• 27 Mar 2023 06:23 PM
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GST reimbursement, assured supply likely for coal gasifiers

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In 2020, Centre announced an ambitious plan to gasify 100 million tonnes of coal by 2030, but it is yet to gain momentum because companies do not see it as economically viable.

Premium Having committed to achieving net- zero carbon emission by 2070, the govt has set itself ambitious goals to tap coal for cleaner uses such as gas. 

In 2020, Centre announced an ambitious plan to gasify 100 million tonnes of coal by 2030, but it is yet to gain momentum because companies do not see it as economically viable.

NEW DELHI : Companies that respond to the government's plan to gasify coal may be reimbursed the goods and services tax that they pay on buying the fossil fuel, said two people aware of the development amid a cool response by investors.

In 2020, Centre announced an ambitious plan to gasify 100 million tonnes of coal by 2030, but it is yet to gain momentum because companies do not see it as economically viable.

As a result, some new incentives are likely to be announced in the next six months, said the people cited above.

"The government will invite private investors for coal gasification and new incentives, including GST reimbursement, assured coal supplies from Coal India Ltd as in the power sector, among others. The idea is to provide support towards capital cost and taxes. We may reimburse the GST on the coal used for gasification," said one of the two persons.

The government previously considered waiving the GST compensation cess of 400 a tonne of coal used for gasification. After lukewarm interest, the Centre is now considering full reimbursement of the GST paid for coal used in gasification.

Another factor behind the development is that three proposed joint ventures of Coal India that were to produce gas from coal have not progressed as anticipated, the second person said.

Coal India had signed three separate memorandum of understanding (MoU) in October with state-run Bharat Heavy Electricals Ltd (BHEL), Indian Oil Corp. Ltd (IOCL) and GAIL (India) Ltd.

"The proposed total investment in these joint ventures is 44,000 crore. Although there has been slow progress, it may gain momentum soon, as inter-departmental talks are underway to remove the obstacles and set the ball rolling," said the person, adding that the consideration of incentive and tax refunds will also help this project to take off.

The high ash content found in Indian coal is also a technical barrier to large-scale coal gasification, the second person said.

Coal gasification, the process which turns coal into fuel gas, is considered as a cleaner option than burning coal to produce energy. The gas produced through the process can be used to produce gaseous fuels such as hydrogen, methane, methanol and ethanol.

Queries emailed to the union ministries of coal and finance remained unanswered till press time.

Having committed to achieving net- zero carbon emission by 2070, the government has set itself ambitious goals to tap coal for cleaner uses such as gas.

Most of the coal produced in India goes into feeding thermal power plants. With the power sector moving toward renewable sources, the use of coal for thermal power generation will come down in the long run, intensifying demand for alternative uses of coal.

In November 2021, the government launched the National Coal Gasification Mission to map the gasification potential of coalfields and develop indigenous technologies suitable for various feedstock ranging from low-ash to high-ash coal.

The mission document suggested tax incentives, including waiver of GST compensation cess, reduction in additional cess and duties and tax holidays for 15 years for all coal gasification projects.

The government has already made a provision for a 20% rebate in revenue-sharing for the coal used for gasification, provided the quantity used for gasification is at least 10% of the total coal production.