Government Allocates ₹8,500 Crore Funding for Coal Gasification Initiatives

In a groundbreaking move to stimulate coal gasification endeavors nationwide, the Union Cabinet granted approval on Wednesday for an enhanced financial allocation of ₹8,500 crore to foster coal gasification projects. This decision is expected to not only incentivize the coal sector by creating additional revenue streams but also diminish the country's reliance on imported crude and natural gas-based products, such as methanol, ammonia, ammonium nitrate, olefins, and more.

The Cabinet Committee on Economic Affairs (CCEA) also greenlit a cumulative equity investment by Coal India (CIL) of up to ₹3,800 crore. This investment aims to establish facilities for coal-to-synthetic natural gas (SNG) and coal-to-ammonium nitrate. The move is anticipated to further reduce India's dependency on imports, particularly for methanol and domestic ammonia, which currently constitute over 90% and 13-15% of the country's consumption, respectively.

The ₹8,500 crore outlay for promoting coal and lignite gasification projects within public sector undertakings (PSUs) and the private sector has been categorized into three segments. In Category I, PSUs will receive a financial outlay of ₹4,050 crore, supporting up to three projects with a lumpsum grant of ₹1,350 crore or 15% of the capital expenditure, whichever is lower.

Category II, with an outlay of ₹3,850 crore, is designated for the private sector and PSUs. Each project in this category will be eligible for a lumpsum grant of ₹1,000 crore or 15% of the capital expenditure, whichever is lower. At least one project in this category will undergo a tariff-based bidding process, with criteria formulated in consultation with NITI Aayog.

Category III, with a provision of ₹600 crore, is earmarked for demonstration projects (indigenous technology) and/or small-scale product-based gasification plants. The selected entity under this category, with a minimum capital expenditure of ₹100 crore and a minimum production of 1,500 normal cubic meters per hour (Nm3/h) of Syngas, will receive a lumpsum grant of ₹100 crore or 15% of the capital expenditure, whichever is lower. The selection process for entities in Category II and III will be carried out through a competitive and transparent bidding process.

In a parallel development, the CCEA approved equity investments by CIL in joint venture companies for coal-to-SNG and coal-to-ammonium nitrate projects. CIL will contribute approximately 25% equity capital in both ventures, with an estimated project capital expenditure of ₹13,052.81 crore for the coal-to-SNG plant in West Bengal and ₹11,782.05 crore for the coal-to-ammonium nitrate plant in Odisha. These strategic investments are expected to be completed by FY29, marking a significant step towards advancing the country's coal gasification capabilities.

HBL