The government is initiating a coal-to-liquid project to meet the rapidly growing need for liquid fuel in the country, President Pratibha Patil said on Thursday.

In her address to a joint sitting of Parliament, Patil said coal is the main source of energy in India and the government has allocated 158 blocks with reserves of almost 40 billion tonnes to public and private sector companies in power, cement and sponge iron for captive use.

Coal-abundant India has been pushing for the $6-8 billion coal-to-liquid project to cut its dependence on imported oil.

The project will produce 80,000 barrels of crude oil per day (about 4 million tonnes a year) by liquefying coal.

An inter-ministerial group, after scrutinising 22 applications, 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 project.

Speaking about the initiates taken by the United Progressive Alliance government in the coal sector, the President said a new Coal Distribution Policy has been put in place and e-auction has been introduced to make coal available to all.

To enable a transparent allocation of coal blocks through competitive bidding, Patil said a Bill has been introduced in Parliament for amending the Mines and Minerals (Regulation and Development) Act.