.94 crore available from the category's overall ₹3,850 crore allocation. 

Support will be capped at 15% of project capex or ₹1,000 crore, whichever is lower. Selected projects must establish new plants with minimum output of 0.4 million tonnes per annum of an eligible downstream product or combination of products. 

Both surface and underground gasification projects are covered. 

Category III Gets ₹400 Crore 

Another ₹400 crore remains under Category III, which has a total allocation of ₹600 crore. The remaining ₹200 crore has already been earmarked for selected projects. 

This category covers commercially scalable demonstration projects using indigenous technology proven at pilot scale, along with small-scale projects using technology already operating commercially elsewhere. 

Projects must have at least ₹100 crore in capex and minimum syngas production of 1,500 Nm³ per hour. Support is capped at ₹100 crore per project or 15% of capex, whichever is lower. 

Incentives Linked to New Projects 

The incentives are limited to new or fresh investment in coal gasification plants. Projects that had achieved financial closure before the August 13 RFP are not eligible. 

The incentive will be paid in two instalments, with the second linked to reaching at least 50% of production capacity and maintaining production for one year. 

Scheme Targets Domestic Coal Value Addition 

Approved in January 2024, the ₹8,500 crore scheme supports coal and lignite gasification and aims to help achieve the government's target of gasifying 100 million tonnes of coal by 2030. 

The targeted downstream products include synthetic natural gas, methanol, ethanol, ammonia, direct reduced iron, hydrogen, and diesel, along with urea and olefins. 

The August 13 RFPs are separate from the ₹37,500 crore surface coal/lignite gasification scheme approved by the Cabinet on May 14. 

Read More: India's Edible Oil Imports Fall 8% to 14.81 Lakh Tonnes in July 2026! 

Conclusion 

The third round makes ₹2,266.94 crore available for new coal and lignite gasification projects across Category II and Category III under the existing ₹8,500 crore scheme. 

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