Indian Government’s Plan to auction off 41 coal blocks to private sector

India standing in the forefront of developing countries has a continuous increase in energy demands. In the race of energy generation technologies, we have come a long way to rely on coal as the more dominant resource. India is the second largest producer of coal with 716 million tonnes after China with 3523.2 million tonnes [1]. Analysing India’s coal usage, with the reserves of 319 billion of tonnes of coal [2], India uses 966 million tonnes of coal every year [3]. Although, 246 million tonnes of coal are imported mainly from Indonesia, Australia, South Africa and Russia. [4]

On 18th June, 2020 PM Modi addressed the event in which 41 coal mines (later changed to 40) were auctioned for commercial mining. Currently India has 83 operational coal mines with producing around 450 Mt of coal with Coal India Ltd. (CIL) being the largest coal producer of India [5]. Here, the roadmap started in 2015, where changes were made to make the laws in the coal mining sector so that private companies carry out mining as a captive requirement not for sale or other purpose. But this news has come with a further change with the removal clause of captive use being removed.

Considering Coal as a sector, this story can be linked to the target of increasing the GDP by 10%. (Federation of Indian Chambers of Commerce & Industry) FICCI in 2019, bolstered the increase of revenue from the mining sector to achieve this target. The mining sector now contributes approximately less than 3% to the GDP, NITI Aayog wants it to be 25% [6]. Moreover, this sector also provides around 355-500 thousand jobs, which are bound to increase with this auction adding more 280 thousand. All in all, this is a big thumbs up for the economy. [7]

Regarding the future of energy, renewable energy is the clear winner because of the cost and increasing efficiencies. Also, foreign investment and acceptability is more in renewable energy so we should not expect FDI in the mining sector. Moreover, various countries in the world are moving away from thermal power plants in the next 15 years. Having all this in the background, digging more 41 coal mines could turn out to be a risk. It is true that coal is our base load, but we can surely get rid of old and not efficient power plants. Also, the quality of coal from India has higher ash content making it non-compatible with highly efficient boilers in thermal power plants (example: Mundra, India). This deal can be helpful for making India independent and reducing imports, investing the funds in your own country. But rather, there are hidden costs to make these 41 coal power plants operational, which is 33 thousand crore rupees [7]. This money could also be invested in the renewable energy sector and try to shut down some thermal plants.

Talking about coal and mining, the environment is always a major parameter. Even though India should already start it’s plan of shifting its dependency on coal and ideally no more coal mines need to be explored, this system is complex and India even actively striving to be a pioneer in renewable energy has no concrete plans of phasing out coal. Geographically, coal and iron are found in dense forest regions. Out of the 41 blocks, some of the blocks have a forest cover of 50-80% [8]. These can turn in a setback for India with the targets of reducing carbon emission. There also exist tribal communities in the marked areas which would need to be displaced. So, these 41 blocks have reserves of approx. 17 billion and if India needs the coal to compensate with the imports of .2 billion/year, then these reserves would last for around 85 years [9]. This shows that there are no plans of phasing out coal from the government, instead to rely on coal for a long time of 85 years. Also, on a longer run, we would still face similar issues after 85 years. We need permanent solutions for reducing our dependency on coal.

Practical solution for the current situation is balance and delineating a plan for an optimum solution. As of today, 67% of the allotted coal mines are not even operational[10]. Firstly, we need to align with the renewable energy capacity targets of 175GW till 2020 and 450GW till 2030[11] and secondly, expanding and optimizing the use of existing blocks to its maximum efficiency. We then would be in a better position to decide upon only some of these blocks for mining, which are not so densely forest covered and meet the demand of imports. This would suffice the energy demand along with preserving the biodiversity and the tribal communities living there.

References:

[1] https://en.wikipedia.org/wiki/List_of_countries_by_coal_production

[2] https://coal.nic.in/content/coal-reserves

[3] https://www.worldometers.info/coal/india-coal/#coal-consumption

[4] https://www.theglobaleconomy.com/India/coal_imports/

[5] https://timesofindia.indiatimes.com/business/india-business/pm-modi-launches-auction-process-for-coal-mines-for-commercial-mining-key-points/articleshow/76438373.cms

[6] https://energy.economictimes.indiatimes.com/news/coal/mining-sector-key-to-indias-double-digit-growth-rate-ficci/69094627

[7] https://energy.economictimes.indiatimes.com/news/coal/auction-of-41-coal-mines-will-make-india-self-reliant-in-energy-sector-create-more-than-2-8-lakh-jobs-amit-shah/76455612

[8] https://www.hindustantimes.com/india-news/coal-mine-auction-opens-up-vast-stretches-of-forests-in-central-india-for-mining-show-documents/story-1SdToixA4Dcomld0op8lzH.html

[9] https://www.financialexpress.com/economy/new-model-privatisation-kicks-in-with-auction-of-41-coal-assets/1996250/

[10] https://youtu.be/dRi5u22FIYQ

[11] https://www.cnbc.com/2020/03/03/india-has-some-huge-renewable-energy-goals-but-can-they-be-achieved.html

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s