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Govt may offer foreign cos coal blocks given up by developers

The government plans to invite foreign companies to produce gas from coal blocks that have been relinquished by developers for being uneconomical. Officials said the blocks would be offered under a new policy for underground coal gasification, a method of converting coal to gas for various uses, including power generation and as feedstock in fertiliser and chemical industries.

The government sees vast potential for underground coal gasification projects since only 41% of India's 301 billion tonnes of coal reserves are recoverable while the balance falls in uneconomical or inferred category. It plans to offer coal and linkage acreages in cases where conventional mining is not feasible, in isolated coal and lignite blocks and relinquished coal-bed methane or CBM blocks.

Underground coal gasification is a costlier but cleaner alternative to traditional coal mining and requires less surface area.

Indian companies including ONGC, GAIL India, Reliance Industries Ltd and Essar Oil have shown interest in underground coal gasification since the government allowed private investment in the sector in July 2007. Australia's Linc Energy, California-based Lemar LLC, Malaysia's Essem Group, Reliance Power, Jindal Steel & Power have responded to a tender floated by Coal India to underground coal gasification projects at the blocks being offered by Coal India Limited to undertake underground coal gasification in two blocks.

Power and coal minister Piyush Goyal had last month told Parliament that two coal blocks - Yellendu Dip Side in Telangana and Bandha-Singrauli Main Basin in Madhya Pradesh - and five lignite blocks had been identified for development of underground coal gasification.

The process was first taken up in the 1980s by ONGC and Coal India Ltd with technical assistance from Russian firms. The pilot projects were dropped due to inadequate technologies and environmental concerns.

As per the present proposal, there will be a two-part bidding on the lines of revenue sharing model of CBM blocks auction. The bidders that qualify in the first technical round and offer to share the highest revenue with the government will win 30-year contracts to develop the mines, an official said.

The contract period will be divided into three phases. The first two phases will comprise evaluation of the blocks and preparation of feasibility reports while the actual exploration will begin in the third phase. The developers will be allowed to exit the projects before the third phase.The developers will pay a lump sum amount and royalty to authorities but will be offered incentives including duty exemption on equipment imports and a minimum seven-year tax break.

Source: The Economic Times