Cabinet's ₹8,500 cr incentive for coal gasification to lessen import dependency

The Union Cabinet has approved the Ministry of Coal's initiative to launch the scheme for promotion of the coal/lignite gasification programme. The venture provides a substantial amount of ₹8,500 crore as an incentive for coal gasification initiatives to both public and private sectors.

Coal gasification, a thermo-chemical process transforming coal into simpler molecules like carbon monoxide and hydrogen (known as synthesis gas or syngas), boasts cleaner and more efficient combustion compared to traditional coal burning. The emissions are captured during the gasification stage.

The Indian government envisions achieving 100 million metric tonnes of coal gasification by 2030, with investments exceeding ₹4 trillion.

Breaking down the ₹8,500 crore allocation for coal gasification projects, the Union Cabinet outlined three distinct categories. The first earmarks ₹4,050 crore for government PSUs, supporting up to three projects with a lump-sum grant of ₹1,350 crore or 15% of the capital expenditure (capex), whichever is lower.

The second category, amounting to ₹3,850 crore, is allocated for both the private sector and government PSUs. Here, a lump-sum grant of ₹1,000 crore each or 15% of the capex, whichever is lower, will be provided. Additionally, one project will be subject to tariff-based bidding, with criteria developed in consultation with NITI Aayog.

The third category sets aside ₹600 crore for demonstration projects (utilising indigenous technology) or small-scale product-based gasification plants. The selected entity will receive a lump-sum grant of ₹100 crore or 15% of the capex, whichever is lower. To qualify, bidders must have a minimum Capex of ₹100 crore and a minimum production of 1500 Nm3/hr of synthetic gas or Syngas, the cabinet states in a statement.

The grant will be disbursed to the selected entity in two equal instalments, according to the statement.

The EGoS chaired by secretary coal will be fully empowered to make any changes required in the modalities of the scheme subject to the condition that overall financial outlay remain within ₹8,500 crore, it adds.

Despite a nearly two-year delay since its initial announcement, the coal gasification initiative has undergone revisions based on industry feedback.

Following the Cabinet meeting, Pralhad Joshi, Union minister of Parliamentary Affairs, Coal & Mines, announced the approval of two coal gasification projects.

“The cabinet led by Prime Minister Narendra Modi has approved equity investment by CIL. This move allows CIL and GAIL to set up Coal-SNG project at ECL Command through joint venture and  CIL and BHEL to form a joint venture to set up Coal-Ammonium Nitrate project at MCL command. This remarkable decision would lessen our dependency on imports of crude and natural gas based products,” Joshi posted via X platform.