The Union Cabinet which met under the chairmanship of Prime Minister Narendra Modi on Wednesday took a major decision on coal gasification projects to reduce imports of natural gas and LPG used for domestic consumption.

Briefing newspersons, Coal and Mines Minister Pralhad Joshi said India has one of the largest reserves of coal. As per latest reviews last week, other than current exploration, India has 361 billion tonnes proven reserves of coal.

“Even if we mine even half of it, it is sufficient for the country’s requirements for 125 years,” he said. At present, 80 per cent of the present mined coal is used for electricity production.

India is at present importing 12 mmtpa of natural gas for fertilisers and 28 mmtpa of LPG for domestic consumption.

Therefore, the Government has decided to encourage coal gasification projects. The first project will start in six months including tenders and production will start by 2028-29.

The projects will not only reduce pollution in the country but hundreds of products will come out of the processes, including synthetic gases. The Minister said India “can’t stop coal mining because the resource is mainly located in the most backward areas of the country.”

Besides, India is to become atmanirbhar in products like explosives. India faced its shortage recently, he said.

The Government has created a joint venture of CIL and GAIL and a single project in ECIL command area will have investment of Rs 13,052 crores.

Another CIL and BHEL joint venture has been created with total investment of Rs 11,782 crore in Sambalpur of Odisha. It will be operationalised by 2028-29.

As Indian coal has high ash content and limited technology is available, the Ministry sought viability gap funding from the Government and the Prime Minister sanctioned Rs 8,500 crores for the project at the Cabinet meeting. Out of this amount, Rs 4,050 crore will be for the two joint ventures.

The total outlay of Rs 8,500 crore will be provided as financial assistance for coal gasification projects under three categories.

In category I, Rs 4,050 crore has been provisioned for Government PSUs in which up to three projects will be supported by providing lump-sum grant of Rs 1,350 crore or 15 per cent of capex, whichever is lower.

In category II, Rs 3,850 crore provisioned for private sector as well as Government PSUs in which lump-sum grant of Rs 1,000 crore or 15 per cent of the Capex, whichever is lower provided 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, Rs 600 crore provisioned for demonstration Projects (indigenous technology) and/or small-scale product-based Gasification Plants under which lump-sum grant of Rs 100 crore or 15 per cent of capex, whichever is lower, will be given to the selected entity which will have a minimum Capex of Rs 100 crore and minimum production of 1500 Nm3/hr Syn gas.

The selection of entities under category II and III shall be carried out through a competitive and transparent bidding process.

The grant will be paid to the selected entity in two equal instalments.

EGoS chaired by Secretary Coal shall be fully empowered to make any changes required in the modalities of the scheme subject to the condition that overall financial outlay remain within Rs 8,500 crore.