Industry insists on assured offtake for coal gasification

New Delhi: The energy industry is seeking assured offtake commitments from the government for coal gasification projects, arguing that viability gap funding (VGF) alone may not be enough to unlock investments in capital-intensive plants.

The investment case remains weak even with government support, if project developers have to commit thousands of crores without certainty on demand, on who would buy the gasification output and at what volumes and prices, industry executives said.

"If you are putting in ₹10,000 crore and there is no assured place to sell the output, the arithmetic does not work," a senior industry executive told ET. Coal gasification is a process that converts solid coal into synthetic gas, which has multiple uses. The comments come as the government rolls out a ₹37,500 crore incentive scheme aimed at scaling up surface coal and lignite gasification and building a domestic coal-to-chemicals ecosystem.


The industry is also seeking freight support or allocation of land near the mine head and ports for gasification projects supplying fertiliser and steel plants, saying logistics costs could further weaken the economics of these projects.

While the new scheme provides a financial incentive of up to 20% of the cost of plant and machinery, industry executives said a capital subsidy alone would not address the demand and market risks associated with projects that require large upfront investments and have long gestation periods.

The experience of the Talcher fertiliser project in Odisha has also highlighted some of the execution challenges associated with coal gasification.