India’s Coal Contradiction


The Indian economy is heavily dependent on coal. Infamous as the world’s fourth largest polluter, India’s current energy mix has an enormous proportion of coal. Close to 60 % of power supply is derived from coal fuelled power plants. Consequently, in 2016, half of the country’s emissions – 805.4 million tonnes – came from the power sector. However, for the country to meet its development goals, and lift millions out of poverty, demands for energy are expected to more than double in the coming years. Furthermore, an estimated 600 million or 40 % of Indian population is likely to live in cities by the year 2031.

India therefore faces a great dilemma in maintaining a balance between its developmental goals and its rapidly deteriorating environment.

The direct and indirect fallout of the coal powered energy grid is already palpable in India. Unprecedented high concentrations of particulate matter PM 2.5 routinely make Indian cities as the worst polluted in the world. PM 2.5 is a tiny pollutant of less than 2.5 micrometres in diameter. Its microscopic size allows it to easily lodge inside human lungs and enter the blood stream and thereby cause a variety of ailments such as asthma, chronic bronchitis, lung cancer, and even death. In 2015 alone, surpassing China, air pollution in India led to 1.1 million premature deaths, the highest in the world. Tellingly, ten of the world’s twenty most highly polluted cities are situated in India.

A recent report by Health and Environment Alliance (HEAL), a leading European NGO, indicates that in 2014 the cost of healthcare in India  exceeded the cost of fossil fuel subsidies by eight times.

Other reports warn that while at present, only 2% of Indian population is exposed to extreme heat, continued use of fossil fuels at the present rate will lead to 70% of Indian population being exposed to extreme heat by 2100 AD leading to serious consequences for both people and food production.

Aware of its precarious situation vis-à-vis the effects of climate change, India, as part of its Paris Agreement commitments, undertook to derive at least 40% of its energy from non-fossil fuel sources by the year 2030.

Towards the end of 2016, the country had a total installed power generation capacity of 307.27 GW of which 46.33 GW or approximately 15% was derived from renewable resources. The government aims to scale up the share of power derived from renewable resources to 175 GW – including 100 GW of solar power and 60 GW of wind power – by the year 2022. To help put things into perspective, 1 GW of power is enough to light up 100 million LED bulbs. Since much of India receives abundant sunlight for most part of the year, solar energy has the potential to electrify thousands of villages.

Interestingly, this year, for the first time, solar power in India priced at Rs.2.44 per unit became cheaper than coal powered energy priced at Rs.3.20 per unit. Wind power too was competitively priced at Rs.3.46 per unit. However, while the cost of renewables may have dropped drastically, massive reserves, widespread availability, and traditional dependence on coal make the resource a formidable enemy. For instance, fossil fuels still receive eleven times more financial support than renewable energy.

It is disappointing to note that the energy sector in India is full of contradictory signals. To begin with, at the time of signing and subsequently ratifying of the Paris Agreement, India maintained the stance that it would continue to expand its coal powered electric grid by building new power plants. Thus, along with the increase in coal fuelled power, the share of renewable energy in installed power capacity would also be increased.

This planned expansion of coal energy indicates incorrect estimation and severely skewed planning, both in terms of environment and economics. Research by Christine Shearer and others shows that if all the proposed 370 coal plants are constructed, along with the planned 40 % of power generation from renewables, it would result in excess production of electricity. Supply would far exceed demand and several coal-fuelled power plants would sit idle and become stranded assets. A similar study by Greenpeace corroborates the findings.

While it is true that under the Paris Agreement, climate finance of USD 100 billion annually by 2020 for mitigation and adaptation was promised by developed countries to developing countries, a look at the annual Indian budget raises doubts about accomplishing the huge target of scaling up renewable energy power to 174 GW. The budget for 2017 allocated             Rs.5,473 crore to the Ministry of New and Renewable Energy. This is only a marginal increase from the Rs.5,036 crore allocated in the budget of 2016.

Furthermore, the Goods and Services Tax (GST), a pan-India tax reform subsuming all forms of direct and indirect taxation which came into effect on 1st July, threatens once again to sway prices in favour of coal fuelled power and undo the gains made thus far by the renewable energy sector. Under GST both solar power and coal fall under the 5 % tax slab. Whereas earlier solar power was exempted from tax, the tax rate for coal has been slashed from the previous rate of 13%. Batteries for storage of renewable energy are being taxed under the highest tax slab of 28 %.

Delivering another blow to the renewable energy sector is the diversion of the coal cess of over Rs.50,000 crore towards GST Compensation Fund. Even though the cess, originally collected for the purpose of funding National Clean Energy Fund was never fully utilised for green energy projects, it will now compensate state governments for revenue losses arising out of the implementation of GST.

Analysts point out that “transparency, longevity and certainty” are the benchmarks for sustaining investment in the renewables over the next few decades. What is important at this juncture is a clear and unambiguous policy with pragmatic timelines on renewables.

Zeenat Masoodi is a lawyer living in Srinagar. Email: [email protected]


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