When the Union Cabinet approved the Viability Gap Funding (VGF) plan on January 24, 2024, it was a big deal. Rs 8,500 crores were set aside for Coal Gasification Projects.

The government wants to gasify 100 million tonnes of coal by 2030, and this strategic move is a key step toward that goal. With big companies like Coal India, GAIL (India), and BHEL on board, the plan is sure to change the energy industry in a big way.

fund scheme

Framework for Viability Gap Funding

The VGF plan is very well thought out; the money is split into three groups. A big sum of Rs 4,050 crores is going to be given to government-owned companies that are leading three important projects.

Bids will be accepted from both state and private organizations at the same time for the second segment, which has a VGF of Rs 3,850 crores.

The last 600 crores are set aside for small plants and “demonstration projects.” Importantly, every project in every group can get a VGF benefit up to 15% of its capital cost.

A cleaner alternative is coal gasification.

When coal is gasified, it changes into a synthesis gas (syngas). This process can lessen the damage to the environment.

This thermochemical process makes it easier to make different chemicals, like manmade natural gas, dimethyl ether, ammonium nitrate, and methanol. Coal gasification is a cleaner way to burn fuel than traditional burning because it makes these goods more useful.

Big Names and Partnerships

The Cabinet’s approval goes beyond just giving money. Company names like Coal India, GAIL (India), and BHEL will be very important in the coal-to-chemical environment.

The joint ventures between Coal India and GAIL (India) will work on a Rs 13,052 crores project to turn coal into synthetic natural gas. Coal India and BHEL will work together on a coal-to-ammonium nitrate project at the same time.

The project will cost Rs 11,782 crores. The costs of the two projects are 25% different, which shows that the government wants to diversify and come up with new ideas in the energy field.

India’s Power to Make Itself

It looks like coal gasification will change everything, and it could cut India’s coal import bill by a lot.

The technology can help replace imports worth 1.3 lakh crores, providing goods such as methanol for mixing with gasoline, Di-Methyl Ether (DME) for mixing with LPG, ammonia for making urea, ammonium nitrate, and helping to make steel by using imported coking coal instead of natural gas in blast furnaces while Synthetic Natural Gas (SNG) is being made.