The Union Cabinet has given its nod to the Ministry of Coal's proposal of rolling out the ambitious coal and lignite gasification programme, under which viability gap funding (VGF) worth Rs 8,500 crore will be offered to the public and private sectors.
Coal Gasification is a thermo-chemical process that converts coal into simple molecules, primarily carbon monoxide and hydrogen, called synthesis gas or syngas. The combustion of this gas is cleaner and more efficient than combustion of coal since emissions are trapped at the stage of gasification.
The Indian government wants 100 MT of coal gasification by 2030, with investments worth over Rs 4 trillion.
The Coal Gasification Scheme
The total outlay of Rs 8,500 crore for coal gasification projects will be divided into three categories, read a statement from the Union Cabinet led by Prime Minister Narendra Modi. In the first category, Rs 4,050 crore has been provisioned only for government PSUs, wherein up to three projects will be supported by providing a lump-sum grant of Rs.1,350 crore each or 15 percent of the capex, whichever is lower.
The second category of Rs 3,850 crore has been provisioned for the private sector as well as the government PSUs in which a lump-sum grant of Rs 1,000 crore each or 15 percent of the capex, whichever is lower, will be provided. At least one project will be bid out on tariff-based bidding process and its criteria will be designed in consultation with NITI Aayog.
For the third category, Rs 600 crore has been provisioned for demonstration projects (indigenous technology) or small-scale product-based gasification plants, under which a lump-sum grant of Rs 100 crore or 15 percent of capex, whichever is lower, will be given to the selected entity. In this, the bidder will need to have a minimum capex of Rs 100 crore and a minimum production of 1500 Nm3/hr of synthetic gas or syngas.
The grant will be paid to the selected entity in two equal instalments, read the statement.
The coal gasification initiative has been delayed by nearly two years since it was first announced due to multiple industry feedback that was received during this period.
In an exclusive interview with Moneycontrol on January 12, Union minister for coal and mines Pralhad Joshi said that the government has also decided to offer a 50 percent rebate in revenue share for the coal used for gasification, provided the quantity used for gasification is at least 10 percent of the total coal production. "Besides, CIL and SSCL (Singareni Collieries Company Ltd) have added a new sub-sector for the auction of coal linkages to the non-regulated sector for coal gasification," Joshi said.
Projects Under Pipeline
Joshi said at least four coal gasification projects by PSUs are in various phases of implementation. These include between CIL (Coal India Ltd) and IOCL (Indian Oil Corporation Ltd), GAIL and CIL, BHEL (Bharat Heavy Electricals) and CIL, and NLC India with BHEL.
Addressing a press briefing after the Cabinet meet, the Union minister said the Cabinet also approved two coal gasification projects under the scheme where Coal India Limited (CIL) will do equity investment beyond the limit of 30 percent.
First will be a coal to syngas project in West Bengal to be executed by a joint venture (JV) created between CIL and GAIL. Initial estimated project capex will be Rs 13,052.81 crore, in which investment of equity capital by CIL shall be in the range of Rs 1,918.76 crore to Rs 1,997.08 crore. For off-take of the produced syngas, the Union minister said that the Department of Fertilisers has given in-principle approval for assured off-take of syngas in fertiliser plants.
The second project is that of coal-to-ammonium nitrate through a JV of CIL and BHEL. The initial estimated project capex for this project is Rs 11,782.05 crore, in which investment of equity capital by CIL shall be in the range of Rs 1731.96 crore to Rs 1,802.56 crore. CIL is the largest consumer of ammonium nitrate for explosive requirements for mining purposes, which assures off-take of the product. Besides, it will supply coal at notified prices, bringing down costs.
Joshi added that a third project for lignite to methanol gasification, NLC India had issued a tender and L&T is likely to be awarded the work. For the CIL and Indian Oil project, he added that talks are still on.
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