Govt eyes alternative use of coal, emptied mines as power plants well-stocked

"Now that production and supply concerns have been addressed and the domestic availability of coal for power and other sectors is not an issue, diversification efforts including coal gasification, and revisiting the plan to pump storage projects (PSP) at de-coaled or emptied mines would gain more prominence going ahead," said a person aware of the development.

Coal use diversification has been on the agenda for the past few years, but increasing domestic coal production and supplies to the power sector had been at the core of the ministry's operations.

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The government has already launched the ₹8,500 crore viability gap funding (VGF) scheme for coal gasification and has selected Jindal Steel and Power Ltd, New Era Cleantech Solution Pvt Ltd and Greta Energy Ltd under the component for incentivization of private players.

Coal gasification, a process in which it is converted into fuel gas, is a highly capital intensive process and the low-quality of the mineral produced in India presents an obstacle for efficient gasification. 

Despite the government's efforts, it has not yet picked up as anticipated so far, leading the government to roll out the VGF scheme in January 2024. The Centre aims to gasify 100 million tonnes of coal by 2030. The government has also approved investment by Coal India Ltd (CIL) in joint ventures with Bharat Heavy Electricals Ltd (Bhel) and GAIL for undertaking coal gasification projects.

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Gasification enables conversion of coal into synthetic gas or syngas, which can be used to produce downstream products like methanol, ammonium nitrate, synthetic natural gas (SNG) and fertilizers, among others.

The idea of setting up pump storage projects (PSPs) was initially mooted a couple of years back, but it did not take off. The ministry, Coal India and NHPC had looked in the feasibility of the projects, but the plan did not take off then.

PSPs are hydro-projects where two reservoirs at different heights generate power as water moves through turbines.

"However, the ministry will again push for PSP in de-coaled mines and projects are expected to turn successful and work will soon start on this front," said another person in the know of the developments, adding that as coal mines have considerable height, it would be adequate for creating a hydro storage at the top which can be used for generation of power at night.

Queries sent to the Union ministry of coal remained unanswered till press time.

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The reform

In the past few years, the coal sector has witnessed reforms including the opening of the coal sector in 2020, and the launch of commercial mine auctions. Further, the rush to increase supplies to power sector post the crisis situation in 2021 has led to record levels of coal production in the country.

In FY25, India's coal production reached 1.04 billion tonnes, and the government aims to reach an annual production of 1.5 billion tonnes by the end of the decade.

Although coal-based power plants are likely to dominate India's energy mix for several years down the line, the energy transition journey and the increase in renewable energy capacity narrows the window for use of coal for the country, which has the world's fourth-largest reserve of the mineral, requiring the government to look at newer and sustainable ways to use the fuel.