Tata or Jindal? Govt to decide in fortnight for CTL

The government may in about two weeks decide whether the Tatas or Jindals will get the $6-8 billion pilot project to convert coal into liquid petrol.

"The process to finalise the allocation of coal-to-liquid (CTL) project may be completed within a fortnight," Minister of State for Coal Santosh Bagrodia told PTI yesterday.

The Inter-Ministerial Group (IMG), which was entrusted with the job of short-listing applicants for the project, has given its recommendations and the government is looking into it to take a final call, Bagrodia added.

The IMG, after scrutinising applications from 22 firms has recommended Strategic Energy Technology Systems Ltd, a joint venture of Tata group with Sasol of South Africa, and Jindal Steel and Power Ltd, for the CTL project.

According to a senior Coal Ministry official, the Tata-Sasol JV may have a cutting edge over rival JSPL due to its operational expertise in the field.

Despite crude prices lowering to around $40 a barrel from the $147 peak in July 2008, India is pushing for the CTL project to cut its dependence on imported oil. The CTL project will produce 80,000 barrels crude oil per day (about four million tonnes a year) by liquefying coal reserves.

Among major firms, which were eyeing the project, but have been rejected, include RIL, Anil Ambani Group's Reliance Infra, SAIL, GAIL, IndianOil, GMR Infra and Vedanta.

Of the 22 applicants, the IMG shortlisted firms having a minimum net worth of Rs 4,000 crore and agreement with foreign firm for technology to convert coal into liquid petroleum.

An official source said RIL's proposal was rejected as it had offered a direct liquefaction process, which was not favoured considering the low reactive content of coal.

GAIL and GMR did not submit agreements with the technology provider, as required for selection. The two firms, however, submitted copies of letters from technology providers after the IMG had finalised its report, and the Chairman of the panel rejected them, he said.

Strategic Energy Technology Systems Ltd (SETSL), which, along with JSPL, has been favoured for being awarded the coal blocks, had opposed giving part of the crude oil, it plans to produce from the project, to the government as profit share.

In a letter to the government, SETSL had said that profit-sharing would effectively be a new tax, which is not permissible under the relevant Acts.

Instead of charging upfront payment or signature bonus for allocating natural resources, the government plans to get a share of the oil and gas produced, called profit petroleum (from the CTL project), which is biddable and can be taken in kind or cash.

For the CTL project, the Coal Ministry is offering three coal blocks -- Radhikapur, Srirampur and Ramchandi -- in Orissa with cumulative reserves of about six billion tonnes.