Only two applications received in second phase of ₹37,500 crore coal gasification scheme

Only two applications have been received in the second phase of the ₹37,500 crore incentive scheme launched by the Central Government to accelerate the development of surface coal and lignite gasification projects in the country. The Ministry of Coal announced on Tuesday that both these applications were received from the state-owned power generation company National Thermal Power Corporation (NTPC) Limited.

According to a PIB report, NTPC has proposed projects for the production of urea, methanol, and dimethyl ether through these applications. The primary objective of this scheme is to promote the domestic production of critical industrial products and to diversify the utilization of India's indigenous resources.

In the first phase of the scheme, a total of seven applications were received, including three applications by Adani Enterprises for urea production projects. Additionally, other applications in the first phase included projects related to products such as synthetic natural gas and direct reduced iron. Notably, NTPC had also applied for a synthetic natural gas production project in the first phase.

Following the conclusion of the second phase, the Ministry of Coal has commenced the third phase of the scheme from November 10, 2026. Under this phase, eligible entities have been given a new opportunity to submit proposals for establishing coal/lignite gasification projects. The deadline for submitting applications for the third phase has been set as January 11, 2027.

According to a Business Standard report, the limited participation in the second round reflects concerns regarding project financing, assured demand for products, and commercial viability, which are acting as barriers to investment.

Atanu Mukherjee, CEO of energy engineering and advisory firm Dastur Energy, stated in a statement to The Hindu, "NTPC's continued participation is encouraging. However, the limited response in the second round indicates that along with financial incentives, there is a need for schemes that make coal gasification projects commercially viable and bankable to attract more private sector investment." He further added that viability-gap funding alone may not be sufficient as lenders remain cautious about technology, construction, and operating risks, especially where local commercial precedents are limited.

According to the Ministry of Coal, these phased efforts aim to increase broad industry participation, attract investment, and accelerate the adoption of gasification technology. This will help in achieving the national target of 10 crore tonnes of coal gasification capacity by the year 2030. This process will lead to cleaner energy, reduced pollution, decreased dependence on imports, and improved energy security.

According to PIB, surface coal refers to coal that is generally at a depth of 200 feet or less from the ground surface and does not require underground mines for extraction. Coal gasification is a process in which, instead of burning solid coal directly, it is heated to high temperatures between 1000 degrees Celsius and 1500 degrees Celsius in the presence of oxygen and steam to convert it into gas. This process produces 'syngas', a mixture of hydrogen and carbon monoxide, which has numerous applications.

The Union Cabinet had approved this scheme on May 13, 2026, with a total financial outlay of ₹37,500 crore.