India rolls out $1 billion in incentives for coal gasification to lower import dependency

The Indian Cabinet has approved ambitious plans for coal and lignite gasification projects for its own public sector undertakings (PSUs) and the private sector that will provide incentives worth $1.02 billion (INR 85 billion) under three categories.

The projects to convert coal into gas were approved in an Indian Cabinet meeting chaired by Prime Minister Narendra Modi on Wednesday.

In a separate decision, the Indian Cabinet Committee on Economic Affairs (CCEA), also chaired by the Prime Minister, approved proposals for equity investment by Coal India Ltd (CIL) for setting up a coal-to-SNG (Synthetic Natural Gas) project at ECL command area through a joint venture between CIL and GAIL. The decisions come as India seeks to reduce its dependence on imported fuels.

The financial assistance to be provided by the government for the coal to gas project include INR 40.5 billion for PSUs in which up to three projects will be supported by providing lump-sum grant of INR 13.5 billion or 15% of capex, whichever is lower, the government said.

In the second category, INR 38.5 billion will be provisioned for private sector as well as government PSUs in which lump-sum grant of INR 10 billion or 15% of capex, whichever is lower, will be provided for each project.

In the third category, INR 6 billion will be set aside for demonstration projects of indigenous technology and/or small-scale product-based gasification plants, under which lump-sum grant of INR 1 billion or 15% of capex, whichever is lower, will be given to the selected small-scale product based entity.