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New Delhi: The Ministry of Coal on Tuesday opened the third round of applications under its Rs 37,500-crore Scheme for Promotion of Surface Coal/Lignite Gasification Projects. It issued a fresh Request for Proposal (RfP) that sets January 11, 2027 as the deadline for submissions. According to a schedule the ministry notified the same day, applications will be opened on January 12, 2027 and the selected applicants will be declared on February 23, 2027. The notice said these timelines “are tentative and subject to change.”
This round can only draw on the money left from earlier rounds. Once each round is evaluated, financial incentive for all its selected applicants is committed against the total outlay, according to the RfP. Each later round “shall be open only to the extent of the residual Financial Outlay remaining after the conclusion of the preceding round.” If no outlay remains, the RfP said, the ministry “shall issue a formal notification and close any further rounds.”
The RfP said the scheme was set up “to accelerate the implementation of surface coal/lignite gasification projects through targeted financial incentive.” The document also listed two more aims that the scheme seeks to serve for the government: cutting India’s dependence on imported chemicals and petrochemicals, and helping to “contribute to achieving the national target of 100 Million Tonnes of coal gasification by 2030.”
Prospective applicants can attend a pre-application conference on November 20, according to the schedule. Written queries must reach the ministry by November 25, and the ministry will respond on December 4. After the selection is declared, the ministry plans to issue letters of award (LoA) on March 9, 2027. Project agreements are due to be signed on May 7, 2027.
The scheme offers financial incentive “at maximum 20 percent of the Cost of Plant and Machinery,” according to the RfP. The incentive is also subject to three caps. A single project can receive no more than Rs 5,000 crore. Across all approved projects, the incentive for any one product is capped at Rs 9,000 crore, but this product cap does not apply to urea or synthetic natural gas (SNG). An applicant and its group companies together cannot receive more than Rs 12,000 crore across all projects, the RfP said. In joint ventures (JVs) and consortiums, the incentive is divided among members by shareholding.
Only “new and unused plant and machinery, procured and installed exclusively for the Project” counts towards the plant and machinery cost, according to the document. Land, site development and pre-operative expenses are excluded from that cost. So are financing costs and machinery moved from another facility. Buildings and civil works are also excluded unless they are linked to erection and installation. Spending incurred before the scheme was approved on May 13 is not counted either. The RfP added that the incentive “shall not be treated as equity contribution of the Project Developer for the purposes of financial structuring, debt financing or financial closure.”
According to the RfP, applicants can be public sector undertakings (PSUs), private companies, or JVs and consortiums of no more than three companies. Each must set up a new surface coal or lignite gasification project in India. The project’s capacity must be at least 0.5 million tonnes per annum (MTPA) of clean syngas. An applicant’s net worth must be more than 20 percent of the project cost. Net worth already committed to a project selected earlier is deducted before a later application is assessed. In a consortium, the lead member must hold at least 51 percent of the equity, the RfP said.
Some applicants are barred. They include companies facing insolvency proceedings admitted by the National Company Law Tribunal (NCLT) and companies blacklisted by the Central or a state government. Companies whose promoters or directors have been convicted of an offence relating to coal block allocation, or sentenced to more than three years’ imprisonment, are also barred. A selected applicant whose ultimate beneficial owner is outside India must get the required clearances before an LoA can be issued, according to the document.
The RfP lists 22 eligible products and says the list is indicative. They include urea, ammonia, ammonium nitrate, methanol, dimethyl ether, direct reduced iron (DRI), hydrogen, SNG, ethanol, and aviation fuel, including sustainable Aviation Fuel (SAF). Applicants can seek to add a product by submitting a written justification. Goods made by processing an eligible product further are excluded, according to the RfP. Its examples are steel from DRI, fertiliser blends or explosives made from ammonia or urea, and paints, adhesives or polymers.
Clean syngas must contain at least 55 percent carbon monoxide and hydrogen combined, and no more than 40 percent nitrogen, by volume on a dry basis. The RfP separately ruled out producer gas, which is made at or near atmospheric pressure. Producer gas “primarily intended for direct combustion in furnaces, kilns, boilers, or other heating applications, shall not qualify as Syngas,” it said.
