OREANDA-NEWS. September 18, 2012. Strategic Energy Technology Systems Private Limited (SETSPL), a joint venture between a consortium of Tata companies and Sasol of South Africa, clarifies that it was allocated a coal block for its coal-to-liquids (CTL) project in a structured process based on predetermined criteria. The joint venture was not meted out any extraordinary treatment, as has been reported in sections of the media in the recent past.

With India importing 80% of its crude oil, posing increasing threat to energy security and ever increasing outflow of foreign exchange, the Coal Mines (Nationalisation) Act, 1973, was amended in July 2007 to include CTL industry as an end-user for allocation of captive coal blocks so that low-rank high-ash coal, abundantly found in India, can be converted to environmentally friendly liquid fuels. With CTL projects being highly capital-intensive, they are viable only with captive coal blocks allocated on nomination basis.

Subsequently, the MoC advertised in June 2008, inviting applications for allocation of coal blocks for captive use for CTL projects. Details in respect of application format, eligibility criteria and other guidelines were posted on the website of the MoC. The eligibility criteria required applicant companies to have minimum net-worth of Rs4000 crore, in view of the large capital investment. Since the technology is not available indigenously, applicants were also required to provide details of their collaborations/tie-up with proven technology providers.

An Inter Ministerial Group (IMG) was constituted by the Government of India to examine the proposals. The IMG consisted of the Secretaries to various ministries and members of the Planning Commission. The applicants were invited to make presentations as per the prescribed guidelines before the IMG in September/October 2008.

SETSPL was among the 22 applicants which made presentations.

The inter-se priority for allocation of blocks among the competing applicants was decided by the IMG based on the following:

Status (stage) level of progress and state of preparedness of projects

Applicant companies should have a net worth of Rs4000 crore, or in the case of a new SP/JV, the net worth of their principals

Credentials of the applicant company/associate company/technology provider in terms of past track record in execution of CTL projects

Installed production capacity for CTL, if any, anywhere in the world

Technology proposed – whether commercially tested / established

Tie-up with established technology owners/providers

Commitment on minimum conversion efficiency

Date of commissioning of captive mine as proposed in the application

Date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application

Sasol, the joint venture partner in SETSPL, has more than 50 years’ commercial experience in CTL and a well-proven technology.

Based on the above stringent comparative evaluation, SETSPL was allocated North of Arkhapal and Srirampur coal block in the Talcher region of Odisha in February 2009.

Though the block was allocated in February 2009, the Prospecting Licence (PL) order was issued by the Government of Odisha only on March 15, 2012. The execution of the PL deed is still pending, without which exploration cannot proceed.

Actual exploration is required to determine if the block has appropriate quantity and quality of coal reserves for the CTL project. In the event that the block has insufficient reserves of the appropriate quality for CTL, then the block will be returned to the government.