NEW DELHI (Reuters) - India is at least a decade behind China in embracing technology that could convert its coal reserves into enough gas and oil to surmount chronic power shortages and halve its energy import bill of $110 billion a year.
Talk about coal gasification in India, a technology used to access even unmineable reserves, is almost four decades old, but it is only now that its first such plant is about to start production. A second one is still on the drawing board.
It will be at least five more years before India reaps significant benefits from this technology to produce feedstock for more steel, power and fertilisers, experts say.
“India is lagging behind in adopting technologies related to coal gasification,” said Parthasarathi Deb, Senior Vice President (Gasification) of Reliance Industries Ltd (RELI.NS).
In comparison, China has some 50 coal gasification plants running and it is ploughing ahead with another 40. And while India is just beginning to turn coal into gas, China has already moved into producing liquid fuels such as diesel from coal.
The difference means India’s coal-use efficiency is about half the world average of 50 percent, its coal-dependent power producers have never met production targets and the country’s total electricity output is just a fifth of China’s.
“Only about a third of India’s proven coal reserves is mineable, which means gasification should have been the top priority if India were serious about using coal efficiently,” said Amitava Banerjee, technical adviser of Lurgi India.
The country’s first coal gasification plant is being built by private sector Jindal Steel and Power Ltd. (JNSP.NS). State-run Rashtriya Chemicals and Fertilizer and Gas Authority of India Ltd (GAIL.NS) are working on the second one.
Jindal’s plant in Orissa will use low-quality, high-ash coal, the variety that abounds in India, to produce 5.7 million standard cubic metre per day of gas.
With its 350 billion tonnes of potential reserves, India is the world’s fourth most coal-rich nation. But it is a net importer, dragged down by state controls over mining rights, regulatory hurdles and land acquisition problems.
In a country where millions of people live in the forested mountains that hold much of the coal and other minerals, there is political pressure to keep those areas off-limits.
Although coal is seen as the solution to India’s power shortage, the regulations are a daunting barrier to development in a country where half a billion people don’t have access to power, and electricity from renewable sources is too expensive.
Technologies such as gasification should have been a natural choice as India seeks to lower carbon emissions, experts say.
But private players stayed away from coal gasification projects as government controls restricted large-scale access to coal to state firms.
“Though coal is used to produce more than half of our power, it has never been the focus,” said A.K. Shrivastava, director of private power producers Abhijeet group.
“Now the government wants to focus on nuclear and renewable energy. What is needed is an integrated policy that enables the private sector to invest in clean coal technology.”
Underground coal gasification process involves combusting underground coal deposits into gas by using oil extraction technology. Proponents of underground coal gasification argue the process creates lower carbon emissions and has a smaller footprint than traditional surface gasification where the mineral is mined and processed in facilities above ground.
The technology is expensive but a rise in oil and gas prices means underground coal gasification could become more economical.
India’s coal demand is set to jump to 980 million tonnes by 2017, but output in that period may only be 795 million tonnes.
But under India’s current coal policies, experts say, producers will not be able to plug the shortfall.
State-run Coal India (COAL.NS), which accounts for about 80 percent of the country’s output, aims to produce 464 million tonnes in 2012/13, and has already scaled down output target to 440 million tonnes in 2011/12.
Coal India is still to come up with any concrete gasification plans.
Coal will be required for 85 percent of the additional 76,000 MW capacity addition the country targets during 2012-17.
Editing by Rebekah Kebede and Sanjeev Miglani