Is India starting to waver on coal?

Seemingly unrelated events in the last few weeks suggest that coal’s role in India’s future may be far more tenuous than widely portrayed.

From court rulings over pollution, to private power companies dumping coal projects in favour of solar, to Coal India revealing it doesn’t know what to do about huge stockpiles of unwanted coal, India’s energy policy is in a state of flux.

Bhagwat Saw, 69, a coal worker suffering from pneumoconiosis. Photo: Greenpeace India.

Clearing the air

Just as public revulsion over air and water pollution has driven a dramatic shift in energy policy in China, it is increasingly coming to the fore in India too. While pollution from cars and burning rubbish are significant contributors, coal is coming in for its fair share of attention.

Late last week the Goa State Pollution Control Board, after reviewing data which showed air pollution at up to double permitted levels, directed subsidiaries of Adani and JSW to cut coal imports by 25 per cent through their facilities at Mormugao Port.

They also imposed a set of other conditions to cut coal dust pollution at the port facilities where the two companies import 12.4 million tonnes of coal a year. While the court held open the possibility that it might relax the volume constraint if pollution levels dropped sufficiently, it gave no guarantees.

The ruling came on top of another judgement against Adani over the illegal destruction of mangroves for a port project at Surat in the state of Gujarat. In early January the National Green Tribunal (NGT) agreed with a legal action brought by the Hazira Fishermen Committee that environmental clearance granted by the Ministry of Environment and Forest for the construction of the port was “illegal.”

The legal action had been brought on behalf of 300 families who were displaced as a result of the port project and prevented from fishing. The NGT also imposed a fine of US$3.7 million towards restoration costs. Adani’s appeal was recently rejected by the Supreme Court which directed the company to deposit its multi-million dollar fine within four weeks.

Not long before, Aswini Kumar Dhal, a social activist, had challenged the authority of the East Coast Railway to operate a railway siding at Jakhapura in Odisha for handling large volumes of coal and iron ore without authorisation from the State Pollution Control Board (SPCB).

Dahl argued before the NGT that air and water pollution from the operation of the railway siding adversely affected a large rural population without any mitigation measures being in place. The NGT backed Dahl and ordered the use of the siding be suspended.

The SPCB complied with the order only to have a local District Magistrate at Jajpur direct the board to overturn its shutdown order. The NGT is now seeking a submission from the magistrate on whether it is within his authority to issue orders under legislation to protect air and water quality.

Just as coal port and transport operators are facing challenges, the shifting economics of solar versus coal are sending shockwaves through the private power sector.

Solar shift

Two weeks ago Reliance Power, one of the three largest private power companies in India, announced that it wanted to abandon the proposed 4000 megawatt Krishnapatnam ‘Ultra-Mega Power Project’ in Andhra Pradesh. Reliance Power had won the right to develop the project in 2007 but by 2011 was unable to attract finance.

At the time Reliance Power blamed the high cost of coal, in particular due to the Indonesian Government’s policy of not allowing coal to be exported below an internationally benchmarked price after late September 2011.

For the best part of the next five years the project remained stalled until the company stated in January that the plant was no longer viable. (Four months earlier Reliance Power had announced it wanted to sell its proposed Indonesian coal mines.)

It was the latest stage in Reliance Power’s retreat from coal-centred expansion plans and consistent with its announced emphasis on solar and other renewables.

The strategic shift by Reliance Power away from coal has been underscored by last week’s announcement by RattanIndia Power – another major private power generation company – that it wants the Punjab government to approve the use of a 324-hectare site for a solar plant instead of a proposed coal plant. The economics of solar, the company stated, are better than that of coal.

It is a point bolstered by the winning solar power price bids at recent reverse auctions which have surprised even the strongest supporters of renewables. In early January solar power reverse auction price came in at 4.34 rupees per kilowatt hour (kwh) (US6.5c kwh), a 7 per cent fall on solar prices from auctions in 2015. (The prices at auction are fixed for a 25 year period while thermal prices increase over time due to the increased costs of coal, labour and other costs.)

The Minister for Power, Coal, New and Renewable Energy, Piyush Goyal, was one who applauded the low price, tweeting that “solar tariffs have reduced below thermal power cost.” (Goyal’s tweet was seemingly referring to coal power based on imported coal.)

With the prices for solar power in India having fallen by 20 per cent in 2015 and 80 per cent over five years, new coal power plants are facing stiffer competition far sooner than most expected.

Too much coal in India?

Adding to the uncertainty around coal in India was the revelation by Coal India that – after increasing production by just under 10 per cent in the current financial year – it now has huge stockpiles of coal it can’t profitably sell.

Coal India – which produces about 80 per cent of all coal mined in the country – has been exhorted by the Modi Government to double its current production to one billion tonnes by 2020. The government has also stated it wants to even triple coal production from current levels in the medium term, in part by opening up the coal sector to private mining companies.

Despite the Modi Government’s bid to accelerate coal production by weakening environmental and land laws and stifling dissenting voices such as Greenpeace India’s, it has been surprised to discover that power generators have been wary of buying the increasing volume of coal produced by Coal India.

The Central Electricity Authority recently released data revealing that there was about 34 million tonnes of coal stocks at power stations, more than double the levels of a year ago. Coal India has a further 40 million tonnes of stockpiles.

“We are struggling to see how we can sell more coal quickly to liquidate some of the stocks … I am seeing a situation where we have to gradually peter down the growth in coal production because of our inability to market that coal,” Goyal said late last week.

A series of reforms aimed at resolving the mountainous debts of the loss-making state distribution utilities is likely to eventually result in under-utilised coal plants soaking up some of the domestic glut in the short to medium term. However, there are no guarantees on that.

With growing stockpiles, interest from private bidders in the fourth round of coal block auctions was so limited the government opted at the start of the year to cancel it in the hope there will be more enthusiasm in the future, especially from the steel sector.

High domestic stockpiles – with a desperate domestic seller – are likely to ensure Indian coal imports will decline significantly, at least in the short term. This will have the effect of slowing coal production and exports from Indonesia, South Africa, Australia and Mozambique.

Increasing Indian coal production would inevitably intensify conflict over the use of scarce land. Hundreds of millions of tonnes of more coal mined and transported a year and burnt in power stations, amounts to a huge additional impact on air, forests, farmlands, water supplies, wildlife and people. More legal challenges and protests against the Modi Government’s bid for a massive expansion in domestic coal production are likely, whether the government’s crude attempt to shut Greenpeace India down is successful or not.

With resistance to coal popping up in unexpected places, solar prices falling, private power producers shifting focus away from coal and Coal India groaning under huge stockpiles, the Modi Government’s coal fixation may well melt away far sooner than is commonly considered likely.

Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) Bob Burton’s Twitter feed is here.