Coal to Chemicals

Coal to Chemicals

The implementation of coal to chemical projects in India shall not only contribute to the growth of the country in terms of domestic product development and import substitution but also employment generation

  • By Debasish Nanda , Director (Business Development), Coal India Limited | June 06, 2023

Coal is the most abundant fossil fuel in India with about 307 billion MT reserves. India produced around 777 MT in FY 2021-22 with around 80% of the coal being consumed by the power sector. In FY 2022-23, the coal production was around 785 MT up to February 2023 which has already surpassed last year’s mark. On the other end of the spectrum, India imports a plethora of chemical products. Import share of total natural gas consumption grew from around 28% in FY 2011-12 to around 48% in FY 2021-22 in India. India imported around US $113.1 billion net worth of oil and gas for the period of FY 2021-22 and for FY 2022-23. This figure has further increased to US $125.6 billion for the period April 2022 to January 2023. 

India also has a huge dependency on imports of crude and natural gas-based products mainly ammonia, DME, methanol, olefins, etc. which can be easily substituted by syngas based on coal gasification. Thus, syngas production from coal gasification can be an alternative to replace the natural gas demand in many downstream applications and thus can help reduce the import bill for the nation.  

Another end of the spectrum is the transition to cleaner methods of utilizing coal. Thermal power generation is a major source of carbon dioxide emission in India. Coal gasification is therefore considered a cleaner alternative as compared to burning coal and utilizes the chemical properties of coal. In line with this principle, our Prime Minister Narendra Modi has laid down the vision of 100 MT coal gasification by 2030. 

The implementation of coal to chemical projects in India shall not only contribute to the growth of the country in terms of domestic product development and import substitution but also employment generation and growth of local communities. Further, ancillary downstream industry and services will arise which will generate additional indirect employment as well. The projects would bring forward an overall social development with an emphasis in the areas of education, training, health, and infrastructure. 

Contribution of Coal India

Coal India Limited (CIL) is accountable for more than 80% of domestic coal supply. With the projected growth of the coal demand in the nation, CIL has put together strategies for growth which shall ensure meeting the energy aspirations of the nation.  

Recognizing the considerable opportunity in the sector, Coal India Limited has identified the coal to chemical business as a natural transition from its existing portfolio. CIL plans to leverage its strengths in areas of raw material security and self-consumption potential (as in the case of ammonium nitrate) among others.  

CIL has identified five projects spread across its subsidiaries producing diverse products such as ammonia, synthetic natural gas (SNG), ammonium nitrate, and urea. CIL has also executed several MoUs with PSUs – BHEL, IOCL, and GAIL, in October 2022 to leverage partnerships to implement these identified projects.  

CIL is a promoter in another project taken up by the Talcher Fertilizer Limited (TFL) along with GAIL (India) Ltd. (GAIL), Rashtriya Chemicals & Fertilizers Ltd. (RCF), and Fertilizers Corporation of India Ltd. (FCIL). The plant, envisioned to be India’s largest and first coal gasification urea plant is expected to significantly reduce the dependence on imported urea. Thus, the realization of all the five identified projects shall provide a boost to the coal-to-chemical sector and thus aid in achieving the vision of Atmanirbhar Bharat. 

Key challenges & way forward

The coal gasification sector in India faces a range of challenges covering technical as well as commercial aspects. With regards to technical challenges, the inherent property of Indian coal being high in ash content coupled with limited technology licensors for the same is one of the key challenges. Other challenges include issues in technology transfers, pithead land availability, etc. 

Another major challenge for coal gasification projects in India is the high Capex requirement. Therefore, it is imperative to introduce incentives and policy enablers which shall aid domestic players to remain competitive with the international players in terms of prices. 

The Government of India has also come out with a number of recent interventions which indicate strong push towards the coal to chemicals sector including the release of the National Coal Gasification Mission document, a preferential auction policy and proposals for surface coal gasification (SCG) projects in the Union Budget among others. 

While a number of steps has been already taken to promote coal gasification in India, other potential enablers are essential for swift implementation of SCG projects in the nation. One such enabler could be in the form of allocation of earmarked land for development of pit-head surface coal gasification projects. This shall significantly reduce logistics cost, improve the overall profitability, and viability of the project. 

Other key enablers may include introduction of economical financing options for SCG projects, robust and timebound fiscal incentive policies such as tax holidays, exemption of duties or introduction of capital subsidies.

Register Now to Attend ChemConnect 2023 on Friday, 13th October 2023, Mumbai

Upcoming E-conferences

Chem Connect 2023

October 13, 2023

Other Related stories