“The auction process is a win-win situation for all”- Narendra Modi

Perhaps not for the environment and since we are all intertwined with eco-system, ultimately it won’t be a win for us either.

On June 18, 2020, the Indian government initiated the process of auctioning off coal blocks to private entities with the aim of boosting industrial development and apparently achieving self sufficiency in meeting our energy demands. The step comes as a part of India’s stimulus package to revive the economy and attain “Atma Nirbhar Bharat”. Coal mining which, until now has been a monopoly of Coal India Limited, India’s coal mining PSU will now be open to the private players to exploit and rejoice. What the decision entails regarding our move towards clean energy is yet to be answered.

The amendments made to the The Coal Mines (Special Provisions) Act, 2015, clearly provide that businesses which do not hold any prior mining experience can participate in the coal block auctions. The ease in restrictions is expected to increase foreign investment, but at what cost?

For a surfeit of reasons already presented by climatologists time and again, the world has been in a shift away from fossil fuels. The prices of solar panels are at their ever lowest, with ‘net-zero’ being the motto of a green future. One cannot help but question the hidden agendas behind such a decision when India herself has questioned the ‘developed economies’ of the world when it comes to achieving the goals of the ‘Paris Agreement’. India is the third largest producer of CO2 emissions behind only China and USA. It is only clear that the Modi government is using the pandemic as a means to accomplish some of its ulterior motives.

During its term, the government has relaxed environmental constraints on washeries (plants that treat coal to make it more environment friendly and better in quality). Pollution Control Boards even allow the function of washeries which hold highly polluting operations and increased water usage. New regulations allow thermal power plants to use low-grade coal for power production, lifting earlier restrictions. These moves form part of a scheme to make it simpler for industries to avoid environmental accountability.  

Clean Coal is a misnomer

‘With the launch of commercial mining, the ministry said India has unlocked the coal sector with opportunities in clean coal’

The term “clean coal” is something strategically devised to shift focus away from the dirty characteristics of coal as a fuel. Being the most carbon intensive fossil fuel, coal emits more CO2 on burning than oil, natural gas or any other fossilized hydrocarbon. Furthermore, coal burning also results in the release of other pollutants such as soot, NOx, sulphur, mercury, and fly ash. There is only so much we can do to mitigate the ill effects of coal. Coal scrubbers, carbon capture systems, catalytic converters, and more form the list of technologies developed to offset some of these consequences. But what is dirty to begin with cannot be made a hundred percent clean with a bit of polishing.

To make matters worse, fact is that the major share of Indian coal has high ash content and low calorific value. Abundance of low-grade coal indicates that scaling up mining practices will not lead to a linear increase in energy production. India’s low-grade supply of coal has always been a matter of dispute, with power users such as National Thermal Power Corporation (NTPC) constantly doubting the overall quality.

Coal production in the past

India’s affinity towards coal began during our colonial past when the East India Company began mining activities in the Raniganj coal field situated alongside river Damodar in the 1770s. The industry boomed with the onset of steam locomotives in the year 1853. India’s independence in 1947 only led to a further increase in coal production. Through a set of provisions that came about after the oil crisis of the 1970s, the government began nationalizing this sector. As a result, Coal India Limited (CIL), was formed in 1975 with the aim of regulating the coal sector with efficient practices and improved standards.

A long history of coal utilization brings us to today when over 70% of the nation’s electricity is produced by coal-fired plants.

Competition from renewables

Inefficiencies in power generation and outdated mining technologies, in addition to the innate ‘dirty’ nature of the fuel have rendered the coal sector prone to environmental challenges. According to Carbon Tracker, an institution that puts out financial data on climate and related industries, 41% of global coal fleet could have been cashflow negative in 2019. New investments in renewables are proving to be cheaper than investments in coal in almost all major markets.

Solar and wind power are currently the cheapest sources of electricity in over 66% of the world population. The tariff for solar power generated in the world’s largest solar park in Bhadla, Rajasthan is only ₹2.44/unit. Technologies have improved and equipment costs have lessened. The runway extends even further with untapped innovations in the pipeline. The coming decade will bear witness to a revolution in the energy sector. We will have massive reforms in the way energy is generated and distributed. With more technological advances, the costs of renewable energy are set to plummet.

According to the EIA, more energy was consumed from renewable sources than from coal in 2019 by USA. Coal was considered the cheapest option for power generation but that is no longer the truth. By 2030, it could be cheaper to construct renewables than to run coal.

The real winners

The decision to commercialize coal is not one that was taken thoughtlessly during the ‘Covid-19’ pandemic. The idea for commercial auctions has been looming around since quite a while back This time around however, the ministry has placed no restrictions on pricing or ownership criteria.

In light of recent events, the move comes perhaps aiming to pour capital into what seems like underutilized assets. Needless to say, this is an unsustainable measure. Numerous factors have caused a drop in demand for the resource. In a market where supply trumps demand, the economic feasibility of privatized coal is still in question. Investors will have to take into account aspects such as environmental clearances, operational costs, infrastructure development limitations, land acquisitions, rehabilitation, etc.

The utilization of coal based thermal plants for power generation has been declining for the past 3-4 years. With the graph pointing down, only time will tell if this endeavor will pass the true litmus test of the market.

It seems highly unlikely that we will witness a worldwide race for procuring the privatized mines of India, especially at a time when global giants in the sector are beginning to reduce production or close shop. The only beneficiaries in this deal are possibly the domestic industrialists who can spike their power units.

India’s green future

Coal has enabled the rapid growth of our nation, fueling our energy needs and that is a fact not trivial. However, continuing along the same route will yield no good. There’s a limit to how much coal quality can be improved. We are at the threshold of moving completely into clean energy. The Government of India has set a target of installing of installing 175 GW of renewable energy capacity by the year 2022, which includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro-power. As of today, renewable energy holds a share of 24% out of the total installed capacity in the nation. Studies show that gradual shifts to sustainable energy sources will not do enough to limit global temperatures from rising over 2 degrees Celsius. The move must come quick. It is precisely during this moment that India is politically marching ahead in the opposite direction.