Introduction
The Indian government has embarked on a landmark initiative to promote coal or lignite gasification projects, both in the public and private sectors, with the approval of an incentive scheme worth Rs.8,500 crore. This scheme, announced in a press release dated January 24, 2024, aims to catalyze the development of coal gasification technologies and foster energy independence. The initiative underscores India's commitment to leveraging indigenous resources for economic growth and technological advancement.
Coal gasification is a process that involves partially oxidizing coal with air, oxygen, steam, or carbon dioxide to produce a fuel gas. This gas, known as syngas, contains methane, carbon monoxide, hydrogen, carbon dioxide, and water vapor. Syngas is versatile and can be used to produce fertilizers, fuels, solvents, and synthetic materials. Underground Coal Gasification (UCG) is a method where coal is converted into gas within the seam and extracted through wells.
"File:Kemper County Coal Gasification Plant.png" by XTUV0010 is licensed under CC BY-SA 3.0.
Allocation of Funds for Gasification Projects
In the first category, Rs.4,050 crore out of the total allocated amount is reserved for Government PSUs. Assistance in the form of a lump-sum grant of Rs.350 crore or 15% capex (whichever is lower) would be provided to up to three projects.
Financial Support for Private Sector and Government PSUs
An amount of Rs.3,850 crore has been allocated for both the private sector and Government PSUs. Each project under this category will receive a lump-sum grant of Rs.1,000 crore or 15% capex (whichever is lower). It is specified that at least one of the projects selected under this category will undergo a tariff-based bidding process, with criteria to be designed in consultation with NITI Aayog.
Funding for Demonstration Projects
In the last category, an amount of Rs.600 crore has been allocated for demonstration projects (indigenous technology) and/or small-scale product-based gasification plants. Only entities with a minimum capex of Rs.100 crore and minimum production of 1500 Nm3/hr Syn gas will be eligible for the lump-sum grant of Rs.100 crore or 15% capex (whichever is lower).
Grant Disbursement and Selection Process
The press release states that the grant paid to selected entities would be in two equal installments. Further, the selection of entities under the second and third categories would be done through a “competitive and transparent bidding process”.
Government's Vision for Coal Gasification
Union Coal and Mines Minister Prahlad Joshi highlighted the coal sector's commitment to Prime Minister Narendra Modi's vision of gasifying 100 million tonnes of coal by 2030. The National Mission for Gasification envisions the adoption of indigenous technologies for the production of chemical products and their derivatives.
Coal transportation in wagons
Progress and Collaborations
Coal India Ltd has formed joint ventures with manufacturing major Bharat Heavy Electronics Ltd (BHEL) and state-owned gas utility GAIL Ltd to tap into the potential of coal gasification and its supply. Minister Joshi announced the approval of two coal-to-chemical projects through joint ventures between CIL, GAIL, and BHEL, expected to be completed by 2028-29.
Reducing Import Costs
The minister emphasized that this initiative will bring down import costs for India, citing incidents like the 2020 Lebanon explosion which led to a shortage of ammonium nitrate. India's heavy dependency on imports of crude and natural gas-based products can be mitigated by by-products derived from syngas.
Appreciation for PM Modi
The Union Cabinet lauded Prime Minister Narendra Modi for the successful consecration ceremony at Ram temple in Ayodhya, acknowledging the public's affection and establishing him as a “Jan Nayak” or people's leader. Defense Minister Rajnath Singh described Modi as a pioneer of a new era, with the Ram temple movement heralding a new narrative.
Approval of Coal-to-SNG Project at ECL Command Area
The Cabinet Committee on Economic Affairs (CCEA) has approved the establishment of a Coal-to-Synthetic Natural Gas (SNG) Project at Eastern Coalfields Limited (ECL) command area. This project will be a joint venture (JV) between Coal India Limited (CIL) and GAIL. CIL will make an equity investment of Rs.1,997.08 Crore (±25%), maintaining a Debt-Equity Ratio of 70:30. The estimated project capital expenditure is Rs.13,052.81 Crore (±25%).
Approval of Coal-to-Ammonium Nitrate Project at MCL Command Area
Concurrently, the Cabinet Committee on Economic Affairs (CCEA) has granted approval for the Coal-to-Ammonium Nitrate Project at Mahanadi Coalfields Limited (MCL) command area. This project will be executed through a joint venture (JV) of CIL and BHEL. CIL will make an equity investment of Rs.1,802.56 Crore (±25%), with a Debt-Equity Ratio of 70:30. The estimated project capital expenditure is Rs.11,782.05 Crore (±25%).
Approval for Equity Investment Beyond 30% and Strategic Move Towards Coal Gasification
The Cabinet has approved Coal India Limited (CIL) to exceed a 30% equity investment of its net worth in both joint ventures (JVs) – CIL & GAIL and CIL & BHEL.
In a strategic move towards coal gasification, Coal India Limited (CIL) is preparing to establish two Coal Gasification Plants in collaboration with GAIL and BHEL. The objective is to achieve 100 MT coal gasification by 2030, aligning with India’s goals of self-reliance and energy independence.
Milestones Achieved Through Memorandums of Understanding (MOUs)
Coal India Limited (CIL) has signed Memorandums of Understanding (MOUs) with GAIL for the Coal-to-SNG Project at Eastern Coalfields Limited in West Bengal, and with BHEL for the Coal-to-Ammonium Nitrate Project at Mahanadi Coalfields Limited in Odisha. The estimated project costs for these ventures amount to Rs.13,052.81 Crore (±25%) and Rs.11,782.05 Crore (±25%), respectively, while maintaining a debt:equity ratio of up to 70:30.
These agreements signify significant progress towards India’s energy objectives, paving the way for the integration of advanced technologies in the coal sector.
Conclusion
India's initiative to promote coal gasification projects marks a pivotal step towards achieving energy independence and fostering economic growth. By leveraging indigenous resources and fostering strategic partnerships, India aims to establish itself as a global leader in clean energy technologies. The incentive scheme, coupled with strategic ventures and joint ventures, lays the foundation for a sustainable and resilient energy future, aligning with India's aspirations for self-reliance and innovation.
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