The declaration by the finance minister that Coal India Ltd will build four coal gasification facilities signals the maturation of the country's coal business and its readiness for a clean energy future.
Gasification allows us to unlock the value of our coal resources in a non-combustible manner, avoiding the release of hazardous gases from coal at the point of combustion.
These projects will create building blocks for the energy and chemical sectors, such as methanol, DME, ammonia, and ammonium nitrate. With a major energy transition to renewables now under way in the power sector, our massive coal reserves can now be redirected to non-combustion industrial uses, with gasification being one of the most prominent. The use of carbon capture and storage (CCS) technology in combination with gasification might allow India to better utilise its massive coal reserves without polluting the air. As a result, it is referred to as "clean coal technology."
CIL listed gasification, along with solar manufacturing and aluminium, as a major component of its diversification program two years ago. Since then, it has sought bids for three gasification projects under BOO, with two more in the works, totalling 10 million tonnes of coal per year. The gasification products that are being developed can be used as fuel and feedstock in downstream industries.
Standards for blending methanol and DME in gasoline and LPG have already been established by the relevant ministries, which will boost demand for these products. Ammonia and ammonium nitrate, the other two products, are essential elements in the production of urea and explosives, respectively, and are now imported to meet domestic demand.
There is one question that arises. India has historically been a coal importer, and it is unclear if there will be enough coal available for gasification once the local electricity and industrial sectors have been met.
It's worth noting that a large number of captive coal blocks have now gone into production, and CIL has set a goal of increasing production from 600 million tonnes last year to one billion tonnes by 2024. In the next 2-3 years, the captive coal blocks are expected to produce over 200 mt of coal each year. As a result, domestic thermal coal supply will surpass demand in the next years.
In 2020, the government made the coal block regime even more appealing by allowing captive coal block owners to sell coal after completing their obligations.
The mining industry has reacted positively as a result of this. Overall, from a position of huge coal imports, there may be a surplus for exports in the coming years.
Coal gasification has a number of advantages. In terms of petrochemicals and natural gas, India is heavily reliant on imports. These new projects' outputs will serve as feedstock for a new industrial economy and promote 'atmanirbharta.' The downstream sectors of petrochemicals and gas are currently heavily reliant on imported feedstock. Imported gas is delivered to projects in Gujarat, Maharashtra, and Kerala via import-based LNG terminals in western India.
Eastern and central India's new coal-gasification-based industries could be a game-changer, stimulating new plants in these sectors and across the country. In West Bengal, Chhattisgarh, Jharkhand, and Maharashtra, the four projects are planned near coalfields. These were the country's historic industrial zones, and with manufacturing's focus shifting elsewhere, they've been lagging for decades due to a lack of large-scale investment.