Cabinet Approves Major Coal Gasification Scheme with ₹8,500 Crore Incentive

New Delhi, January 26, 2024: In a significant move to promote cleaner energy sources, the Union Cabinet has approved the Ministry of Coal's ambitious initiative to boost coal/lignite gasification. This groundbreaking venture comes with a substantial incentive of ₹8,500 crore, aimed at encouraging coal gasification projects in both the public and private sectors.

Union minister of Parliamentary Affairs, Coal & Mines Pralhad Joshi announced the approval of two coal gasification projects following a recent cabinet meeting.

“The cabinet led by Prime Minister Narendra Modi has approved equity investment by CIL. This move allows CIL and GAIL to set up Coal-SNG project at ECL Command through joint venture and  CIL and BHEL to form a joint venture to set up Coal-Ammonium Nitrate project at MCL command. This remarkable decision would lessen our dependency on imports of crude and natural gas based products,” Pralhad Joshi, Union minister of Parliamentary Affairs, Coal & Mines, announced the approval of two coal gasification projects via his social media handle X. 

Ref: https://twitter.com/DG_PIB/status/1750134958306591081

Coal gasification is a process that converts coal into synthesis gas or syngas (a mix of carbon monoxide and hydrogen) and promises a cleaner and more efficient alternative to traditional coal burning. This method allows for the capture of emissions during the gasification stage, marking a significant stride towards environmentally friendly practices.
The government of India has set an ambitious target to achieve 100 million metric tonnes of coal gasification by 2030, with investments expected to exceed ₹4 trillion. This initiative is a part of India's broader strategy to balance its energy needs with environmental concerns.

The ₹8,500 crore incentive has been divided into three categories by the Union Cabinet. The first allocates ₹4,050 crore exclusively to government PSUs for up to three projects, offering a lump-sum grant of ₹1,350 crore or 15% of the project's capital expenditure (capex), whichever is lower.
The second category, with a budget of ₹3,850 crore, is open to both private sector and government PSUs. Each project in this category can receive a lump-sum grant of ₹1,000 crore or 15% of the capex, whichever is lower. Notably, one project in this segment will be selected through tariff-based bidding, developed in collaboration with NITI Aayog.

The third category reserves ₹600 crore for demonstration projects using indigenous technology or for small-scale, product-based gasification plants. The selected entity under this category will be eligible for a lump-sum grant of ₹100 crore or 15% of the capex, whichever is lower.