MC Exclusive | GST refund, capital subsidy, assured coal availability to promote gasification: Coal Secy

India to soon come up with a package for coal gasification.

The Indian government will provide capital subsidy, reimbursement of Goods and Services Tax (GST), and assured availability of coal at reasonable prices in its National Coal Gasification Mission, Coal Secretary Amrit Lal Meena confirmed to Moneycontrol. This will be in addition to the decision to offer 50 percent incentive in revenue sale for the use of coal for gasification, which has already been announced.

Meena said the proposal was sent to the finance ministry which has given in-principle approval to it. “It was felt that the policy decision of offering 50 percent incentive in the revenue sale for the use of coal for gasification, on its own, will not make much of an impact. So, it has been finalised that we will be coming up with a package to promote coal gasification," he told Moneycontrol, adding that the proposal will be sent to the Union Cabinet soon as the coal ministry intends to roll out the programme in FY 2023-24.

The package, the estimated amount of which has not been decided yet, will have four verticals ― 1. Capital subsidy; 2. GST reimbursement; 3. Assured coal at reasonable cost; 4. 50 percent revenue sale incentive. "With this, we are hopeful that based on our recent interactions with PSUs and the private sector, there would be interest in coal gasification,” Meena said.

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Coal gasification is a process in which coal is partially oxidised with air, oxygen, steam or carbon dioxide to form a fuel gas, known as syngas. Syngas is a mixture consisting primarily of methane, carbon monoxide, hydrogen, carbon dioxide and water vapour. Hydrogen can be extracted from this and used to power a hydrogen economy. Syngas can be used to generate urea and a variety of products such as methanol, dimethyl ether (DME), and olefins, allowing India to minimise imports and become self-sufficient. It is already used to some extent in the fertiliser industry. It can also be used for power generation in the steel industry and even in the petrochemical value chain.

Coal gasification is considered a cleaner coal technology compared to coal combustion, which is why Prime Minister Narendra Modi has set a target of achieving 100 million tonnes (MT) of gasified coal by 2030.

However, coal gasification is expensive, which is why it is mostly being carried out only in small pilot projects in India so far. It takes Rs 10,000 crore for 1.4 MT of coal gasification in a year.

“Based on industry input, it has been felt that we need to provide a little bit of capital support because the plant is very expensive. So, we are planning to give a subsidy of about 10 percent for those who set up coal gasification plants,” the coal secretary said.

“Secondly, the input cost, which is coal, also has to be cheaper. Apart from cost of production, currently, one has to pay Rs 400 per tonne as GST. It has been finalised that GST will be reimbursed for coal gasification. This will take care of 10-20 percent of the cost of coal, depending on whether it is on notified price or on auction,” Meena said.

The third point in the programme will be to offer coal at an assured notified price for a period of 15 years, he said.

The fourth is the policy decision wherein companies winning coal blocks in commercial mining auctions will be eligible to get 50 percent discount on the revenue-share quoted by them during the bidding process, if they earmark at least 10 percent of the fuel output for coal gasification or liquefaction projects.

Talking about technology, Meena said currently in India, Bharat Heavy Electricals Limited (BHEL) has the technology for coal gasification. “Several other technologies are available abroad. So, whenever we come out with the programme it is going to be technology-agnostic,” he said, while acknowledging that there still exists some form of scepticism in the industry.

He further said the government is will focus a lot on ammonium nitrate, a by-product of coal gasification, because it has an assured market, for instance, in the explosives sector; Coal India Limited (CIL) and the mining sector on their own use a lot of explosives. DME can be blended with natural gas, whereas methanol can be used in the chemical and petrochemical sector.

Three large central PSUs ― BHEL, Indian Oil and GAIL (India) ― have already decided to form separate joint ventures with CIL for large “syngas” projects.