Some policies to boost coal production have been counterproductive – report

Some policies formulated with the intent of improving coal availability in the country, have been counter productive, a report by the International Institute for Sustainable Development said.

“Across all major drivers that affect coal, there is also an important role being played by policy, where generous lending practices and interventions that reduce the cost of investment and operations have driven poor investment decisions and masked the extent to which plants are under stress. In some cases, policy tools may also be having a counter-productive influence,” the IISD said in a report titled India’s Energy Transition: Stranded coal power assets, workers and energy subsidies.

India’s 2018 crisis of stressed coal power assets may rear its head in future years as various drivers suggest increased coal power costs in the future, the report warns. Government interventions should not only focus on the short term, they also need to support a managed transition fair for all involved, including workers, it recommended.

One of the review’s striking findings was government support measures for coal have remained largely unchanged since 2014, despite an ongoing crisis in the coal sector, where around 18 per cent of installed capacity is “stressed” and at risk of entering bankruptcy proceedings.

The IISD said deeper analytical work is required to estimate the range of impacts across different scenarios in light of higher coal prices. “This should review future risks associated with water scarcity, air pollution and renewable energy cost-competitiveness. This assessment may want to focus on states where stressed assets are already most problematic: Chhattisgarh, Odisha and Jharkhand,” the report said.

The IISD also commented on the impact on coal mine workers when power sector assets are stranded. It said that there is a need to explore complementary policies that ensure that stranded assets do not lead to stranded workers and communities.

Current drivers of stressed assets include coal shortages and the financial distress of energy distribution companies (DISCOMs), while future drivers are likely to include water scarcity, air pollution regulations and cost-competitiveness of renewables, according to the report.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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