One of the brightest spots in the Bharatiya Janata Party (BJP)-led government’s tenure has been India becoming the world’s fastest-growing energy market, fuelled in no small measure by an ambitious renewable energy program.
Yet, the conundrum is that 15 of the world’s country most-polluted cities are also in India—a dubious distinction that can only become worse in the absence of energy reforms.
The immediate danger comes from a clampdown in coal imports in China since early this year, which is prompting global suppliers to avidly look towards second-largest consumer India.
While China’s coal imports in the year’s first quarter plunged by 29%, India’s in the financial year ended March 2019 increased by 9%. Projections by CARE Ratings are that they will increase by 8-10% in the current fiscal year.
So what is driving India’s brisk imports of the dirty fuel?
For one, it’s because India’s electricity generation is majorly based on thermal power. However, to a large measure a lot of the mess is due to lack of prudent policies.
Last year, India suddenly imposed a 25 % anti-dumping duty on imports of solar PV modules from China with the aim of boosting domestic manufacturing, but it only served to drive up renewable project costs and slowed expansion— which otherwise could have reduced coal demand.
A number of our thermal units are located along India’s vast coastline, which means they thrive on imports of high-ash grade coal from places such as Indonesia and South Africa rather than domestic mines
Even with a strong appetite for coal, carbon emissions could have been better managed with sufficient investment in technology and retrofitting of coal-based assets. But lack of reforms have hurt earnings of utilities, and thereby such meaningful investments.
For example, the government has not been able to move forward much on amendments to the electricity act, which would have ushered in measures like separation of the role of distribution and bill collection with the setting up of infrastructure. That would have improved efficiency all around and plugged transmission losses that range as high as 20-30%.
Similarly, rampant electricity subsidies to rich and poor alike could have been replaced with direct benefit transfers to targeted underprivileged consumers, again reducing losses to utilities.
The incumbent government need not have looked far but Prime Minister Narendra Modi’s native Gujarat state where electricity is paid for rather than secured as a matter of right for free by consumers.
Well, hopefully with the whopping mandate secured at the parliamentary elections the government would push such legislation and reforms through parliament.
It may bring some short term pain, but ultimately it will be a small price to pay to breathe a little easier.
Bandini Chatterjee, the columnist, is an independent analyst focusing on the ups and downs of the commodity markets.