Mumbai: The coal ministry has invited applications for allocation of captive blocks for converting coal into liquid fuel like petrol and has allocated blocks with about 1-1.5 billion tonnes of coal for producing diesel oil and other oil products, the ministry said on its website. 

''The block cluster or blocks should enable mining operations of 28-31 million tonnes of run-of-mine coal per annum for 30 years,'' the ministry said.

The government has also constituted an inter-ministerial group to examine the basis of allocation of captive coal blocks to CTL projects.

The applicant company shall have a minimum net worth of Rs4,000 crore to be eligible for CTL projects, the ministry said.

''Since the expected investment for a 3.5 million tonne oil and oil-products project is expected to be around $6-8 billion, the applicant company should have minimum net worth of Rs4,000 crore,'' it said.

Reliance Industries had earlier informed of its intention to enter coal gassification business with investments of around $8-billion and had sought allocation of coal mines with reserves of about 1.5 billion tonnes of coal.

RIL had proposed to set up a plant with a capacity to produce 80,000 barrels of oil a day.

South Africa's Sasol Ltd, world's largest producer of liquid fuels from coal, had also evinced interest in establishing a CTL project in India in collaboration with the Tata group, and has asked for similar coal mines.

As per some estimates, producing liquid fuels from coal in the US achieves break-even with oil priced at $35 per barrel. This is significantly lower than the current global crude oil prices, hovering above $135 per barrel.

The government has also issued guidelines for selection of captive blocks:

Blocks already identified for development by CIL where adequate funding is on hand or in sight should not be offered to the private sector.

The blocks offered to private sector should be at a reasonable distance from existing mines and projects of CIL in order to avoid operational problems.

The areas where CIL has invested in creating infrastructure for opening new mines should not be  handed over to the private sector, except on reimbursement of costs.

Blocks that are explored in detail and where Geological Report with assessment of extractable reserves is available should normally be put in the offer list. Public/private sector shall bear full cost of exploration in blocks which may be offered for captive mining.

For identifying blocks, the requirement of coal for about 30 years or such other period as may be decided in the ministry, would be considered.
 
 In order to ensure timely completion of end use project, the government has decided to allow early development of associated captive coal mining block so that by the time the end use project is ready in stages the coal mine could have reached  full capacity coal production to meet the coal requirement of the end use plant. 

Since the mine has to be developed to its full capacity over a period of time, coal is produced during the development period.

Government  has allowed transfer of surplus coal extracted from the captive mine during the development periods to the local Coal India subsidiary company to avoid the hazards of storing of coal for long periods which leads to auto combustion and the adverse impact  on economy.