India, with vast coal reserves estimated at 378 billion tonnes and about 199 billion tonnes classified as ‘proven’, is looking to harness this resource for energy production through coal gasification. Currently, around 80% of India’s coal is utilized in thermal power plants. As the country shifts towards cleaner energy solutions, the Ministry of Coal is focusing on sustainable coal use. In 2020, the Coal Gasification Mission was launched, aiming to gasify 100 million tonnes of coal by 2030, aligning with Prime Minister Shri Narendra Modi vision of achieving energy independence by 2027.
Coal gasification, a thermo-chemical process converting coal into synthesis gas (syngas), consisting primarily of carbon monoxide and hydrogen, presents a significant opportunity. With India importing approximately 83% of its oil, over 90% of its methanol, and 13-15% of its ammonia, coal gasification offers a path to reduce reliance on imports and conserve foreign exchange, particularly in the oil, gas, fertilizer, and petrochemical sectors.
On January 24, 2024, the Cabinet Committee on Economic Affairs approved equity investments by Coal India Limited (CIL) to form joint venture companies with BHEL and GAIL. This initiative aims to demonstrate the financial and technical viability of gasification projects, stimulate markets for downstream products, and establish new economic value chains.
Coal Ministry Invites Proposals for Research and Development in Coal Sector
To promote coal gasification, the Ministry offers a 50% rebate in revenue share in commercial auction policies for gasification coal, established 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 financial incentives up to ₹1,350 crores per project.
- ₹3,850 crores for the private sector and PSUs, with financial incentives up to ₹1,000 crores per project.
- ₹600 crores for demonstration projects and small-scale plants, with financial incentives up to ₹100 crores per project.
- Selection Process: Transparent selection for Government PSUs/JVs in Category I, and transparent bidding for Categories II and III.
- Financial Incentives: Grants disbursed in two instalments: first after bank loan disbursement and 30% equity contribution, and second after achieving 50% production capacity and one year of continued production.
- RFPs Published: Requests for Proposals for financial incentives published on May 15, 2024. Interested entities can register on the MSTC website for bidding.
Significant Projects
- CIL-BHEL JV Project in Lakhanpur, Odisha: Producing ammonium nitrate (0.66 MMTPA), costing ₹11,782 crores, expected commissioning by FY’29.
- CIL-GAIL JV Project in SonepurBazari, West Bengal: Converting coal to synthetic natural gas (1.83 MMSMD), costing ₹13,052.8 crores, operational by FY’29.
- CIL-SAIL JV Project at Durgapur Steel Plant: Producing syngas for direct reduced iron.
- NLCIL Lignite to Methanol Project: Developing clean energy products from lignite, including syngas, diesel, and green hydrogen.
- WCL Coal-to-Ammonium Nitrate Project: Gasifying coal into ammonium nitrate (0.66 MTPA).
Pilot Project and Call for Applications
India’s first pilot project for Underground Coal Gasification (UCG) has been initiated at the Kasta coal block in Jharkhand, marking a significant milestone. The Ministry of Coal has invited applications for coal/lignite gasification projects from Government PSUs and private sector entities. The last date for bid submission is November 11, 2024.
Coal gasification is drawing enthusiastic responses, showcasing a positive outlook for transforming coal into valuable products and generating significant investor interest. This initiative is poised to create numerous job opportunities and stimulate economic growth, paving the way for a more sustainable and prosperous future in energy security. The Ministry remains committed to promoting coal gasification projects, encouraging innovation, investment, and sustainable development in the coal sector.
