CCEA approves CIL’s coal-to-gas-and-ammonia projects; incentivises coal gasification

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved Coal India Ltd’s (CIL) proposals for equity investment in a coal-to-synthetic natural gas (SNG) project in a joint venture with Gail India and for setting up a coal-to-ammonium nitrate joint venture with BHEL. 

The coal-to-SNG project is proposed to be set up in the command area of Eastern Coalfields Ltd while the coal-to-ammonium nitrate project will be set up at Mahanadi Coalfields Ltd.

CIL will invest Rs1,997.08 crore (±25 per cent) for a 51 per cent stake in coal-to-SNG joint venture, which will have a proposed debt-equity ratio of 70:30, and an estimated project investment of Rs13,052.81 crore (±25 per cent). The project is proposed to be set up at Sonepur Bazari area of Eastern Coalfields Limited (ECL) in Burdwan district of West Bengal. Gail will have 49 per cent in the joint venture.

CIL will invest another Rs1,802.56 crore (± 25 per cent) for a 51 per cent stake in the proposed coal-to-ammonium nitrate joint venture with BHEL. The project, involving total investment of Rs11,782.05 crore (±25 per cent) considering a debt-equity ratio of 70:30, BHEL will hold 49 per cent in the joint venture which is proposed to be set up at Lakhanpur area of Mahanadi Coalfields Limited (MCL) in Jharsuguda district of Odisha.

CIL is authorised to make equity investment beyond 30 per cent of its net-worth in the joint venture with GAIL and in the joint venture with BHEL.

Coal India Limited has set a target of 100 tonnes coal gasification by the year 2030.

The CCEA meeting chaired by Prime Minister Narendra Modi also approved a Rs8,500-crore incentive scheme for promotion of coal/lignite gasification projects. The scheme will offer incentives to coal gasification projects under three categories and will apply to both public and private sector ventures.

The total outlay of Rs8,500 crore will be used to provide financial assistance for coal gasification projects under three categories:

Category I, which includes government PSUs will be allocated Rs4,050 crore with provision to support up to 3 projects providing lump-sum grant of Rs1,350 crore or 15 per cent of capex of each project, whichever is lower.

In category II, which includes both private sector as well as PSUs, a provision of Rs3,850 crore has been made with proposed lump-sum grant of Rs1,000 crore or 15 per cent of capex, whichever is lower, for each project. At least one project will be bid out on tariff-based bidding process and its criteria will be designed in consultation with NITI Aayog.

In category III, Rs600 crore has been earmarked for indigenous technology demonstration projects and/or small-scale product-based gasification plants under with lump-sum grant of Rs100 crore or 15 per cent of capex, whichever is lower, to the selected entity that will have a minimum capex of Rs100 crore and minimum production of 1500 Nm3/hr synthetic gas.

The selection of entities under category II and III shall be carried out through a competitive and transparent bidding process and the grant will be paid to the selected entity in two equal instalments.