India's path to renewable energy: Balancing growth and coal transition

From G20 to COP28, there were two themes India did not budge from: Increasing its share of renewable power generation for meeting its climate targets, and not phasing down coal production (read thermal power) for fuelling its economic growth. However, as the share of renewable energy (RE) increases in the country’s energy mix, it is expected that the dependency on coal will decline.

There are caveats, though. The most important one is, what will happen to India’s eight coal-rich states, which are socio-economically dependent on this dry fuel. Jharkhand, Chhattisgarh, Odisha, Maharashtra, Madhya Pradesh, West Bengal, Uttar Pradesh, and Telangana are the coal producing states in the country, of which the first three are majority suppliers.
 

‘Just Transition’
 

In 2022, Coal India Limited (CIL), the national miner and world’s second largest coal producer, hosted its first ever conference on Just Transition. Attended by the academia, labour unions and the management, the conference aimed to kickstart an informed dialogue on what will be one of the biggest corporate headaches in the near future. The same year, the union coal ministry also set up a Just Transition Task Force, in partnership with the World Bank, though it currently only aims at sustainable mine closure.
 

Just Transition entails a fair and inclusive pathway to “green” an economy, and ensures that job opportunities are not lost in the rush of green. A rarely heard term in India, it is becoming a catchphrase among policymakers. Jharkhand, for instance, has set up a Just Transition task force, becoming the first and only state so far to plan in that direction.
 

For states such as Jharkhand, Chhattisgarh, and Odisha, coal is the backbone of their revenues. These states are also poor in RE resources. This means when the share of RE in the electricity grid increases, the net flow of electricity would move towards RE-rich states.
 

A white paper1 by Indian Institute of Technology (IIT) Delhi professors Sanjay Mitra and Rohit Chandra, for the National Institute of Public Finance and Policy (NIPFP), says the impact could be substantial, adding 8.66 per cent to the combined deficits of the RE-poor states under conservative assumptions. “The impact is most severe on the three coal-rich states of Jharkhand, Odisha and Chhattisgarh. Absent an acceptable frame­work for an equitable sharing of costs and benefits across the states and with the Centre, these develop­ments could impede the realisation of the national goals for climate change mitigation,” says the paper.
 

Chandra, assistant professor at IIT Delhi, says power generation projections by the Central Electricity Authority show that it is likely that towards the end of this decade, as coal growth slows and RE growth accelerates, the fiscal deficits of coal-rich states will rise. “Coal-rich states could become even bigger net importers of power and the regional imbalance of power generation will widen. There needs to be much more thinking on how to rectify this imbalance,” Chandra said in a written response to Business Standard.

 

Mining for jobs
 

In coal-rich states, mining is the main fabric of direct and indirect jobs. Pramod Agarwal, speaking to this newspaper last year when he was the CIL chairman, had said the public sector giant’s manpower had been decreasing in the range of 12,000 to 13,000 every year, thanks to digitalisation, automation, and outsourcing. To improve its bottom line, it had been increasingly outsourcing its mining operations under the MDO (mine developer and operator) route to private agencies.

Labour unions say the energy transition plan in its current form is unjust and would affect a much larger population than accounted for.
 

“According to our calculations, the net zero plan will impact the livelihoods of close to 22 million people across several states. Along with CIL employees, people running numerous small businesses in the vicinity of coal mines for earning their livelihoods will also be affected. Close to 500,000 coal pensioners will be affected due to depletion of the pension corpus as only close to 200,000 active employees remain in CIL,” D D Ramanandan, general secretary, All India Coal Workers Federation, said over a phone call.

The CIL management disagrees.
 

“Resettling its own workforce, as part of Just Transition, is not applicable in case of CIL right now,” Veera Reddy, director (technical), CIL, told Business Standard in an email response. He said the decrease in CIL’s headcount in the last five years was around 87,000, owing to reasons of “natural attrition only, like superannuation, resignations, death in service and terminations but not due to heightened mechanisation and involvement of MDOs.”

“Where natural closure of mines occurs, CIL’s manpower is gainfully deployed in new and existing mines in the proximity. India’s coal potential is still not fully utilised, and relocating people as a fallout of Just Transition is far off,” Reddy said.
 

Decline of regions
 

Indeed, a large-scale impact on jobs due to coal mine closure is not yet on the cards. As power demand touches new records, due to economic growth, stat­es are falling back on thermal power. Close to 80 gigawatt (Gw) of new and brownfield thermal power projects are in the pipeline till 2030. This means more coal. The Ministry of Coal is aiming to build 

a coal production capacity of 2 billion tonnes by the end of this decade.

That said, Chandra, co-writer of the white paper for the NIPFP, strikes a different note. “As CIL moves towards more capital-intensive forms of mining from a small number of large opencast mines, much of the historical welfarism associated with it is in decline. You can see that CIL’s permanent workforce has been shrinking consistently for over a decade. This has led to economic collapse and depopulation of some mining regions,” he says, adding that state and central governments need to think about the decline of many of these regions, which will likely affect millions of livelihoods.
 

Reddy, re-emphasising that the workforce is not displaced due to closure of existing mines, says CIL has deployed agencies to impart skill development and training for local populations to find alternative employment. At the same time, CIL has started venturing into greener business verticals, such as solar manufacturing and coal gasification.

No coal-rich state is planning for an imminent future sans coal. But, in this era of competitive federalism, Just Transition might hold the key to global funding. “Just Transition is just one of the many framings for states to attract investors, projects and funding for the energy transition. Coal-rich states could benefit from the JT framing because currently there seems to be international interest in providing finance to mitigate some of the economic effects of the decline of coal,” Chandra says.

He adds that legislation is not required. “Rather you need to accept that these losses will be considerable, devolve sufficient finances earmarked for JT activities, trust in state institutions to execute these activities, and be prudent enough to accept international finance where available.”
 

Transition is inevitable. Will it be Just?

https://www.nipfp.org.in/media/medialibrary/2023/10/ WP_402_2023.pdf