Indian Economy News

The Coal Ministry is developing a comprehensive plan to support projects for coal gasification with a budget of US$ 730.3 million (Rs. 6,000 crore)

The government's commitment to utilising the power of coal gasification is shown in the Ministry of Coal's objective to achieve coal gasification of 100 million tonnes (MT) of coal by FY30. Coal Ministry hopes to accelerate the progress of the country with the introduction of this ambitious initiative. The plan includes a wide range of actions that make use of available resources and show that coal gasification is both technically and financially feasible. The goal of this programme is to support other industries while supplying the nation's future energy requirements.

Gasification technology will revolutionise the coal industry in India and lessen the country's dependency on imports of vital commodities like natural gas, methanol, and ammonia. To meet domestic demand, India currently imports around 50% of its natural gas, over 90% of its total methanol consumption, and about 13-15% of its total ammonia consumption. It will boost employment prospects and support India's goal of becoming Aatmanirbhar. By lowering imports by 2030, the installation of coal gasification is anticipated to significantly aid in the development of the country. By lowering carbon emissions and encouraging sustainable practises, this programme has the potential to lessen the environmental load and support our worldwide pledges to a greener future.

The Ministry is taking innovative measures to accelerate the development of coal gasification projects. In line with this objective, the Ministry is considering a comprehensive scheme to promote Coal/Lignite gasification projects for both Government Public Sector Undertakings (PSUs) and the Private Sector with an outlay of US$ 730.3 million (Rs. 6,000 crore).

A competitive and open bidding process will be used to choose the companies for the coal/lignite gasification plan. Additionally, the government is thinking about giving eligible Public Sector Undertakings (PSUs) and businesses in the private sector budgetary support so they can start coal gasification projects. The government will help government PSUs in the first phase. With a budget allotted to each project, the second segment includes both government and private PSUs. A tariff-based bidding process will be used to pick at least one project for this segment, with the NITI Aayog consulting on the selection criteria. The third and last section deals with giving demonstration projects that make use of local technology and/or small-scale product-based gasification plants budgetary support.

In addition to the scheme, the Ministry is also considering an incentive to reimburse the Goods and Services Tax (GST) compensation cess on coal utilized in gasification projects for a period of 10 years after the commercial operational date (COD), provided that the GST compensation cess is extended beyond FY27. This incentive aims to offset the inability of entities to claim input tax credit for the same.

The Ministry also emphasises collaboration in advancing Surface Coal Gasification (SCG) projects throughout the coalfields of Coal India Limited (CIL). Strategic bilateral agreements, including a Memorandum of Understanding (MoU) between Bharat Heavy Electricals Limited (BHEL) and CIL and an MoU between Indian Oil Corporation Limited (IOCL), Gas Authority of India Limited (GAIL), and CIL, were signed in October 2022. These partnerships seek to promote teamwork and expertise in advancing the execution of SCG initiatives.

The CIL Board has accepted the pre-feasibility reports for three projects which includes Eastern Coalfields Limited (ECL), Mahanadi Coalfields Limited (MCL) and Western Coalfields Limited (WCL) and has approved the initiation of pre-project activities, such as topography survey, soil investigation and water availability studies. Tendering activities are also being undertaken to arrive at firm prices required for the preparation of a Detailed Feasibility Report (DFR) for the respective projects. The CIL Board has also given 'in-principle' approval for the formation of Joint Ventures as envisaged above. Currently, negotiation and finalization of the Joint Venture agreement are in progress.

The Ministry of Coal is still dedicated to supporting coal gasification initiatives since they have the greatest potential for converting coal into a variety of useful goods. To encourage innovation, investment, and sustainable growth in the coal gasification industry, the suggested scheme and incentives are created to entice Government PSUs and the Private Sector.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.