India’s stressed coal assets: Government missing the bigger picture

With elections around the corner, the government recently announced plans to revive India’s stressed power projects by introducing measures to improve coal linkages and giving power producers more flexibility in cases of non-payment of PPAs. But while experts have said such a move should have been made a long time ago, a new report has highlighted the damage such measures can inflict on India’s coal sector.

Chief among the concerns in the report, released by the International Institute for Sustainable Development (IISD) and the Overseas Development Institute (ODI), is that such short-term measures benefit only the asset owners and do nothing for the workers employed to service these stranded assets.

As of November 2018, India had 34 stressed coal-fired plants that are at the risk of bankruptcy (21% of the sector’s total operational capacity). Chhattisgarh, Odisha and Jharkhand are the worst hit states with their stressed capacity standing at 58%, 55% and 27%, respectively.

The study states that so far, the government has moved to provide short-term remedies such as subsidies and public finance through loan preferential rates to address the issue. But it is missing the ‘bigger picture’. The government’s myopic view of the problem is not taking into account some long-term drivers of stressed assets such as increasing air pollution, falling prices of renewables and increased water stress, the study says. These need to become a crucial part of the discussion.

Balasubramanian Viswanathan, IISD Associate, and co-author of the study, says, “The financial liabilities of coal power plants are likely to increase as air pollution regulations, water scarcity concerns and competition from renewables become growing issues. It is time policy makers escalate India’s transition past coal.”

Besides this, the study also recommends making complementary policies for affected workers so that they get a fair deal. This would include engaging with coal workers and addressing their concerns, looking into general employment schemes and identifying sectors that can be considered for employment transfers.

Leo Roberts, Operations and Partnership Manager at ODI, and co-author of the study says, “The growth of renewable energy will create a great deal of new jobs. But if there is a risk of coal power stranding in future, policy makers should start thinking now about the dialogue and complementary policies that will be needed to ensure a fair outcome for affected workers.”

About The Author

IISD

The International Institute for Sustainable Development (IISD) is an independent think tank that delivers the knowledge to act. Our mission is to promote human development and environmental sustainability. Our big-picture view allows us to address the root causes of some of the greatest challenges facing our planet today – ecological destruction, social exclusion, unfair laws and economic and social rules, a changing climate. IISD’s Global Subsidies Initiative (GSI) is dedicated to promoting a positive relationship between government support policies and sustainable development. With offices in Winnipeg, Geneva, Ottawa, Toronto and Beijing, our work impacts lives in nearly 100 countries.

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