Govt’s Rs 8,500 Cr Incentive For NCGM Likely To Attract Fresh Investments: Report
The union government’s Rs 8,500 crore capital incentive for coal and lignite gasification projects could be a tipping point for attracting fresh investments, the rating agency Icra has said in a report.
The report stated that due to the scarcity of domestic natural gas, investments in coal gasification projects carry the potential to substitute a chunk of India’s imports of natural gas, urea, ammonia and methanol.
The Centre has recently unveiled a capital subsidy of Rs. 8,500 crore for promoting coal gasification projects aimed at achieving the National Coal Gasification Mission’s (NCGM) target to gasify 100 million tonne per annum (MTPA) of domestic coal by CY2030.
Notably, out of the Rs 8,500 crore allocated capital grant, about 48 per cent has been exclusively reserved for the public sector undertakings (PSUs), approximately 45 per cent for the private sector along with PSUs and 7 per cent for pilot projects demonstrating indigenous technology.
The grant will be released to eligible entities in two equal instalments. However, the rating agency in the report added, "The technology's adoption has been slow thus far, with only two industrial scale operating sites in the country."
It added that negative emission technologies like carbon-neutral hydrogen production (CCUS) remain important in reducing coal’s environmental impact as the coal gasification technology gets more widely adopted.
The levelised cost of brown hydrogen is slated to increase between 20 to 40 per cent to USD 1.7-2.0/kg H2 following investment in carbon capture and storage (CCS facility to produce blue hydrogen.
Coal gasification is a highly capital-intensive process with 50 per cent of the levelised cost of brown hydrogen being accounted for by interest, depreciation, and return on equity (RoE).
After factoring in the government's capital subsidy scheme, Icra estimates that the levelised cost of unabated brown hydrogen will decline by 7 per cent to USD 1.3-1.5/kg H2, helping increase its cost-competitiveness.
