Profound inequality bears heavy on India’s energy transition

Unjust power structures typical of India’s coal belt will make the prospects of a just transition much tougher than in the west

On Thursday, just as this piece was being prepared to be published, Indian Minister of Petroleum and Natural Gas Hardeep Singh Puri and US Secretary of Energy Jennifer Granholm jointly convened a virtual ministerial meeting to launch the India-US Strategic Clean Energy Partnership (SCEP). Through the formation of six Task Forces, the SCEP has a stated objective of increasing inter-governmental cooperation between the two nations on Power and Energy Efficiency, Responsible Oil and Gas, Renewable Energy, Sustainable Growth and Emerging Fuels. Tucked deep in the press release was also the announcement of a Joint Committee to “deliberate” on Just Transition in the Coal Sector— a process that is likely to affect around 21.5 million lives in India.

Early among the millions slated to be affected by the energy transition in India are the communities dependent on the Sargipali mine in Odisha. When the mine closed abruptly, the local community was suddenly hit with the herculean task of sustaining their livelihood without a source of income. The mine, operated by Hindustan Zinc Limited (HZL), had been active for three decades before the state government decided to close it owing to its unprofitability.

With the sudden closure of the mine, the local community had to face income loss and unemployment. Since the mine was located in a remote area, a majority of the population in that area was dependent on it. Most of the people affected were labourers aand local businessmen because permanent employees opted for a voluntary retirement scheme.

Many locals who took loans and ventured into the milk business lost their customers. Unable to pay the loan, they entered into an interlocked credit market. People in the lower age group started migrating and others in their middle and old age began commuting 22 km to 40 km to different towns to find work.

The account of Sargipali is a clear example of the arbitrariness in planning, which severely impacted the local community. In the times to come, this could be the fate of many fossil fuel companies in India as the country transitions toward a low carbon economy. However, this transition would deeply impact the workers and communities dependent on them.

In order to ensure sustainable livelihoods for people and communities and improve socio-economic and environmental conditions of these regions, India has to rely on a just transition.

From where did the concept of just transition originate?

The concept of just transition was championed in North America during the 1970s labour movement to secure workers’ rights and livelihoods in response to government-led environmental legislation and regulations that could have labor impacts. The leader of the Oil, Chemical, and Atomic Workers Union (OCAW), Tony Mazzacchi, has been attributed as the person responsible for the movement.

Mazzacchi asked for a “superfund for workers” as a result of increased environmental regulation. He claimed, “those who work with toxic materials on a daily basis in order to provide the world with the energy and the materials it needs deserve a helping hand to make a new start in life.”

In the 1990s, the idea of a “superfund for workers” was officially endorsed by North American Labour organisations and was later described as just transition.

The idea was brought into the climate policy platform by the International Trade Union Confederation (ITUC) in 1997. In its statement to the Kyoto Conference, the ITUC demanded the proposition of a just transition. This set in motion the discussion on the issue. It was included in the negotiating text for the Copenhagen Summit in 2009 and later the preamble to the Paris Agreement adopted in December 2015.

In 2018, the ‘Solidarity and Just Transition Silesia Declaration’ was adopted during the Katowice Conference, COP24. It highlighted that just transition of workforce and creating decent and quality jobs is key for an inclusive transition to a low carbon economy.

Why justice in India will differ from the west

When Germany closed its coal mines in the Ruhr valley, it took a comprehensive and planned approach. It was an important employer in the region employing around six lakh people during its peak time in 1957. However, owing to unprofitability, the mines were closed in 1968. The last mine was closed in 2018–around 50 years after the plan was tabled.

Various stakeholders were included in the discussion for the transition. The government came out with policies based on the discussions to minimise the effect of mine closure on the workers and communities. One of the significant achievements of the planned closure was that it did not result in unemployment as predicted.

In the context of India, some coal mines are becoming unprofitable and closing down, but overall, coal mining still remains a profitable venture. Additionally, the socio-economic conditions in developed countries are different from developing countries like India. Just transition models which work for developed nations have to be planned differently for socio-economically backward regions of India. 

In western countries where coal mines started closing around 50-60 years ago, their biggest challenge was how to deal with the formal workforce, said Sreshtha Banerjee, director of Just Transition, at iFOREST. “Currently, if we talk about just transition from a western perspective, which is largely dominating the discussion, it is mainly oriented around this [challenge of formal workforce] where trade unions play an important role.”

However, in India the main challenge is the number of informal workers in the coal industry, which is three times more than the formal workforce, stressed Banerjee.

