Finance

Cabinet okays subsidy for urea produced via coal gasification

Coal gasification plants are strategically important as coal prices are non-volatile and coal is abundantly available in
the country.

The Cabinet Committee on Economic Affairs on Tuesday approved subsidy for urea to be produced by state-run Talcher Fertilizers (TFL) at its soon-to-be-commissioned Odisha facility. This will be only plant to produce the nitrogenous soil nutrient through coal gasification route. The Centre pays subsidy on urea to fertiliser manufacturers on the basis of cost of production at each plant and the units are required to sell the fertiliser at the government-set maximum retail price (MRP).

Talcher Fertilizers — a joint venture of Coal India, GAIL (India), Rashtriya Chemicals and Fertilizers and Fertilizer Corporation of India — is setting up the 1.27 million tonne per annum capacity urea plant based on coal gasification technology in Odisha with an estimated investment of Rs 13,277 crore. The project is expected to be complete by September 2023, but the construction process has faced delays after the Covid 19 pandemic.

Coal gasification plants are strategically important as coal prices are non-volatile and coal is abundantly available in
the country. India still has large coal reserves but its known gas reserves are limited.

The Cabinet also approved Bangalore Metro’s 58.19-km expansion plan at a completion cost of Rs 14,788 crore to provide the much-needed additional public transport infrastructure to Bengaluru, one of the fast-growing metro cities in the country.

The turnkey tender for the construction of the TFL project has been awarded to China-based Wuhuan Engineering. The CCEA has given its approval for “a specific subsidy to promote this innovative technology of coal-gasification for the first time in India,” commerce minister Piyush Goal said.

“This effort to convert coal to gas, and then gas to urea will truly help India become Aatmanirbhar (self-reliant),” Goyal said. The gasification process adopted in the Talcher unit is a clean-coal technology giving negligible sulphur dioxide, nitrogen dioxide, and free particulate emissions as compared to directly coal fired processes, he added.
India’s fertiliser consumption in FY20 was about 61 million tonne, out of which 55% was urea.

Due to lack of investment in the fertiliser sector until 2010, the import dependency has increased — 9 million tonne imported against about 22 million tonne domestic production of urea till last year. After change in policy during UPA, companies were allowed to produce urea out of natural gas as feedstock, shifting from costlier naptha. But it did not help cut import.

Prime Minister Narendra Modi had said last year that `20,000 crore will be invested in coal gasification projects by 2030 for ecofriendly utilisation of the fuel, which is abundantly available in the country. With this technology, coal can be gasified to turn it into a clean syngas or synthesis gas — a mixture of hydrogen and carbon monoxide — which constitutes the basic building block of the chemical industry and converted into a wide range of downstream products.

The Centre has not changed the MRP of urea since 2012, when it was increased by Rs 50/tonne to Rs 5,360/tonne. The MRP of 45 kg bag of urea is Rs 242 and that of 50 kg bag is Rs 268, all prices exclusive of charges towards neem coating and taxes as applicable. As a result, the government’s total outgo on fertiliser subsidy has been pegged at Rs 79,530 crore for FY22, out of which Rs 58,767 crore has been budgeted only for urea.

A typical world scale gasification facility needs about $2 billion of investment and can produce between 1 and 2 million tonne of methanol a year, which would need gasifying 2 to 5 million tonnes coal. Since imports from Gulf countries pose price challenges for products from coal gasification units, government support is required to make these projects feasible.

“Coal gasification plants are strategically important as coal prices are non-volatile and coal is abundantly available. Talcher plant shall also reduce dependence on important Natural Gas for production of urea leading to reduction in LNG import bill,” the government said in a statement.

As for the Bengaluru metro project, Rail Project Phase 2A (Central Silk Board Junction to KR Puram) and Phase 2B (KR Puram to Airport via Hebbal Junction) will streamline the urban transportation system in the city.

“The project involves integration with other urban transport system in an efficient and effective manner which is possible only by adopting innovative methods of designing, technology and institutional management,” the government said in a statement.

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