Govt amends policy to introduce separate, dedicated auction window for coal gasification

• The Ministry of Coal has asked CIL and SCCL to add a new subsector for auction of coal linkages to the Non-Regulated Sector (NRS) for coal gasification
• According to the order, the Fuel Supply Agreements may be for the complete tenure of 15 years

New Delhi: In order to address the problem of shortage of coal for coal gasification, the government has issued a directive on Monday for the introduction of a separate auction window for allocation of coal linkage to coal gasification projects. Through a letter, dated February 14, 2022, accessed by PSU Watch, the Ministry of Coal has asked Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL) to add a new subsector for auction of coal linkages to the Non-Regulated Sector (NRS) along side cement, sponge, iron/steel, aluminium, among others.

"The sub-sectors under the NRS linkage auction have been reviewed in the Ministry of Coal. With the approval of the Competent Authority, the following decisions have been taken with regard to the new sub-sector under the NRS linkage auction policy. Coal Block Allocation Rules, 2017 have already defined Production of Syn-Gas as one of an end-use sector. Production of Syn-Gas leading to coal gasification may be considered as a subsector of NRS," the Ministry of Coal has said.

Coal gasification: FSA may be for complete tenure of 15 years

According to the order, the applicable floor price would be decided by CIL, SCCL as per provisions of the NRS linkage auction policy of 2016. Coal quantity and coal grade shall be offered as per availability after taking into consideration, to the extent possible, the demand from industry. The Fuel Supply Agreements (FSA) may be for the complete tenure of 15 years, the government has said.

"CIL / SCCL is, therefore, requested to take immediate necessary action for implementation of the aforesaid decisions," said the order.

Explaining the significance of the addition of a new, dedicated auction window for coal gasification, Peeyush Kumar, Chief Manager/Director (Technical) in the Ministry of Coal, told PSU Watch, "Earlier coal could be availed for coal gasification only through other sectors under NRS linkage auction policy like iron, steel, fertilizer. The introduction of a dedicated window will allow entities to avail coal just for coal gasification projects, without it being linked to any end-use sector."

Under the NRS linkage auction policy, sub-sectors like cement, sponge, iron/steel, aluminium etc, compete within themselves for auction of coal linkages.

Backdrop

In her Union Budget 2022-23 speech, Finance Minister Nirmala Sitharaman had announced that "four pilot projects for coal gasification and conversion of coal into chemicals required for the industry will be set up for technical and financial viability." In its National Goal Gasification Mission document, the Central government has laid out the goal of achieving 100 MT of coal gasification by 2030. India has huge reserves of coal. And coal gasification could be a relatively cleaner way of using these reserves as the world, including India, gradually transitions away from coal toward cleaner fuels in the wake of climate change. 

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