Coal India plans gasification JV

Coal India Ltd (CIL), the world’s largest coal producer, will sign a joint venture agreement with another PSU for undertaking surface-based coal gasification project, a source close to the development said.

The agreement will be signed in two days, the source said, but did not name the PSU.
“We have received 2-4 proposals for surface coal gasification project, of which we are going ahead with one of them, which is with another  PSU,” the source said, adding: “It is for the production of synthetic gas and some other by-products as well and there would be an investment from CIL.”

ONGC had proposed 50:50 joint ventures to CIL for surface coal gasification purpose.
In January last year, CIL had signed a memorandum of understanding with GAIL India Ltd for undertaking joint development of surface based coal gasification project. The capex for the project was estimated at Rs 2,400 crore. However, the project has not taken off.

When contacted, a GAIL India official said that production was delayed because a coal block has not yet been allotted.

Gautam Dhar, chief general manager, CIL, said, “The MoU had been signed and a feasibility report was prepared by an independent agency and subsequently, a joint nature of allocation of coal was to be done. But due to some reasons, it got delayed.”

“The request for allocation of coal block was with ministry of coal for more than a year and recently they have written to CIL adjourning the coal block. It (the MoU) is now under examination,” Dhar added.

Sajjan Jindal-promoted JSW Steel too has been planning to undertake a surface coal gasification project in West Bengal. They have received one coal block at West Bengal for steel manufacturing, but nothing concrete has come from the company till now.

CIL is also looking at revising its pricing structure for its forward e-auction process.
The first forward e-auction of coal took place for Western Coal Fields Ltd in August, but received a poor response from coal buyers due to a high reserve price.

A CIL official told DNA Money, the reserve prices were higher because the coal was “only from loss-making mines”.

“The principle we followed was cost of production plus reasonable rate of return, or 100 per cent of the notified price. It was only for those consumers who need coal desperately… and who will get an assured supply.”

The official hinted that CIL may makes changes to its e-auction format. “The fact there have been globally speaking only 16% of the quantity offered have been booked indicates that the response is not yet that good and depending upon that we will recalibrate,” the official said.