Context: 

This editorial is based on the news “Union Cabinet approves Rs 8,500 cr incentive for coal gasification projects” which was published in the Business Standard. Recently, The Union Cabinet approved a viability gap funding (VGF) scheme of ₹8,500 crore for coal gasification projects for public and private sector companies.

What is Coal Gasification?

• About: A thermo-chemical process that converts coal into simple molecules, primarily carbon monoxide and hydrogen, called synthesis gas or syngas. 
• Mechanism: In the gasification process, coal is partially oxidised by air, oxygen, steam, or carbon dioxide under controlled conditions to produce a liquid fuel known as syngas. 
• Significance: The combustion of this gas is cleaner and more efficient than coal combustion since emissions are trapped at the gasification stage.

Methods of Coal Gasification

• In-situ Method: In this, oxygen is infused into the seam together with water and ignited at high temperatures, causing coal to partly oxidised into hydrogen, carbon monoxide (CO), carbon dioxide (CO2), methane (CH4), and hydrogen sulphide (H2S).
• Ex-situ Reactors: It is designed to simulate the gasification process above the ground surface, where Sulphur in coal is transformed to H2S and trace volumes of carbonyl sulphide (COS).

Need for Coal Gasification

• A Proven Reserve of Thermal Coal: India has the second largest coal reserve in the world after China and India contributes more than 10% of the global coal production.
• Coal Gasification Target: The government has launched the National Coal Gasification Mission to achieve coal gasification and liquefaction of 100 MT of coal by 2030. 
• Reducing Import Dependency: India has a huge dependency on imports of crude and natural gas-based products which can be easily substituted by by-products derived from syngas.
• Transition to Sustainable Energy: India has huge reserves of coal, it would benefit India if it finds a sustainable way towards cleaner fuels in the wake of climate change.
• Sustainable Usage of Coal: The demand for coal is projected to rise from the current requirement of nearly one billion tonnes to 1.5 billion tonnes by 2029-30. 
• Pharmaceutical Industry: There is a high potential for Syngas to make active pharmaceutical ingredients (APIs) and methanol as a solvent as India plans to produce API domestically. 
• Cleaner and environmentally Friendly: Coal gasification plants produce no scrubber sludge.

Challenges with Coal Gasification in India

• Inferior Quality of Coal: The high ash content 30-35% in Indian coal is a technical barrier. 
• Induced Subsidence of Surrounding Rocks: Heating, quenching, water flux and potential roof and wall collapse may seriously compromise the integrity of the cavity, leading to a subsidence.
• Occupational Hazard: It cannot be controlled to the same extent as surface gasifiers, which poses the risk of high temperature and pressure, furthering the workers’ risk. 
• Environmental Factors: It generates more CO2 than a conventional coal power station.
• Groundwater Contamination: It is a more water-intensive energy generation method. 
• Economy of Project: Changes in the quantity and quality of gas produced has significant impact.
• Technological Concern: There is lack of availability of proven gasification technology.

About Viability Gap Funding (VGF) for the Coal Gasification Scheme

• Aim: To support infrastructure projects that are economically justified but fall marginally short of financial viability.
• Three Categories of Projects: 
  • First category: Rs 4,050 crore for Public Sector Utilities (PSUs) supporting up to three projects. This support will be extended through a lump sum grant of Rs 1,350 crore or 15% of the capital expenditure, whichever is lower.
  • Second category: Rs 3,850 crore has been allocated for both government and private sector projects and each project will receive a lump sum grant of Rs 1,000 crore or 15% of the capital expenditure, whichever is lower. 
  • Third Category: Rs 600 crore has been provisioned for demonstration projects (indigenous technology) or small-scale product-based gasification plants and lump-sum grant of Rs 100 crore or 15% of capex, whichever is lower, will be given. 
• Selection of Entities: By a competitive and transparent bidding process for categories II and III.
  • The grant will be paid to the selected entity in two equal instalments.

Way Forward to the Coal Gasification in India

• Regulation on Ash Content: The ash content of coal supplies needs to be enforced and Coal blending is a need, which is easy to handle and can be value-adding in themselves.
• Dedicated Closed Coal Mines:  It is required for better coal quality consistency, sustained supply & closer mining & transportation cost control. 
• Viability Gap Funding: Financial incentives from the government to support very high CAP of gasification projects needed to improve the viability of ‘Energy Security’ (Clean) projects. 
• Level Playing Field: Exemption from currently applicable cess/duties on coal feedstock prices should be provided for environment–friendly Projects due to its Clean Technology adaptation. 
• National Policy on Coal Gasification & Liquefaction: This should be urgently formulated and promulgated for faster and smoother implementation of Coal Gasification Projects. 
• Blending Schemes and Policy Framework: Schemes for ‘Blending Methanol, DME with Gasoline & LPG’ should be implemented, along with a policy framework for all associated by-products.
• Leveraging Global Gasification Technologies: India should leverage the gasification technology globally available for fast-track development of local coal for the chemical industry.