The RfP said, “Applicants shall preferably set up Projects at the pithead.” Developers may use coal or lignite from their own mines or other arrangements. The ministry will also facilitate projects through the non-regulated sector (NRS) linkage sub-sector under “Production of Syn-Gas leading to coal gasification,” according to the document. Securing coal and other raw materials remains the developer’s responsibility. “The responsibility for offtake shall rest entirely with the Project Developer,” the RfP stated.
Each project will be scored out of 100, according to the RfP. The largest single component, worth 30 marks, rewards applicants that seek a smaller incentive. To get an applicant’s score, the lowest incentive share of plant and machinery cost sought by any applicant is divided by that applicant’s own share, then multiplied by 30. In the RfP’s own example, an applicant seeking 12 percent gets the full 30 marks, while one seeking 20 percent gets 18.
Plant capacity carries 20 marks, split equally between raw syngas and clean syngas output. Each stream earns full marks above 4,00,000 normal cubic metres an hour. Project cost per million tonnes of annual coal use also carries 20 marks. Full marks go to projects costing Rs 3,000 crore or less per million tonnes, and projects costing more than Rs 5,000 crore get none. Technology tie-ups are worth 10 marks. Indigenous technology, or the acquisition of international technology backed by a firm tie-up, earns all 10. A firm agreement with a technology provider earns five. The last 20 marks assess financial strength, measured by net worth against project cost. The RfP also said, “Adoption of indigenous surface coal/lignite gasification technologies for setting up the Project is encouraged.”
Projects need a “minimum qualifying Applicant Score of 40” and are ranked by score. Incentive is earmarked “strictly in the order of their ranking,” subject to the outlay available and the caps, according to the RfP. If the remaining outlay cannot cover a selected applicant’s full incentive, the ministry may offer a partial allocation. The applicant can accept it or withdraw. “No claim shall lie against the MoC on account of insufficiency or unavailability of Financial Outlay,” the document said.
Tied scores are settled first in favour of projects with indigenous technology or acquired international technology. Next come projects producing urea or SNG, then projects with the higher score on cost per tonne of coal. If scores are still tied, the ministry will draw lots.
The incentive will be paid in four equal instalments of 25 percent each, according to the RfP. The first is due once the developer has acquired land and secured environment clearance. It must also have tied up coal supply, finalised its technology licensor and engineering, procurement and construction (EPC) contractor, and reached financial closure. Before this first payment, the developer must furnish an insurance surety bond or bank guarantee worth 25 percent of the instalment.
The second instalment reimburses actual spending. It is paid after a bank loan has been disbursed, the developer has put in 30 percent of its equity contribution and at least half the incentive amount has been spent on plant and machinery. The third instalment comes on commissioning. The RfP defines commissioning as seven continuous days of operation at a minimum of 50 percent of peak annual capacity. The fourth comes once the plant has achieved at least 50 percent of peak annual capacity over the previous 365 days.
Delays reduce the payout. If commissioning comes more than five years after the project agreement is signed, the ministry will pay only 50 percent of the remaining incentive, according to the RfP. That falls to 25 percent if commissioning takes between six and seven years. Nothing more is paid after seven years. Periods of force majeure are excluded from this count.
Applicants must furnish a Rs 50 lakh bank guarantee as application security. It is forfeited if a selected applicant fails to sign the project agreement within 60 days of the LoA. To sign the project agreement, the applicant must also furnish a performance security worth 3 percent of the plant and machinery cost, which is refunded at financial closure. If a developer surrenders the project before the first instalment, the earmarked incentive is withdrawn and 5 percent of the performance security is forfeited, according to the RfP.
The earmarked amount is the ceiling for each project. It can be cut if the actual plant and machinery cost comes in lower. However, “No upward revision in earmarked Financial Incentive shall be permitted under any circumstances,” the RfP said. Any incentive the ministry has to recover must be repaid with interest at twice the State Bank of India’s three-year marginal cost of funds-based lending rate (MCLR), compounded annually from the date of disbursement. The ministry can also bar a defaulting company from its future schemes and tenders.
Projects cannot be transferred or sold without the ministry’s approval while they are being implemented. During that period, the developer must hold at least 51 percent of the equity, according to the document. Through the application letter format, applicants also agree to “irrevocably waive any right or remedy” to challenge the ministry’s decisions on the selection.
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