Indian Government Mulls ₹6,000-Crore Incentive Scheme for Coal Gasification Projects

Indian Government Mulls ₹6,000-Crore Incentive Scheme for Coal Gasification Projects

Boosting Clean Energy: India’s Cabinet to Consider Major Incentive Scheme

The Indian government is poised to present a ₹6,000-crore incentive scheme for coal gasification projects to the Union Cabinet for consideration. Two informed sources have confirmed that the cabinet note has been finalized and is ready for approval.

Three Key Components of the Incentive Scheme

Public Sector Unit-Led Gasification: This segment will offer viability gap funding (VGF) of up to ₹1,000 crore or 10% of project expenditure, whichever is lower, for each project.

Private Sector Projects: Private sector initiatives will receive government support of up to ₹600 crore or 15% of the overall project expenditure.

Pilot Projects: The scheme also allocates ₹100 crore per project or up to 20% of project costs for five pilot projects focused on technology development.

Additionally, the proposal includes the reimbursement of Goods and Services Tax (GST) on coal used for gasification, potentially extending over a 10-year period.

Reinvigorating PSU-Led Gasification

The Public Sector Unit (PSU)-led gasification projects will encompass joint ventures between Coal India and entities like GAIL and BHEL. These projects, announced in October last year, had initially faced challenges, primarily due to the higher cost of the product compared to imports. The VGF provision is expected to enhance their viability.

Moving Toward Cleaner Energy

Coal gasification, a process that converts coal into fuel gas, is regarded as a cleaner alternative to traditional coal combustion. The resulting gas can be utilized to produce various gaseous fuels such as hydrogen, methane, methanol, and ethanol.

Government’s Ambitious Goals

with the goal of achieving net-zero carbon emissions by 2070, the Indian government has set ambitious targets for coal gasification. It aims to gasify 100 million tonnes of coal by 2030, a significant step in light of the declining use of coal in thermal power plants as the country shifts toward renewable energy sources.

National Coal Gasification Mission

In November 2021, the government launched the National Coal Gasification Mission to assess the gasification potential of coalfields and develop indigenous technologies for a range of feedstocks, from low-ash to high-ash coal. The mission document recommended tax relaxations, including GST compensation cess waivers, reduced additional cess and duties, and a 15-year tax holiday for coal gasification projects.

Rebate for Future Coal Block Auctions

Coal Minister Pralhad Joshi announced in July that the government has devised a policy to provide a 50% revenue-share rebate for all future commercial coal block auctions, provided that at least 10% of the total coal production is used for gasification.The initiative aligns with India’s commitment to clean energy and sustainable development, ensuring the efficient use of its coal resources in a rapidly changing energy landscape.