Coal supplied for gasification should be priced lower than that for power sector: NITI Aayog

The price of coal supplied for gasification should be kept at a notified price lower than that for coal supplied to the power sector. It can be charged on extraction basis so as to create certainty in the minds of developers of coal gasification projects in the public or private sector, NITI Aayog suggested at a recent meeting called to review the progress of coal gasification projects.

According to those present in the meeting (a copy of the minutes was accessed by businessline), NITI Aayog will provide a comfort letter to the Ministry of Coal.

The joint meeting of the steering committee and technical standing group on the Coal Gasification Mission was held under the chairmanship of Dr V. K. Saraswat, Member, NITI Aayog.

The discussions covered technologies, ash content suitability for coal gasification, cost estimates on coal gasification projects, the technology readiness level of pilots, preparation of reports of gasification projects, minimum size of plants, and parameters for tariff-based competitive bidding projects, among others.

The meeting also took up the need for a support letter from the NITI Aayog on the supply of coal for gasification projects at low prices.

Centre’s support and RFP

According to Amrit Lal Meena, Secretary, Ministry of Coal, the Centre wants more coal to be gasified so that syngas-based chemicals can be manufactured and import substitution takes place.

“The government has taken major policy decisions to promote coal gasification,” he had previously told businessline.

According to the official, the requirements broadly include land, raw materials, finances, technology and market.

The government has approved a land leasing policy for setting up energy related infrastructure on land belonging to coal mining companies. Anyone setting up a coal gasification unit can look for land and lease it.

On raw materials, if the investor in a coal gasification project is a captive or commercial mine owner, then 50 per cent of the revenue share is incentivised, if it is used for gasification.

“For those who do not have captive or commercial mines, Coal India will offer coal on a long-term basis at subsidised prices (a little higher than the notified price),” Meena said, adding: “it will be through a separate window”.

Institutions such as banks, PFC and REC have shown interest in financing such projects.

“Based on our assessment, (and) keeping in view the global price of finished products, it was noted that there is a certain viability gap. To compensate for the viability gap, the government has approved a scheme to promote coal gasification and allocated Rs 8,500 crore for various plants,” the official said.

In terms of technology, products such as ammonium nitrate are consumed by the coal miners. These products are consumed by fertiliser and petrochemical companies as well.

Over the last one month, since the scheme was approved, inquiries have started to come, the Ministry official said, adding: “We are getting a good response from the private sector. We will be coming out with a draft RFP shortly and seek comments from stakeholders. Thereafter, we will come out with a final RFP.” Post that, the Ministry will invite proposals and give three months time to seek responses.

“But responses so far are positive, optimistic and forthcoming. RFP will come in FY25,” Meena said.

Other decisions

It was also decided at the Steering Committee meeting that all gasification projects, including the fertiliser sector and existing gasification plants, should be treated under the Gasification Mission. They may be made eligible for the same relaxation under the scheme.

“The Ministry of Coal needs to relook the matter for the issuance of a necessary policy directive to promote coal gasification in India,” it said.

Also, the minimum size of demonstration projects need to be considered at 100 MT; while discussions also centred around the need “to relook the pricing of lignite in order to reduce the end product price after the coal gasification projects.”

“NLCIL needs to review cost estimates in consultation with GAIL/ JSPL for their lignite to gasification project proposed at Neyveli, Cuddalore. Accordingly, the decision to re-tender may be taken in order to reduce the end-product price,” the minutes of the meeting said.

A committee will also be constituted under the chairmanship of the Department of Science & Technology and representatives from NITI Aayog, Ministry of Coal, Ministry of Steel, IIT-Delhi, IIT-Bombay, CIL, ISC Bengaluru, CIMFR Dhanbad and other industry experts, for an assessment of the tech readiness and maturity of the technology developed through the R&D plants.

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