Cabinet grants INR 8,500 cr for coal gasification projects

Union Cabinet approved a financial incentive package of INR 8,500 crore for coal gasification projects. The first segment allocates INR 4,050 crore specifically for public sector utilities (PSUs). It extends support to a maximum of three projects, providing a lump sum grant capped at INR 1,350 crore or 15% of the capital expenditure, whichever is the lesser amount.

Coal

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On Wednesday, the Union Cabinet sanctioned a financial incentive plan of INR 8,500 crore for coal gasification initiatives. The initial segment allocates INR 4,050 crore for public sector utilities (PSUs), supporting up to three projects with a lump sum grant capped at INR  1,350 crore or 15% of the capital expenditure, whichever is lesser.

In the second segment, INR 3,850 crore is allocated for both government and private sector projects, offering a lump sum grant of INR  1,000 crore or 15% of the capital expenditure, whichever is less, for each project.

At least one project will undergo a tariff-based bidding process, with criteria formulated in consultation with NITI Aayog, as stated in a government release.

The third category focuses on demonstration projects utilizing indigenous technology and/or small-scale product-based gasification plants, with the Centre setting aside INR 600 crore. This involves awarding a lump sum grant of INR 100 crore or 15% of the capital expenditure, whichever is lower.

“The coal sector is working on the direction of Prime Minister Narendra Modi to gasify 100 million tonnes of coal by 2030. Accordingly, The National Mission for Gasification envisions the adoption of indigenous technologies for the production of chemical products and their derivatives,” Union Coal and Mines Minister Prahlad Joshi said.

Coal gasification involves extracting methane from coal during the mining process and utilizing it for commercial purposes.

An extensive scheme for coal gasification has been in development for over 15 years. However, it was entangled in a revenue-sharing dispute between the Coal Ministry and the Ministry of Petroleum and Natural Gas.

With the scope defined and coal Public Sector Undertakings (PSUs) planning coal gasification projects, the Centre has recently received requests for viability gap funding. Coal India Ltd has established joint ventures with manufacturing giant Bharat Heavy Electronics Ltd (BHEL) and state-owned gas utility GAIL Ltd to explore the potential of coal gasification and its supply.

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