India is planning to embark on a major push to produce alternative fuels and petrochemicals from coal. The coal gasification sector presents tremendous growth opportunities for India. A chemical industry based on indigenous feedstocks like coal could offer significant value addition to Indian economy in medium to long term in terms of savings in foreign exchange, revenue generation (taxes, duties, royalty etc.) and employment generation. The outcome of this initiative has the potential to affect the future energy distribution in India as well as impact the global supply and demand dynamics of petrochemicals.
- In the past, availability of cost-effective technologies to handle low quality Indian coal was a limiting factor in fully monetizing India’s coal resources. However, a significant progress has been made on the technology front during the last decade and now high ash coal can be effectively processed using established technologies.
- India has significant coal resources; However, challenges (logistics, environmental approvals and land acquisition) to commercialize resources has forced Indian market to increasingly turn to imports to meet its demand.
- Global gasification technology companies will be interested to invest in Indian gasification industry and take on the technical risk for a reasonable return on investment.
To enable the indigenous feedstocks based chemical industry, it is imperative to incentivize coal to chemical projects by sharing the ‘benefits’ of a reduced current account deficit, energy independence and employment generation. These incentives can be a combination of policy, fiscal and non-fiscal based benefits. India should leverage the gasification technology globally available for fast track development of local coal to chemical industry. Global gasification technology companies will be interested to invest in Indian gasification industry and take on the technical risk for a reasonable return on investment. To attract private sector investment and global technology players in the Indian coal to chemical industry, Government should consider providing incentives to make the risk – returns globally competitive for the sector. A policy push for coal to chemicals would need to be driven by feedstock supply security and attracting proven global technologies in coal gasification to make it competitive.