Page 175 - CW E-Magazine (13-5-2025)

Special Report

from biomass is still in the early commer- To begin with, take the quality of mines to optimize inbound logistics, lead-
cialization stage, which limits the scale of Indian coal. Indian coal has a high ash ing to lowest possible landed cost of raw
production, leading to a higher cost of pro- content, which negatively impacts its calo- material. However, incumbents desiring
duction when compared to plants operat- rifi c value. This inherent drawback would synergies with their existing production
ing on fossil fuel feedstocks. mean that larger than necessary quantities facilities and downstream supply chain
of such coal will be required to produce will fi nd the dedicated facility unattractive
Additionally, to make renewable methanol. Argument can be made for and a costly affair.
methanol cost-competitive domestic pro- benefi ciation of the low-grade coal, but
ducers will have to drive down either the building such a facility will require addi- CONCLUSION
landed cost of biomass or reduce the capi- tional capital investment. Additionally, the The government’s roadmap for a
tal expenditure of such plants. Both seem problem of ash residue management will methanol economy, coupled with the
to be diffi cult to achieve in the short and require domestic producers to invest. potential for substantial import substitu-
medium term. tion and the availability of cheaper alterna-
The incumbents will have to invest in tive feedstocks, makes domestic methanol
Hence, despite its attractiveness as an coal gasifi cation technology for synthesis production appealing to both established
alternate feedstock, switching to biomass gas production, with an additional invest- players and new entrants.
will remain a challenge for the domestic ment for a cryogenic distillation unit for
methanol producers. generating oxygen required for produc- However, challenges such as signi-
tion. Moreover, the technology for produc- fi cant capital investment, inferior raw
Coal as a feedstock ing methanol from high ash coal has not material quality, and the need for a potential
India’s abundant coal reserves offer a matured yet, affecting the cost competi- redesign of the supply chain could hinder
signifi cant opportunity for methanol pro- tiveness of the fi nished product and competitiveness against imports, which
duction through coal gasifi cation, a cleaner making investment unattractive. are predominantly sourced from the
alternative to traditional coal combustion. Middle East and China. Consequently, any
This process generates synthesis gas (syn- Finally, switching the feedstock to coal impact on the existing supply chain may
gas), essential for producing methanol and may require the incumbents to revamp be minimal.
other high-value chemicals, while also their inbound supply chain. To begin with,
addressing the challenges posed by the they will need to onboard suppliers who Moreover, by the time domestic
high ash content typical of Indian coals. can provide coal from a single source with producers achieve competitiveness, the
The Indian government envisions a gradual minimal content of fi ne particles. This will burgeoning hydrogen economy could
reduction of coal in the overall energy ensure a steady quality of feedstock needed overshadow the methanol market, further
mix, and promoting a coal-to-chemicals to streamline the operations. Furthermore, complicating prospects for growth in this
complex aligns with initiatives like they may have to set up facilities near coal sector.
Atmanirbhar Bharat.
ABOUT THE AUTHOR
By leveraging its approximately 307 Sapratag Hota is a strategy consultant with expertise in the
billion tonnes of thermal coal reserves for Chemicals sector and Supply Chain domain. He has worked
methanol production, India can reduce with clients on multiple engagements developing market entry
dependence on imported fuels, enhance strategies, logistics network design, and fi nancial models. Prior
domestic capabilities, and position itself to consulting, Saptarag worked in an integrated fertilizers and
as a leader in the emerging methanol chemicals manufacturing fi rm.
economy.
ABOUT AVALON CONSULTING
Complication Avalon is a strategy and management consulting fi rm that advises on strategy,
Although coal is a viable and cheaper performance improvement, organizational transformation, and transactions.
alternative, switching the feedstock to Avalon Consulting is the highest-ranked Indian strategy consulting fi rm in Asia
coal will not be straightforward for the Pacifi c in Vault’s Best Consulting Firms in Asia for Strategy Consulting multiple
incumbents. This is due to three factors: times, including for 2024. Its client list includes the likes of the Tata Group, Aditya
quality of Indian coal; investment in new Birla Group, Hero Group, DCM Shriram, TVS Group, and other top MNCs who
technology; and re-orientation of the value its way of collaboration.
supply chain.

Chemical Weekly May 13, 2025 175

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