It is supposedly used for firefighting, due to the fire-extinguishing properties of the residual firefoam. It requires manual targeting to use, as colonists manning mortars don't automatically aim at fires.
However, it is somewhat cost-ineffective, as its tiny 5-tile radius isn't enough to cover large-scale fires, and it lacks the precision to be able to be dropped onto small fires accurately. Firing these shells to extinguish fires will quickly eat through your supply of steel. It cannot extinguish fires inside your colony properly as the mortar's blind spot prohibits it from hitting fires close to it.
It does allow colonists incapable of firefighting to help with firefighting efforts, however, which can be handy if you need more hands on deck in controlling an out-of-control wildfire.