Significantly, unlike its earlier proposal, the Tata-Sasol project does not seek any tax concession/ subsidy from the government or protection from the market risk of oil prices falling below a certain level.
Officials said the Tata-Sasol project got clearance on February 27 from IGP chairman Dr Kirit Parikh, who is also a member (energy) of the Planning Commission. The project has now been recommended for coal block allocation by the ministry of coal.
The Tata group has sought access to 30 million tonnes per annum of black diamond for producing 3 million barrels of oil and 1,500 mw of power for the CTL project.
For the CTL plant in India, Sasol will use the Fischer Tropsch technology, which converts the syngas, extracted from coal into oil, which in turn can be refined to produce diesel, naphtha, jet fuel, LPG and lubricants. The project would save over $25 billion for the exchequer through crude import substitution.
The IMG earlier had reservations over the significant energy penalty implicit in the conversion process. Sources said a calculation circulated in the last IMG meeting showed that in financial terms, the cost of import is tilted in favour of coal at the level of prices for coal and oil prevailing in the international market in late 2007 ($80/tonne and $100 a barrel, respectively). It was pointed out in the IMG meeting that the financial advantage would remain valid even if the CIF price of oil fell to $50 a barrel and the CIF price of imported coal remained at $80 a tonne.
The chairman of IMG argued that while there is a loss of energy in terms of domestic coal, the loss is made up as it is likely to be financially cheaper to convert domestic coal to liquids and import an equivalent quantity of coal instead. Thus, the domestic availability of energy would be the same or more and there is no energy penalty, said a senior official.