India will remain a coal-dependent economy well into the future

Despite diplomat-speak at Glasgow, the country will remain a coal-dependent economy well into the future

Pollution be damned, we didn’t contribute. We need coal to grow. This was, in essence, India’s position at COP26, if you eliminate the far-into-the-future targets and the diplomat-speak about climate change. India needs coal — it is dependent on the cheap, reliable power it provides, on the jobs coal offers and on the trillions of rupees in cess, taxes, royalties and rents. More importantly, coal is available in our backyards and we don’t have to go looking for it in West Asia. In short, it’s easily available, gives us control over prices and there is plenty to last for generations.

That’s why India prevailed on COP26 to water down the phrase on coal to phase “down”, and not “out”, allowing the country to use a cheap, domestically available resource to drive its development just as the mineral helped meet the energy needs of US, Europe and China. Indian Environ­ment Minister Bhupender Yadav asked how anyone can expect developing countries to make promises about phasing out coal and fossil fuel subsidies when they provide the much needed social security and support.

India has the world’s fifth largest reserves of coal coupled with the least import dependency at around 25 per cent — and that could come down to 10 per cent if domestic production rises by around 150 million tonnes. Compare that to 85 per cent for oil or 50-60 per cent for natural gas and LPG. India has one of the youngest coal-fired plants in the world, with 132 Gw or 64 per cent of total coal-fired capacity less than 10 years old. These can operate for as long as 30 years if maintained properly, and can be upgraded to more efficient, less polluting ultra-super critical plants. New capacity of around 60 Gw is in the pipeline.

Renewables do not give the comfort of coal because materials used in batteries or solar panels still need to be imported from hostile neighbours, rogue nations or politically unstable countries in Africa and South America, prone to Chinese influence. Batteries are made up of lithium, cobalt and nickel among other minerals, and need to be replaced every few years. Chile has over half the world’s lithium reserves; China has nearly half the rare earths; Congo has the world’s biggest cobalt reserve; and the Taliban-ruled Afghanistan has an abundance of lithium, rare earths, cobalt, bauxite, mercury, uranium and chromium. India will continue to depend on Chinese battery cells for the medium term, says Crisil. By 2030, batteries for electric vehicles (EVs) are expected to account for an 80 per cent share in the lithium-ion battery market, according to ICRA. Green hydrogen, the current policy-makers’ favourite, depends on expensive, imported electrolysers to split water and extract the gas.

 

Blackouts this year and in 2014 showed how coal continues to drive India’s economy despite expanding renewable capacity. Solar and wind grew over threefold in the last eight years to 86 Gw but that could not meet the surge in power demand. Coal may constitute 54 per cent of installed capacity but accounts for around 70 per cent of generation while renewables, at 26 per cent, only account for 12 per cent. The advent of EVs increases the dependency on coal-fired generation. Rahul Tongia, a senior fellow at the Centre for Social and Economic Progress, said even at 33 per cent of total vehicle sales by 2030, EVs will constitute the most significant load. The grid impact with EVs plugged in together versus theoretically spread out to cause minimum instantaneous surges varies with a ratio of over 50 times. Charging will be done in the evening, while solar generation peaks in the afternoon. Thermal plants will carry the load in the absence of inexpensive, reliable battery storage technology.

Coal is also a key contributor to India’s finances. The tax on coal, which includes cess, royalty and district funds, ranges from 60 per cent to 114 per cent on Coal India’s notified price. New Delhi charges Rs 400 a tonne as a cess on coal, and uses it as GST compensation to states. The cess amounted to nearly Rs 40,000 crore for 980 million tonnes of coal supplies in 2019-20 from both domestic and imports. Coal India paid around Rs 50,000 crore in taxes and royalties to federal, state and district governments, and the coal industry contributed Rs 3,400 crore to key coal-bearing districts, and spent over Rs 1,000 crore as corporate social responsibility, according to a study by the University of British Columbia.

Coal India employs around 270,000 people and there are some 500,000 coal industry pensioners. Nearly 40 per cent of India’s districts depend on coal or coal-powered generators for jobs or funds, with over 30 districts in Jharkhand, Odisha, Chhattisgarh, Telangana and parts of Madhya Pradesh depending on it to a very large extent. There are 3.6 million people directly or indirectly employed in coal mining and power in 159 districts, the study said, of which 80 per cent linked to coal mining live in 51 districts, mostly poor and backward.

The Indian Railways, which earns 44 per cent of freight from transporting coal, will also be affected by a shift from coal as these freight charges subsidise passenger travel.

Coal also ties in with Prime Minister Narendra Modi’s Aat­manirbhar Bharat and Bharat­iya Janata Party’s (BJP) parent, the Rashtriya Swayamsevak Sangh’s, focus on self-reliance. It makes for sensible politics in India just as climate and carbon do in Europe. Access to LPG and electricity in villages — largely thermal — helped the ruling BJP in key state polls in Uttar Pradesh and Bihar and federal polls. Tongia expects coal to remain the dominant fuel in the power sector in India, through 2030 and beyond. Coal is still very much a part of India’s power needs, said Sunita Narain of the Centre for Science & Environment at a recent event.

New Delhi’s preference for coal is seen in recent directives. The government mandated coal-fired generators in Punjab, Haryana and UP to instal desulphurisation units by 2025 and also allowed defaulting plants to pay a small penalty to continue operations rather than close. It overturned an environment ministry notification mandating the use of washed coal with ash content not more than 34 per cent, allowing the use of coal irrespective of the ash content.

In January, Home Minister Amit Shah said Rs 4 trillion will be invested in India’s coal sector, of which public sector units will account for over 60 per cent. The coal sector will be the biggest contributor to the Modi government’s $5-trillion GDP target, he added, reflecting how India’s top brass are wedded to coal.