The BGA India Team, led by Managing Director Anuj Gupta, prepared an update for clients on the recently approved $3.9 billion coal gasification scheme.

Context

  • India’s Union Cabinet approved a $3.9 billion scheme on May 13 to promote coal and lignite gasification, marking a major policy shift toward domestic energy conversion. The program targets gasification of 75 million tons of coal and lignite and supports the national goal of gasifying 100 million tons by 2030. The initiative is expected to mobilize $26-31 billion in investment and generate around 50,000 jobs across 25 projects in coal‑producing regions.
  • The scheme comes amid heightened energy security concerns linked to the Middle East crisis and supply disruptions through the Strait of Hormuz. India’s import bill for LNG, urea and methanol reached approximately $29 billion in FY2025, while disruptions have stranded over 1.6 million tons of crude along with LNG and LPG shipments. In response, the government has invoked emergency provisions to redirect supplies and is accelerating domestic alternatives such as syngas production.

Significance

  • The policy represents a strategic shift toward reducing dependence on energy imports by leveraging India’s vast domestic coal reserves. With approximately 400 billion tons of coal and 47 billion tons of lignite reserves, India is positioning gasification as a core pillar of energy and chemical self-sufficiency. This transition also supports domestic production of critical inputs, including urea, methanol and synthetic natural gas, currently sourced largely from global markets. The government has extended the coal linkage tenure up to 30 years under the gasification sub-sector, providing long-term fuel security and policy certainty that de-risks investment.
  • The scheme establishes one of the most attractive policy frameworks for industrial investment in India’s energy and chemical sectors. Financial incentives cover up to 20 percent of plant and machinery costs, with caps of $520 million per project and extended 30‑year coal linkages ensuring long‑term feedstock security. Combined with existing measures such as the $890 million viability gap funding scheme and a 50 percent revenue share rebate on coal used for gasification, the policy significantly de-risks large-scale investments.

Implications

  • Companies across energy, chemicals, fertilizers, steel and gas sectors can expect substantial investment opportunities and market expansion. Assured coal supply, long-term policy support and rising domestic demand for syngas-derived products create strong conditions for entry and scale. Firms with capabilities in mining, engineering or process technologies are particularly well positioned to participate in new projects.
  • Businesses should incorporate coal gasification into long-term supply chain and energy planning in India. The shift toward domestic production will reduce reliance on imports that currently account for over 50 percent of LNG and LPG consumption and a significant share of chemical feedstocks. As production scales and coal output rise toward a projected 1.5 billion tons by FY2030, companies will need to align strategies with a more self‑reliant and policy-driven energy ecosystem.

We will continue to keep you updated on developments in India as they occur. If you have any comments or questions, please contact BGA India Managing Director Anuj Gupta at agupta@bowergroupasia.com.

Best regards,
BGA India Team

A small ginko leaf

Managing Director

Anuj is a distinguished policy leader and strategist who has played a catalytic role across India’s government and private sector, guiding stakeholders through the country’s complex and evolving policy and investment landscape. As BGA’s India practice leader, he helps clients leverage the country’s rapid economic growth to advance their goals and strategies.  Anuj previously led public policy efforts for the Tata Group, India’s largest business conglomerate, where he advised more than 30 group companies on policy affairs strategy. His interventions directly influenced high-stakes outcomes across diverse sectors, including technology, finance and manufacturing.   Anuj spent a decade in the Indian and Abu Dhabi governments, where he ... Read More