The Union Cabinet on 24 January, 2024 approved a multi-pronged viability gap funding (VGF) scheme of Rs 8,500 crore for coal gasification projects by public and private sector companies. The government had launched a mission document for coal gasification of 100 million tonne by 2030 since it is considered a cleaner option compared to burning of the fuel.
The VGF will be given in three categories, and the first will include three projects of government-owned companies, for which a grant of Rs 4,050 crore will be given. In the second segment, bids will be invited from both public and private firms for Rs 3,850 crore VGF. The remaining Rs 600 crore will be for small-scale plants and 'demonstration projects'.
In each of the segments, the benefit to a project will be limited to 15 percent of its capital cost. In gasification, coal is partially oxidized by air, oxygen, steam or carbon dioxide under controlled conditions to produce chemical constituents. The desired resultant products can be synthetic natural gas, dimethyl ether, ammonium nitrate and methanol, among others. Synthetic natural gas can be used as a substitute for LPG and for electricity generation, while dimethyl ether is an alternative to be used in diesel engines. Ammonium nitrate can be used for explosives.
The Cabinet also cleared coal-to-chemical project equity investment by joint ventures of Coal India and GAIL (India), and Coal India and BHEL. Coal India and GAIL will set up a coal-to-synthetic natural gas project with a total project cost of Rs 13,052 crore. The second JV with BHEL will be for coal-to-ammonium nitrate with a cost of Rs 11,782 crore. Both the project costs come with a variation of 25 percent. The decision was taken at the meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi.
Coal gasification is a thermo-chemical process that converts the black diamond into a synthesis gas or syngas, and this technology can substitute the imports worth Rs 1.3 lakh crore of the country. It can yield methanol to blend with petrol, Di-Methyl Ether (DME) to be blended with LPG, ammonia for manufacturing urea and ammonium nitrate and steel making towards substituting imported coking coal in blast furnace and production of SNG.
