India’s Energy Sector Seeks Assured Offtake for Coal Gasification
By Business Desk
India’s energy industry demands government-backed purchase agreements for coal gasification projects, citing insufficient financial incentives like viability gap funding.
India’s energy industry is strongly advocating for guaranteed purchase agreements, known as offtake commitments, from the government to bolster coal gasification projects. This push comes as current financial incentives, specifically the viability gap funding, are deemed insufficient to attract the necessary investment.
Project developers highlight that the substantial capital requirements and extended development timelines for these plants necessitate a firm commitment on demand, volume, and pricing for the synthetic gas produced. An industry executive underscored that an investment of ₹10,000 crore is not viable without an assured market for the output.
Understanding the Incentive Gap
- Current Viability Gap Funding (VGF) totals ₹37,500 crore.
- This VGF offers up to 20% of plant and machinery costs as a financial incentive.
- Industry leaders argue this incentive is inadequate for highly capital-intensive operations.
Coal gasification is a process that transforms solid coal into synthetic gas, which possesses a wide array of industrial applications. The government’s broader objective for these projects is to expand surface coal and lignite gasification, simultaneously fostering a robust domestic coal-to-chemicals ecosystem within the country.
Beyond direct purchase agreements, the industry is also seeking crucial logistical support to improve project economics. These additional requests are vital, especially for facilities slated to supply key sectors like fertiliser and steel plants.
Key Logistical Support Demands
- Provision of freight support to mitigate transportation costs.
- Allocation of land specifically near mine heads and ports for project development.
The operational intricacies of coal gasification initiatives have been clearly demonstrated through experiences like the Talcher fertiliser project in Odisha. This particular project has served to underscore some of the significant challenges associated with these complex industrial undertakings.