As India transitions to green energy, it must map financial challenges in coal mining regions

Every year in October, cash registers ring in shops dotting east India’s mining hubs during the Hindu festival season of Dussehra, when the country’s biggest coal company, Coal India Ltd, hands its workers a bonus.

Researchers and unions are calling for this coal cash – which fuels spending in homes and local economies – and the revenue local governments earn from coal mining firms to be mapped as a first step towards planning for a post-coal economy.

India is aiming to more than triple its renewable energy capacity by 2030 – but state support for renewables projects is still a fraction of that for fossil fuels, as coal production is also being ramped up to meet rising energy demand.

Researchers are calling for a large increase in spending on renewable energy to help ensure that coal mining communities do not lose out as India shifts to a more climate-friendly economy.

“India needs to go back to the drawing board to map its financial challenges as it transitions to green,” Prateek Aggarwal, programme associate with the Council on Energy, Environment and Water, told the Thomson Reuters Foundation.

“In coal-dependent economies, a majority of the expenditure depends on coal revenue,” said Aggarwal. “And these states need to diversify – for where will they get the money from for the state’s development and social welfare?”

He co-authored a report released in May – Mapping India’s Energy Policy 2022 – which shows that coal continues to enjoy more investment and state subsidies than renewables and argues that the balance needs to be tilted towards clean energy.

A phase-down of India’s coal production and use in the future is inevitable, policy experts said, calling on the country to immediately begin planning for alternative industries and building renewable energy capacity.

Kavita Rao, director of the National Institute of Public Finance and Policy, a think-tank, said coal in India would not disappear for another three decades, so jobs may be protected for now, but that will not last as the sector stops expanding.

“Our challenge is gross energy production – and if we move to solar and other sources of energy incrementally, a just transition can be managed,” she added.

Follow the money

India, the world’s number-two coal producer, aims to build 500 gigawatts of renewable energy capacity by 2030, up from about 150 gigawatts now and has pledged to reach net-zero climate-heating emissions by 2070.

It is betting heavily on large solar and wind projects to meet these targets, incentivising investments and launching water and energy security schemes to phase out fossil-fuel use in the farming sector.

But to achieve its 2030 goal, India needs to invest $20 billion-$27 billion per year in renewable energy, double what it is now spending, according to the renewable energy ministry.

While the government cut coal subsidies to $1.7 billion last year from $3 billion in 2014, they are still higher than support for renewables, which stood at about $1 billion last year, up from $0.6 billion in 2014, said the study Aggarwal co-authored.

But what the state gets back for its investment is a big barrier to change.

More than 80% of India’s total energy revenue of about $94 billion – mainly in the form of taxes and duties – comes from oil and gas, followed by coal and electricity at about 16%, while less than 1% comes from renewable energy sources, calculations in the new report show.

Coal mine closures will have a cascading effect on local economies and services such as health and education. Surendra Pandey, all-India secretary of the Delhi-based labour union Bharatiya Mazdoor Sangh, called for a “just transition law” that would give workers the right to compensation following mine closures.

“Coal India should increase investments in solar power in these regions, but currently their focus is on beefing up coal production,” he said, referring to India’s recent decision to increase coal capacity to meet growing energy demand spurred by a severe heatwave.

India’s plan to reopen shut mines and open new mines to increase domestic coal production to 1.2 billion metric tonnes from about 780 million tonnes now is out of step with long-term climate-related risks, researchers said.

“The decision to invest in coal expansion means that already limited public resources will be used to fund a mature technology that has clear negative impacts on the environment, people’s health and the planet,” said Swasti Raizada, co-author of the Mapping Energy Policy report.

Moreover, coal-fired power projects will become stranded assets as the world adopts clean energy, said Raizada, policy advisor at the International Institute for Sustainable Development.

A beginning

Conversations around just transition are only now starting in India – and the subject is often dismissed as premature in the corridors of thermal power and coal production firms.

But a beginning of sorts has been made: the federal coal ministry is conducting ground surveys of two mining districts to plan a socially fair shift away from coal – which union leader Pandey said must be expanded soon to cover all 290 shut mines.

Officials at Coal India – which accounts for almost 80% of the country’s coal production – also met labour unions and researchers in a rare interaction on just transition this month.

Describing the gathering as a “historic milestone”, professor Pradip Swarnakar, who heads the Indian Institute of Technology Kanpur’s Just Transition Research Centre, said everyone accepted a green energy shift was on the cards. “Even if coal ends in the next five or 20 or 30 years, we have to work from today – otherwise it will be disastrous like the tsunami,” said Swarnakar.

Coal India officials told the Thomson Reuters Foundation they were mindful of both direct and indirect reliance on coal in mining hubs.

Vinay Ranjan, Coal India’s director of personnel and industrial relations, who participated in the just transition dialogue, said the firm was looking at re-skilling workers to prepare them for other industries or evergreen jobs such as welders and electricians.

Coal India, he added, understands that multiple layers of workers, their families and local businesses depend on coal.

“During Dussehra, shopkeepers wait for the bonus that our employees will get as they buy new clothes,” he said. “This is a big festival and the happiest people during this time are the shopkeepers.”

This article first appeared on Thomson Reuters Foundation News.