Coal gasification likely to see a ₹50,000-cr incentive push

THE UNION BUDGET for 2026-27 is set to signal a major pivot in India’s coal policy with the government preparing to anchor a nearly ₹50,000-crore incentive push for coal gasification -- one of the largest clean-coal interventions -- as it looks to cut import dependence for energy.

- SAURAV ANAND

The scheme will also help revive stranded gas-based power capacity and rebalance the country’s energy mix, a senior official said on condition of anonymity.

The move represents a sharp escalation from the ₹8,500-crore coal gasification incentive scheme approved in 2024, which focused largely on pilot and demonstration projects.

The proposed framework is expected to primarily rely on large-scale Viability Gap Funding (VGF) to crowd in public and private investment into coal-to-gas, ammonia and methanol projects.

IT WILL ALSO comprise other incentive structures for investors in underground coal gasification, and technologyintensive ventures for converting unmineable coal into combustible gases through in situ gasification.

Officials expect the higher Budget outlay and the revamped scheme will be closely tracked by energy PSUs, private developers and lenders as a reference point for capital allocation in clean-coal technologies.

Coal gasification converts coal into synthetic gas that can be used for power generation or as feedstock for fertilisers and chemicals. Policymakers increasingly see it as a transition lever-less emissions-intensive than direct coal combustion and capable of providing firm energy support as renewable capacity expands.

Import dependence, stranded assets drive urgency