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Govt offering up to 50% discount to commercial miners for coal gasification

Companies winning coal blocks in the forthcoming auctions for commercial mining will be eligible to get as much as 50% discount on the revenue-share quoted by them during the bidding process if they earmark at least 10% of the fuel output for coal gasification or liquefaction projects.

As per the original auction methodology for commercial coal mining — approved by the Cabinet in May 2020 — miners were provided a 20% rebate on the agreed revenue share for using the fuel for gasification or liquefaction.

The higher incentive for coal gasification comes soon after a blueprint for the ‘National Coal Gasification Mission’ — prepared by the Union coal ministry — proposed a 15% methanol-blending target with petrol to encourage investments in the nascent sector. As FE recently reported, the ministry has also proposed massive tax waivers to incentivise coal gasification, which can lead to eco-friendly alternate utility of the fuel abundantly available in the country.

Experts said that a typical gasification facility needs about $2 billion of investment and can produce between 1 and 2 MT of methanol a year, and it is estimated that 5-6 MT of coal would be required to produce 2 MT of methanol. The coal auction methodology has been amended by the Centre on the recommendation of the empowered committee
of secretaries.

“The aforesaid modification shall be applicable for ongoing and successive tranches of auction for sale of coal,” the order issued by the coal ministry stated. Commercial coal mines are being auctioned off through the market-determined revenue share model that replaced the fixed fee/tonne regime.

The government launched the third tranche of commercial coal auctions on October 12, offering 88 mines with geological reserves of 55 billion tonnes and annual peak rated capacity of 282 million tonnes. As many as 48 coal mines in the list are “roll over” mines which could not find bidders in the previous two rounds of auctions. The government had offered 67 blocks under the second round of auction in August for commercial mining, out of which only eight mines could be put up for final bidding.

In the maiden auction round under the commercial coal mining policy, held in November last year, as many as 19 mines out of the 38 offered could be auctioned off. Currently, the government is also working on the second round of bidding for 11 coal mines which had received only one bid in the second tranche of auction.

Prime Minister Narendra Modi had said in June 2020 that `20,000 crore will be invested in coal gasification projects by 2030 to utilise 100 million tonne of coal. Coal can be gasified to turn it into a cleaner syngas or synthesis gas—a mixture of hydrogen and carbon monoxide — which constitutes the basic building block of the chemical industry and can be converted into a wide range of downstream products such as methanol and olefins of which India is at present a net importer.

A recent Niti Aayog study has found out that methanol is much more economically competitive than ethanol when it comes to blending with gasoline.
Source: Financial Express

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