₹37,500 Crore Coal Gasification Scheme: Ministry of Coal Concludes Round 2 with NTPC Bids, Launches Round 3

In a major stride toward enhancing national energy self-reliance and advancing clean coal technology, the Ministry of Coal, Government of India, has announced the conclusion of Round 2 under the flagship Scheme for Promotion of Surface Coal/Lignite Gasification Projects. Backed by a substantial Union Cabinet-approved financial outlay of ₹37,500 crore, the initiative aims to systematically revolutionize India’s industrial landscape by converting indigenous coal and lignite into valuable chemical feedstocks and clean energy sources.

The second bidding round witnessed major participation from state-run power major NTPC Limited, which submitted two comprehensive proposals aimed at producing critical industrial chemicals, including Urea, Methanol, and Dimethyl Ether (DME). Concurrently, the Ministry of Coal has officially rolled out Round 3 of the bidding process starting 10th November 2026, inviting prospective public and private entities to submit proposals before the deadline of 11th January 2027. This structured push directly aligns with India's long-term target of achieving 100 million tonnes (MT) of coal gasification capacity by 2030.

Key Highlights & Major Announcements

• Cabinet Outlay: Total financial outlay of ₹37,500 crore approved by the Union Cabinet on 13th May 2026 to support surface coal/lignite gasification projects across India.
• Round 2 Outcome: Concluded with two high-value technical applications submitted by NTPC Limited.
• Product Focus: The proposed projects target domestic manufacturing of essential industrial inputs: Urea (fertilizer sector) alongside Methanol and Dimethyl Ether (DME) (energy and chemical sectors).
• Round 3 Launch: Officially opened on 10th November 2026 for eligible public and private sector applicants.
• Submission Deadline: Final date for submitting applications under Round 3 is 11th January 2027.
• National Objective: Accelerate industrial investments to fulfill the national mandate of 100 MT coal gasification capacity by 2030.

Understanding Surface Coal and Lignite Gasification

Coal gasification is a thermo-chemical transformation process that converts solid coal or lignite into synthesis gas (syngas)—a versatile mixture composed primarily of carbon monoxide, hydrogen, carbon dioxide, and methane. Unlike traditional coal combustion, which burns solid fuel directly to generate steam for electricity, gasification operates in an oxygen-controlled, high-pressure environment. This enables the precise \textraction of hydrogen and carbon building blocks required for synthetic fuels, fertilizers, and petrochemical products.

By utilizing surface gasification, India can leverage its vast domestic coal reserves—currently ranked among the largest globally—while significantly reducing localized particulate emissions, sulphur dioxide, and nitrogen oxides. Syngas serves as a foundational building block for several vital commodities:

• Urea: Essential for agricultural soil nutrient management, drastically reducing India's dependency on imported natural gas-based urea.
• Methanol: A critical chemical feedstock used in plastics, paints, adhesives, and as a clean blending agent for transportation fuels.
• Dimethyl Ether (DME): An eco-friendly substitute for diesel and LPG, providing a clean-burning alternative for rural household cooking and industrial heating applications.

Analysis of NTPC Limited’s Round 2 Proposals

The submission of two major proposals by NTPC Limited under Round 2 marks a crucial operational shift for India's largest power utility. As NTPC actively diversifies its portfolio beyond conventional thermal power generation, entering high-tech coal gasification strengthens its positioning in clean energy technologies.

1. Production of Agricultural-Grade Urea

NTPC's first application focuses on utilizing syngas to synthesize domestic Urea. India currently spends considerable foreign exchange importing natural gas and finished urea to fulfill agricultural requirements. By converting coal into syngas-based ammonia and subsequently urea, the project promises to buffer the agricultural ecosystem against global energy price shocks, supporting national food security and reducing fiscal subsidy burdens.

2. Synthesis of Methanol and Dimethyl Ether (DME)

The second application aims at setting up facilities for Methanol and DME production. Producing these chemicals locally directly aligns with the NITI Aayog’s 'Methanol Economy' roadmap, which seeks to blend methanol into automotive fuels and industrial supply chains. DME, known for its high cetane number and ultra-low soot emissions, serves as an efficient fuel alternative that directly supports India's net-zero transition strategy.

"Through successive rounds of the financial incentive scheme, the Ministry of Coal aims to encourage wider industry participation, attract robust capital investments, and accelerate the adoption of surface coal gasification technologies, contributing directly towards the national target of achieving 100 million tonnes of coal gasification capacity by 2030."

Round 3 Framework and Financial Support Mechanism

The launch of Round 3 on 10th November 2026 provides a renewed window of opportunity for energy companies, chemical manufacturers, and infrastructure developers. The Ministry of Coal has structured the ₹37,500 crore financial outlay to mitigate initial capital expenditure barriers and technical risks associated with advanced gasification plants.

Structure of Financial Assistance

The scheme provides viable financial support through capital grants and fiscal incentives categorized into distinct segments:

• Category I (Government PSUs): Direct capital support provided to central and state Public Sector Undertakings to establish anchor gasification units.
• Category II (Private Sector & Joint Ventures): Dedicated financial incentives designed to attract private capital investment, encouraging competitive technology selection and operational efficiency.
• Category III (Small-Scale & Demonstration Projects): Grants allocated for demonstration facilities and novel gasification technologies targeting niche end-products.

Interested bidders have until 11th January 2027 to complete their technical assessments, secure feedstock linkage commitments, and submit official applications to the Ministry of Coal.

Significance & National Impact

The strategic implementation of the Surface Coal/Lignite Gasification Scheme is anticipated to generate far-reaching economic, environmental, and industrial benefits for India:

1. Import Substitution and Foreign Exchange Preservation

India imports substantial quantities of crude oil, liquefied natural gas (LNG), methanol, and chemical fertilizers annually. Channeling indigenous low-grade coal and lignite into chemical synthesis substantially decreases India's reliance on volatile global supply chains, preserving foreign currency reserves.

2. Environmental Decarbonization and Syngas Clean Up

Direct coal burning is a major contributor to greenhouse gas emissions. Surface gasification allows carbon capture, utilization, and storage (CCUS) technologies to be integrated far more efficiently at the syngas processing stage compared to traditional post-combustion power plant flues. This makes gasification a key transitional technology for heavy industries aiming for decarbonization.

3. Industrial Diversification in Coal-Bearing States

Gasification projects are capital-intensive developments typically situated near coalfields in eastern and central Indian states such as Odisha, Jharkhand, Chhattisgarh, and West Bengal. These projects foster localized chemical manufacturing hubs, generating long-term skilled employment and stimulating regional economic growth.

Frequently Asked Questions (FAQs)

What is the total financial outlay of the Coal Gasification Scheme?

The Union Cabinet approved a total financial outlay of ₹37,500 crore on 13th May 2026 to promote surface coal and lignite gasification projects across public and private sectors in India.

Which company submitted applications under Round 2 of the scheme?

NTPC Limited submitted two applications during Round 2. The proposals focus on setting up projects for the production of Urea, Methanol, and Dimethyl Ether (DME).

What is the timeline for submitting applications under Round 3?

Round 3 of the scheme opened on 10th November 2026. The last date for eligible entities to submit their project proposals is 11th January 2027.

What is India's national goal for coal gasification capacity?

The Government of India has set a strategic national target to achieve 100 million tonnes (MT) of coal gasification capacity by the year 2030.

Official Source & Verification

This article is grounded on the official press release issued by the Press Information Bureau (PIB), Government of India (Release ID: 2334671, Ministry of Coal). Access the official document: https://pib.gov.in/PressReleasePage.aspx?PRID=2334671&lang=1.