The coal ministry has notified stringent guidelines for carrying out underground coal gasification (UCG). Normative time ceilings have been announced to ensure that Syngas production from the captive block will commence within 36 months (42 months in case the area is in a forest land) from the date of issue of the letter of allocation. Any slippage in meeting the deadlines, unless previously agreed due to special reasons to be recorded in writing, may lead to the forfeiture of bank guarantees or/and allocation cancellation of the previous approval under Section 5(1) of the Mines & Minerals Act, 1957 or mining lease.
The guidelines, notified on July 13, are crucial, especially when companies like Reliance Industries, GAIL India, Oil & Natural Gas Corp and Neyveli Lignite Corp are currently involved in UCG. According to the World Energy Council and the coal ministry, there are about 52 million tonne of coal reserves for UCG in the country. The coal ministry expects the UCG to be carried out through joint ventures.
Sources in the coal ministry pointed out that the allocatee company will be required to submit a performance guarantee of Rs 50 crore within three months of the date of issue of the letter of allotment. Further, 50% of the bank guarantee will be linked to the time schedule set for the development of a captive block and the remaining will be guaranteed production. The bank guarantee will be encashed in case of lapses, if any, vis-a-vis the deadlines set for that year. Once production commences, in case of any lag in the production of Syngas, a percentage of the bank guarantee will be deducted. On the exhaustion of the bank guarantee amount, the block will be liable for de-allocation/cancellation of the mining lease.