You could say Odisha and Maharashtra have been quick off the mark with their own incentives for coal gasification. They are reaping the first-mover benefits now that the Centre has put a Rs 37,500-crore lifeline in place to take some of the risk out of these projects. New Delhi is making it known it wants more states to come on board, build up at home and trim an import bill of some Rs 2.77 lakh crore, especially with the West Asia situation putting a dent in LNG and commodity values.
The numbers driving urgency
The coal ministry figures the central package can be the catalyst for Rs 2.5-3 lakh crore in investment, some 25 or so projects and close to 50,000 new jobs in the coal regions. But for that to happen, you need the states to help with operating costs while the Centre puts up the capital, according to those in the know.
If you ask the government, the case for this is made in terms of employment, saving on imports and giving investors some confidence. Here are the figures behind it:
– A Rs 37,500-crore pot from the Centre for surface coal and lignite gasification.
– Some Rs 2.5-3 lakh crore in investments on the table, by their reckoning.
– A target of 25 projects and 50,000 jobs to be had.
– An import tab of just under Rs 2.77 lakh crore for FY25.
– And with the first wave of projects, you are looking at about Rs 20,000 crore in early substitution.
“It takes state policy to make something of it,” says Coal Secretary Vikram Dev Dutt. “To turn intent into steel and concrete.” You already see this in Odisha and Maharashtra, where they have put in place what is being held up as a model for the rest of the country to consider when it comes to wooing investors.
Dutt’s view is that the Centre will back the plant and machinery, but it is the state packages that can make the economics of a project work by chipping away at opex. He also notes the approach is not tied to any one technology; developers are free to go with what has been proven in the market and works with the high-ash coal we have here and the kind of products they want to put out.
Dutt will tell you the push is no coincidence, given the price run-up in March and April on the heels of the trouble in West Asia.
In his view, the kind of foreign exchange we’re seeing leave the country makes a strong case for us to put in the work and build up at home with gasification, as opposed to being at the mercy of a fickle global market.
Strategic shake-up across fuels and chemicals
You can make the case that coal gasification is a way to do without importing natural gas, ammonia, urea, methanol or even coking coal. That has the potential to turn the cost curve on its head for everything from fertilisers to steel. G. Kishan Reddy, the Coal and Mines Minister, puts it this way: moving in this direction will put our manufacturing in petrochemicals, hydrogen and other advanced sectors on firmer ground.
The process is straightforward: you take dry fuel and make synthetic gas out of it. It’s an alternative fuel that also eases the carbon footprint. More importantly, it underwrites the local making of methanol, fertilisers and the like, so the talk of supply security becomes something you can actually put into industry.
Where policy is headed next
Reddy says the Centre is in touch with the likes of Chhattisgarh, UP, Jharkhand, Andhra Pradesh, Telangana and Assam to see what can be done at the state level. “We are in conversation with their chief ministers. It won’t be long before they have some incentives of their own on the table,” he said.
Dutt would have you believe the outreach is well under way. Chhattisgarh is far along in putting a scheme together; we’ve made inroads with Madhya Pradesh and Andhra. Then there is West Bengal – with a new government in town, it’s time to put some money behind gasification.
De-risking early movers
There is more to the Rs 37,500-crore package, and the one before it for Rs 8,500 crore, than just a fiscal handout. Dutt calls it a way to de-risk those who are first in and get the value chain moving.
It is a Whole of Government Approach, according to Reddy. We are trying to get the ministries, the states, PSUs, the private side, the tech and the financiers all on the same page. The idea is to cut down on red tape and make sure projects don’t get stuck in the approval or offtake phase.
At the roadshow, Dutt was blunt about the change in the world order. “The situation in West Asia has changed how energy and commodities move. I’ll be clear: the opportunity is there, and it’s never been better. You need to act now, and we will be there to support you.”
All of this is meant to put some wind in the sails of the 100 million tonne gasification target for 2030. But we won’t judge success by the number of projects we sanction; we’ll look at how fast they put a stop to imports and keep prices in check.
For a state like Odisha or Maharashtra, being first in line is a way to draw in the big players and set up your suppliers. For the Centre, it’s about turning this into a string of viable projects that can stand up to the ups and downs of the market.
It will come down to how quickly the states can put policy in place, whether the offtake is solid and if the technology fits the coal we have. Get that right and you not only make India’s industry more robust, you also fix a weakness in the balance sheet when it comes to fuel and feedstock.
