The VGF will be given in three categories. One, for three projects of government-owned companies, for which a grant of₹ 4,050 crore will be given. In the second segment, bids will be invited from both public and private companies for ₹3,850 crore VGF.
The remaining ₹600 crore will be for small-scale plants and “demonstration projects”, the government said. In each of the segments, the benefit to a project will be limited to 15% of its capital cost. “India has a proven reserve of 361 billion metric tonnes of thermal coal,” coal minister Pralhad Joshi said.
In gasification, coal is partially oxidised by air, oxygen, steam or carbon dioxide under controlled conditions to produce chemical constituents.
The desired resultant products can be synthetic natural gas, dimethyl ether, ammonium nitrate and methanol, among others.
Synthetic natural gas can be used as a substitute for LPG and for electricity generation, while dimethyl ether is an alternative to be used in diesel engines. Ammonium nitrate can be used for explosives.The government had launched a mission document for coal gasification of 100 million metric tonnes by 2030 since it is considered a cleaner option compared to burning of the fuel. About 80% of coal produced is used in thermal power plants.The Cabinet also cleared coal-to-chemical project equity investment by joint ventures of Coal India and Gail (India) Ltd, and Coal India and BHEL Ltd. Coal India and Gail will set up a coal-to-synthetic natural gas project with a total project cost of ₹ 13,052 crore. The second joint venture with BHEL will be for coal-to-ammonium nitrate with a cost of ₹11,782 crore. Both the project costs come with a variation of 25%.
The department of fertiliser has in-principle agreed for assured offtake of synthetic natural gas in fertiliser plants, the government said. Coal India is the largest consumer of ammonium nitrate for explosives in mining.