Govt seeks proposals for coal gasification under VGF scheme

New Delhi: The coal ministry on Tuesday sought proposals from public and private sector players among others for coal gasification projects under a ₹8,500-crore viability gap funding scheme.

The proposals have to be submitted by 12 September.

"To promote clean coal technologies, the ministry of coal has issued RFP seeking proposals from public sector undertakings, private sector investors, R&D agencies etc., under scheme for promotion of lignite and coal gasification," said an official statement.

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Coal and lignite production in FY24 stood at 1 billion tonnes and the target for this fiscal has been set at 1.08 billion tonnes. Noting that in future there would be surplus domestic coal after meeting the requirement of power and other sectors, the ministry said that coal-to-chemical and gasification processes are being promoted.

Support for private investors

In January this year, the union cabinet approved a ₹8,500 crore viability gap funding (VGF) scheme for coal gasification.

According to current plans, for public sector units, a viability gap funding of ₹1,350 crore per project would be provided. Under category II, mainly private sector investors, a viability gap support f ₹1,000 crore would be provided. Under category III or demonstration projects, the support is for ₹100 crore per project.

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Apart from viability gap funding, the ministry has created a separate long-term linkage window. It has also notified a policy under which commercial or captive coal mine owners may utilize their coal for gasification, for which a 50% incentive on revenue-share would be provided.

Gasification is the process by which coal is turned into fuel gas and is considered as a cleaner option than burning coal. The gas produced through the process can be used to produce gaseous fuels such as hydrogen, methane, methanol and ethanol among others. 

However, the high ash content in Indian coal is a technical barrier to a wider adoption of coal gasification.

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India has the fourth largest coal reserves in the world, with reserves of 361.41 billion tonnes, according to data from the coal ministry.