India’s Union Cabinet is poised to consider a ₹6,000-crore incentive scheme designed to promote coal gasification projects. The scheme, which has been finalized and awaits cabinet approval, aims to provide incentives for various types of gasification initiatives, including those led by public sector units (PSUs), private sector companies, and pilot projects.
Under the proposed scheme:
- PSU-Led Gasification Projects: Viability gap funding (VGF) of up to ₹1,000 crore or 10% of the expenditure for each project is likely to be provided. This category includes joint venture projects involving Coal India, GAIL, and BHEL.
- Private Sector Projects: Government support would be extended to private sector projects, with incentives of up to ₹600 crore or 15% of the overall expenditure per project.
- Pilot Projects: Support for five pilot projects focused on technology development would be up to ₹100 crore per project or up to 20% of the project cost.
The scheme also includes provisions for the reimbursement of Goods and Services Tax (GST) on coal used for gasification, which may be applicable for a period of 10 years.
Coal gasification is a process that converts coal into fuel gas, offering a cleaner alternative to traditional coal burning. The resulting gas can be used to produce various gaseous fuels, including hydrogen, methane, methanol, and ethanol. However, the high ash content in Indian coal has been a technical barrier to widespread coal gasification.
As India strives to achieve net-zero carbon emissions by 2070, the government has set ambitious goals for gasifying coal, aiming to reach 100 million tonnes of gasified coal by 2030. The increased adoption of renewables in the power sector is expected to reduce the use of coal for thermal power generation, making alternative uses of coal more important.
The National Coal Gasification Mission, launched in November 2021, seeks to assess the gasification potential of coalfields and develop indigenous technologies for gasifying coal with varying ash content. The mission also proposed tax-related relaxations, including a waiver of GST compensation cess, a reduction in additional cess and duties, and a tax holiday of 15 years for coal gasification projects.
Coal Minister Pralhad Joshi indicated in July that the scheme had been approved by the Expenditure Finance Committee (ECF) and would be presented to the cabinet for approval. The scheme aligns with India’s efforts to transition to cleaner energy sources and reduce its reliance on conventional coal-based power generation.