Coal India (CIL) has reportedly told the government that rules for the Centre’s ?37,500 crore coal-gasification incentive scheme could put the state-run company at a disadvantage vis-a-vis private sector competitors.

According to an Economic Times report on Saturday, CIL has raised concerns over the short bidding window and the exclusion of captive power plants from the costs considered for calculating incentives.
 
What are Coal India's key concerns?
 
The state-run company sought six months for the first round of applications, arguing that the proposed 60-day window could favour companies that already have project reports ready.
 
The coal ministry, however, is said to have rejected the request, saying subsequent bidding rounds will begin immediately after the previous round closes, with each round having a two-month application period.

A senior CIL official said applicants are required to submit a board-approved feasibility report or project report along with their applications, giving an undue advantage to companies whose detailed project reports (DPRs) or preliminary feasibility reports (PFRs) are already ready or under preparation, the Economic Times reported.

The timeline is significant because financial support for each product category is capped at ?9,000 crore across applicants. Companies submitting bids in the initial rounds could therefore secure a larger share of the available support, while projects still completing their feasibility studies may have to wait.
 
Coal India has also questioned which costs can be counted while calculating the incentive. The company asked whether a captive power plant using rejects from a coal washery to supply electricity to a gasification unit would qualify as part of the project. It also sought clarity on whether such a plant could be included in the project cost and the cost of plant and machinery used to calculate the incentive. The ministry's response was categorical in its denial, according to the Economic Times report, saying "No. Captive power plants do not fall under the definition of project."

The company raised both objections during the ministry's pre-application conference for the scheme. It is now evaluating the implications as it prepares to submit its bids under the scheme.
 
What is the coal-gasification incentive scheme?
 
In June this year, the Centre operationalised its ?37,500 crore scheme to provide incentives for coal gasification by notifying a competitive-bidding framework. Under the framework, bidders seeking lower financial incentives will receive higher evaluation scores.
 
The notification, issued by the Ministry of Coal, provides for subsidy caps, milestone-linked payouts and penalties for project delays. It offers financial assistance of up to 20 per cent of the cost of an eligible plant and machinery.

Financial assistance is capped at ?5,000 crore for any single project and ?12,000 crore for any corporate group, including its holding, subsidiary and associate companies. The government has also introduced safeguards to prevent concentration of incentives. In addition, incentives for any individual downstream product have been capped at ?9,000 crore, except for urea and synthetic natural gas projects.
 
The scheme aims to support projects capable of gasifying around 75 million tonnes (MT) of coal and lignite, contributing to India's target of achieving 100 MT of coal gasification by 2030. To oversee implementation, the Centre has constituted an empowered group of secretaries chaired by the expenditure secretary. It has also set up a special task force under the Ministry of Coal and a project management agency to monitor project execution and verify expenditure claims.

Source: Business Standard 

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