Cost, capital availability next challenge for coal gasification

Even as the government strongly backs coal gasification through a ₹37,500-crore incentive program, analysts and industry players stress the need for a dedicated financing and risk-sharing architecture to make it market-ready. Coal gasification converts coal into various downstream products, potentially reducing imports of natural gas, methanol, and fertilizers.

However, these projects face large upfront capital requirements, lengthy gestation periods, and multiple risk factors, including technology performance, execution, product pricing, and debt financing. While the government addresses the capital cost gap, the next challenge is securing the necessary capital, as large-cap companies are hesitant and mid-sized firms and startups find the opportunity financially unattractive.

Industry sources suggest that the government should implement a partial credit guarantee facility to assist projects in transitioning from subsidy allocation to financial closure and execution. Atanu Mukherjee, CEO of Dastur Energy, emphasizes that the incentive framework is just the beginning and that long-tenor, competitively priced debt is crucial for scaling the sector.

The goal should be to facilitate commercially viable projects' financial closure early on, gradually reducing the need for government support as lenders gain better risk assessment capabilities.