Cabinet Approves Rs 8,500 Crore Viability Gap Funding Scheme For Coal Gasification

On January 24, 2024, the Union Cabinet gave the green signal to this scheme. Viability Gap Funding (VGF) Scheme, Allocation of Rs 8,500 crore for Coal Gasification Projects, This strategic move is an important step towards realizing the ambitious mission of the government Gasification of 100 million tonnes of coal by 2030. This initiative is set to revolutionize the energy sector, especially with the active participation of key players like Coal India, GAIL (India) and BHEL.

Viability Gap Funding Framework

The VGF scheme has been designed with precision in which the funding is divided Three categories. Government-owned companies leading three major projects are going to get a substantial grant of Rs 4,050 crore. Additionally, bids will be invited from both public and private entities for the second segment, which will contribute a significant amount of Rs 3,850 crore to the VGF. The remaining Rs 600 crore has been earmarked for small-scale plants and ‘demonstration projects’. Importantly, each project in each category is eligible for VGF benefit up to 15 per cent of its capital cost.

Coal Gasification: A Clean Alternative

In the field of coal gasification, Where coal is converted into synthesis gas (syngas), there lies the potential to reduce environmental impact., This thermo-chemical process facilitates the production of various chemical components such as synthetic natural gas, dimethyl ether, ammonium nitrate and methanol. The versatility of these products makes coal gasification a cleaner alternative to traditional fuel combustion.

Major players and joint ventures

Cabinet approval extends beyond mere funding. Coal India, GAIL (India), and BHEL Poised to play a key role in the coal-to-chemicals scenario. The joint venture between Coal India and GAIL (India) will focus on the coal-to-synthetic natural gas project. Total project cost Rs 13,052 crore. Along with this, the collaboration between Coal India and BHEL will focus on coal-to-ammonium nitrate project with an investment of Rs 11,782 crore. Both projects come with a 25 per cent variation in cost, demonstrating the government’s commitment to diversify and innovate in the energy sector.

India’s energy independence

Coal gasification has emerged as a game-changer, with the potential to significantly reduce India’s coal import bill. Technology is the key Import substitution worth Rs 1.3 lakh croreOffering products like Methanol for petrol blending, Di-Methyl Ether (DME) for LPG blending, Ammonia, Ammonium Nitrate for urea manufacturing, and replacing imported coking coal in blast furnaces while producing Synthetic Natural Gas (SNG). Contributes to steel making. ,

Important questions related to exam

1. What is the primary objective of the Viability Gap Funding (VGF) scheme approved by the Union Cabinet on January 24, 2024?

2. Which government-owned company is involved in joint venture with GAIL (India) for coal-to-synthetic natural gas project?

3. What is the maximum percentage of capital cost that a project can avail under the VGF scheme?

Please share your feedback in the comments section!!

Cabinet approves Rs 8,500 crore Viability Gap Financing Scheme for coal gasification_40.1

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