Union Cabinet Greenlights Scheme for Coal/Lignite Gasification Projects

• 29 Jan 2024

On 24^th January, 2024, the Union Cabinet granted approval for a comprehensive scheme, backed by a budget of Rs 8,500 crore, aimed at fostering coal/lignite gasification initiatives by both state-run and private-sector entities.

Key Points

• New Projects: Two joint venture projects for coal gasification have been sanctioned, involving collaborations between Coal India and GAIL, as well as Coal India and BHEL. The operationalization target for these projects is set for 2028-29.
• Accelerated Commencement: The projects, once tendered and awarded, are slated to commence within six months.
• Independent Initiatives: Coal India will independently establish two coal gasification plants, contributing towards the government's ambitious goal of achieving 100 million tonnes of coal gasification by 2030.
• Specific Projects: The coal-to-SNG (synthetic natural gas) project in West Bengal and the coal-to-ammonium nitrate project in Odisha, involving partnerships with GAIL and BHEL respectively, have estimated project costs of Rs. 13,052.81 crore and Rs. 11,782.05 crore.
• Significance of Underground Coal Gasification: India places strategic importance on underground coal gasification, aiming to tap into deep, scattered coal reserves covered by forests.
• Syngas technology will be employed to convert non-mineable coal/lignite into combustible gases through in situ gasification.
• Viability Gap Funding Categories: The government's viability gap funding of Rs 8,500 crore will be categorized into three segments.
• Category I, allocated Rs. 4,050 crore, targets government PSUs for up to three projects, with each project eligible for a grant of Rs. 1,350 crore or 15% of the project's capital expenditure.
• Private Sector Focus: Category II, assigned Rs 3,850 crore, focuses on the private sector and government PSUs, with a grant of Rs. 1,000 crore or 15% of capex.
• The third category, with funds amounting to Rs 600 crore, emphasizes demonstration projects and small-scale product-based gasification plants.
• Tariff-Based Bidding: A tariff-based bidding process, in collaboration with NITI Aayog, will select one project. Earlier agreements were inked by CIL for coal gasification projects with GAIL, BHEL, and IOCL.
• Import Substitution Goals: Coal gasification is seen as a means to reduce imports of ethanol, methanol, di-methyl ether, and ammonium nitrate, all byproducts of the gasification process.
• Addressing Import Challenges: Rising coal imports have posed a strain on India's current account, and the government aims to substitute about 110 million tonnes, representing half of the total imports, through increased local production.