India Advances Coal Gasification with New Incentives and Projects to Boost Energy Security

The Coal Gasification Mission, launched in 2020, aims to gasify 100 million tonnes of coal by 2030, enhancing the value and utility of this essential resource.

India is capitalizing on its extensive coal reserves, estimated at 378 billion tonnes, with a significant portion classified as 'proven'. Currently, about 80% of this coal is used in thermal power plants. As the country pivots towards cleaner energy and renewable sources, the Ministry of Coal is spearheading sustainable coal use through innovative initiatives.

The Coal Gasification Mission, launched in 2020, aims to gasify 100 million tonnes of coal by 2030, enhancing the value and utility of this essential resource. This initiative supports Prime Minister Narendra Modi's vision of achieving energy independence by 2027.

Coal gasification, a thermo-chemical process, converts coal into synthesis gas (syngas), which consists mainly of carbon monoxide and hydrogen. This process reduces India's reliance on imports for oil, methanol, and ammonia, which constitute a substantial portion of the country's needs. By diversifying the use of coal, gasification helps in substituting imports and promotes cleaner utilization of domestic coal reserves.

On January 24, 2024, the Cabinet Committee on Economic Affairs approved a scheme for equity investments by Coal India Limited (CIL) to establish joint ventures with BHEL and GAIL, surpassing a 30% equity limit. This move is expected to demonstrate the financial and technical feasibility of gasification projects, stimulate downstream markets, and create new economic value chains.

To support coal gasification, the Ministry offers a 50% rebate on revenue share in commercial auction policies for gasification coal, establishes a new sub-sector for syngas production, and provides long-term coal allotments to gasification plants.

Key Features of the Coal Gasification Scheme:

Financial Outlay: ₹8,500 crores allocated across three categories:

₹4,050 crores for Government PSUs, with up to three projects eligible for financial incentives of ₹1,350 crores per project or 15% of Capex, whichever is lower.

₹3,850 crores for private sector and PSUs, offering ₹1,000 crores per project or 15% of Capex, whichever is lower.

₹600 crores for demonstration and small-scale projects, with ₹100 crores per project or 15% of Capex, whichever is lower.

Selection Process: Category I employs a transparent selection process for Government PSUs/JVs, while Categories II and III use a transparent bidding process.

Financial Incentives: Grants are disbursed in two installments: the first after bank loan disbursement and 30% equity contribution, and the second after achieving 50% production capacity and one year of continued production.

Requests for Proposals (RFPs): Published on May 15, 2024, on the Ministry of Coal and MSTC websites, inviting private and government entities to register and participate in the bidding process.

Noteworthy Projects Underway:

CIL-BHEL JV Project, Lakhanpur, Odisha: Producing ammonium nitrate with a capacity of 0.66 MMTPA, costing ₹11,782 crores, and expected by FY'29.

CIL-GAIL JV Project, SonepurBazari, West Bengal: Converting coal to synthetic natural gas with a capacity of 1.83 MMSMD, costing ₹13,052.8 crores, expected by FY'29.

CIL-SAIL JV Project, Durgapur Steel Plant: Producing syngas for direct reduced iron to enhance steel manufacturing.

NLCIL Lignite to Methanol Project: Developing clean energy products from lignite, including syngas, diesel, and green hydrogen.

WCL Coal-to-Ammonium Nitrate Project: Targeting coal gasification into ammonium nitrate with a production capacity of 0.66 MTPA.

Additionally, India has initiated its first pilot project for Underground Coal Gasification (UCG) at Kasta coal block in Jharkhand. This marks a significant milestone for Coal India Limited (CIL) and positions India at the forefront of underground coal gasification technologies.

The Ministry of Coal has invited applications for coal/lignite gasification projects from Government PSUs and private sector entities, with bids due by November 11, 2024. This initiative is anticipated to create numerous job opportunities, stimulate economic growth, and drive a more sustainable future in energy security.

The Ministry remains committed to promoting coal gasification, which offers substantial potential for transforming coal into valuable products. The scheme aims to attract investment and innovation in the coal sector, representing a significant step towards clean coal technologies and ensuring the success of coal gasification projects.