This country is profoundly unjust and unequal and every challenge that other countries face will be greater in India, said Rathin Roy, Managing Director (Research and Policy) at Overseas Development Institute (ODI) and a senior visiting fellow at Centre for Policy Research (CPR) India. “In a society where labour laws are not upheld, society is unjust and work is largely informal in nature, the challenges are much bigger and obviously more difficult to carry out a just transition.”

Why does India need a just transition?

The recent Intergovernmental Panel on Climate Change (IPCC) report warned of increasingly extreme climate events that will leave an irreversible impact on the climate. The UN chief termed the report as a Code Red for humanity. For India, the report projected a rise in frequency and severity of extreme heat events.

India is also amongst the top five countries vulnerable to climate change, as per the Global Climate Change Risk Index. According to studies, the country is estimated to lose 3% to 10% of its GDP annually due to the climate crisis by 2100 if the same conditions persist.

The IPCC report is a clarion call to move towards a low carbon future. While fossil fuel sources dominate the primary energy market, it is crucial for India to plan a phased exit from them. India has already embarked on a journey of energy transition and is progressing rapidly.

It has pledged to increase the share of non-fossil fuels-based electricity to 40% by 2030 with international support on technology transfer and financing. This includes an ambitious target of achieving 175 GW of renewable energy (out of which 100 GW will be from solar) by 2022.

At the UN Climate Action Summit in 2019, India declared that it aims to achieve 450 GW of renewable energy capacity by 2030, planning to go beyond what was committed under the Nationally Determined Contributions (NDCs).

Justice: Easier to preach than to reach in India

A transition away from coal will be a challenging task for India considering that around 40% of the districts in India have some form of coal dependency and people’s lives and livelihoods are shaped by the coal industry.

According to research published this year at the University of British Columbia, around 3.6 million people in 159 Indian districts are either directly or indirectly employed in the coal and power sector. While an estimated 80% of these jobs are linked to the coal mining sector (in 51 districts), the remaining 20% are linked to power plants (in 141 districts), it stated.

This is a significant finding since it shows that the socio-economic contribution of the coal mining sector in jobs is more than the power sector. However, coal mines are more concentrated in a smaller number of districts. 

The study noted “there is a knowledge gap regarding the socio-economic dimensions of coal transitions – in India, and around the world.”

The closure of mines also results in migration of people to an unfamiliar economy, which creates a system of economic inequality.

“We cannot have the same unequal world and the same injustice that existed in the past as we transition away from coal,” said Roy. According to him, as India transitions towards a low carbon future, it should ensure this does not increase inequalities. 

Another challenge is creating jobs in poorer areas so that people don’t have to migrate to other states for jobs, he added.

For many coal-producing states like Jharkhand, Chhattisgarh, and Telangana, royalty is a major source of revenue. Data shows that royalty paid from coal mining in India has increased from Rs99.73 billion in 2014-15 to Rs147.46 billion in 2018-19 with a CAGR of 8.14%. This indicates that coal royalty plays a significant role in the state exchequer for these states. However, in 2019-20, the royalty decreased to Rs12,962 billion.

Additionally, coal companies contribute 26% of their profits into the District Mineral Fund (DMF), a benefit-sharing mechanism that uses the finances generated by it to ‘work for the interest and benefit of people and areas affected by mining’. With the decrease or absence of coal revenues, the project supported by DMF will be difficult to operate.

Another bottleneck in just transition is the infrastructure and social vulnerabilities of coal mining areas. When a coal mine is set up, it brings basic infrastructure facilities like schools, hospitals, and communication services to remote villages. With phasing out of coal, many of these social projects will be derailed, thereby impacting local communities.

Suranjali Tandon, assistant professor at the National Institute of Public Finance and Policy told CarbonCopy that the most palatable challenge is the movement out of fossil fuel, especially coal, which occupies a large fraction of power supply.

“Beyond that a whole macroeconomic risk awaits us,” she said. “If you start divesting in companies and assets that are related to fossil fuel, then you have to bear the risk within the financial system as extended credit is provided to these sectors.” There is the potential of contagion across the system unless this is staggered and well managed, she said.

Another challenge raised by experts is–who is going to fund a just transition? According to Tandon, it is always natural to ask the government to fund something that has a broad spectrum of welfare effects. But it will be a difficult task for the government because a significant part of its revenue is derived from fossil fuels (close to a fifth of the total), which may be adversely affected, she said. It will be a challenge to garner the kind of resources, through public finance, required for managing the transition, she added.

India’s low-carbon transition is far from a simple task of energy accounting, and must be seen as in juxtaposition with massive scales of social and economic transformations that it implies. Justice in India’s transition requires not just overarching plans that chase intangible targets, but the dismantling of several tangible power structures that exist today.

This is the first installment in a three-part series on the prospects of a just transition in India’s coal belt. The next installments will be published in the following days.

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Swati Joshi

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