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Tezzbuzz Desk: Amidst the government's big plan to make India self-reliant in the energy sector and produce gas and chemicals from coal, the industry has put forward some important demands. The central government has launched an incentive scheme of ₹37,500 crore to promote coal gasification projects, but the industry says that it will not be easy to bring private investment in such big projects with financial help alone. Companies want the government to give a firm guarantee i.e. 'offtake guarantee' for the purchase of products produced from gasification.

Coal gasification is a process in which instead of burning coal directly, it is converted into synthetic gas. This gas can be further used to make chemicals, fertilizers and other industrial products. The government aims to reduce the country's dependence on imported natural gas, fertilizers and chemicals through this technology and make better use of domestic resources.

According to the industry, large coal gasification plants require an initial investment of thousands of crores of rupees. The cost of some projects may exceed ₹10,000 crore. In such a situation, the biggest question for the companies is who will buy the synthetic gas and chemicals produced from the plant, in what quantity and at what price. If there is no purchase agreement for a long time, then the risk of investment increases significantly. This is why companies are demanding long term offtake commitment from the government. This means that before starting the project, there should be a definite market or buyer for the sale of the product. The industry argues that Viability Gap Funding (VGF) provided by the government can reduce the initial cost of the project, but it does not eliminate market and demand risks.

The industry has also placed demands to land and logistics before the government. Companies want land to be made available near mines or ports for coal gasification plants. Apart from this, demand for freight support has also been made to reduce the cost of transportation of raw materials and finished products. The industry says that the high cost of logistics can affect the economic feasibility of big projects. Under the government's ₹ 37,500 crore incentive scheme, there is a provision of financial incentive up to 20 percent of the cost of plant and machinery. Its objective is to promote surface coal and lignite gasification and create a strong ecosystem for making chemicals from coal in the country.

However, the industry believes that capital subsidy alone will not be sufficient. Large projects may take several years to complete and are subject to changes in market demand, product pricing and logistics costs. The experience of Odisha's Talcher Fertilizer Project has also revealed the technical, financial and operational challenges to coal gasification. In such a situation, the challenge before the government is that instead of limiting the ₹ 37,500 crore scheme to just financial assistance, a policy should be made which gives confidence to private companies for long-term investment. The decision on demands like offtake guarantee, land and freight support can decide the direction of big investment in this sector.