Strategic Energy Technology Systems Pvt Ltd, a joint venture between the Tatas and South African energy company Sasol Synfuels, appears set to put the country’s first coal-to-liquid (CTL) initiative on the back burner.
The partners are yet to decide on the feasibility of the project despite the coal ministry starting to breathe down its neck.
To make matters worse, Sasol has lost interest in such projects following the economic slowdown and has already shelved similar projects in South Africa and China in line with its strategy of conserving cash and investing only in high-return projects.
The coal ministry has issued a show-cause notice asking the venture why a delay in development of the North Arkhapal Srirampur CTL block allotted to it should not be held as violation of the terms and conditions of its allotment. It has also sought a detailed status report on the progress of the end-use plant for which the block was allocated.
Milestones required to be fulfilled to comply with conditions for allotment like land acquisition, grant of mining lease and grant of environment management plan clearance are still pending, the coal ministry letter noted.
Going by sources, the venture is till working on the feasibility study for a 100,000 barrels a day CTL facility at Talcher in Odisha.
If it indeed loses the coal block meant for the CTL project, it would bring to an end an embarrassing episode for the Tatas who had earlier had to defend the controversial allocation of the block in 2009.
Following media reports that the block was hurriedly allocated by the government just a day before the Election Commission was to issue notification for the 2009 Lok Sabha elections, Tatas went on record claiming that the allocation was made on predetermined criteria and that the joint venture was not meted out any extraordinary treatment.
The Tatas had then argued that since CTL projects are highly capital-intensive, allocation on nomination basis would only make them viable and that such projects are needed to convert low-rank high-ash coal to environmentally friendly liquid fuels.
Interestingly, Sasol plans to continue investing in gas-to-liquid projects to cash in on the attractive price differentials between gas and crude oil. However, investments in CTL projects would be on a case-to-case basis with the project in India remaining the only such effort globally.
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