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India’s energy security could be at risk due to underutilisation of coal, delays, says panel

For ensuring the energy security of India, over the last year, the government of India has taken a series of measures to increase the domestic production of coal and stop imports, despite objections and pressure from the environmental groups.

-- Expressing concern about the under-utilisation of coal in the country, a parliamentary panel has said that for ensuring energy security, India needs to become self-reliant in coal and increase its domestic production.

-- In its reports, the parliament’s standing committee on energy highlighted that delays in the completion and execution of power projects range from one year to 15 years and have resulted in cost overruns of over Rs. 720 billion.

-- Experts and community leaders, however, note that there is no logic in pushing for more power assets without assessing the demand in the sector. They also emphasise the importance of addressing the concerns of communities impacted by such projects.

The under-utilisation of the country’s coal power reserves and the delays in execution or completion of power projects by power sector companies, could put India’s energy security at stake. In a report, earlier this month, the Indian parliament’s standing committee on energy noted that that the total coal resource of the country is 344.02 billion tonnes but at the present rate of excavation of coal, “which is around 729 million tonnes annually, this reserve can last for more than 400 years.”

“Due to the growing environmental concerns and commitments of our country at various global fora and also increasing focus on renewable energy, it is obvious that most of our coal reserves may not be ever utilised,” said the committee while observing that despite having significant coal reserves in the country, it is a paradox that India has been importing a substantial amount of coal.

According to the official data, the share of imported coal, in some years, has been as high as 16-17 percent of the total coal receipt. One of the reasons noted by the central government is that the imported coal is of superior quality. “Some plants are designed for use of imported coal while some others require it for blending purpose, etc.,” the committee said.

The parliamentary committee led by Janata Dal (United) leader Rajiv Ranjan Singh alias Lalan Singh said in its report on August 5 that “import of coal should be done away in a phased manner, as we have more than enough coal reserves to fully cater to meet our demand,” adding that the quality of indigenous coal can be enhanced and the design of boiler of power plants can be modified to enable them to run on domestic coal.

The panel called for “a clear-cut policy that is not only in consonance with the idea of ‘Atmanirbhar Bharat’ (self-reliant India) but also helpful in achieving the energy security of the country and providing affordable power for the common man” and asked union ministries of coal and power to collaborate for “optimum utilisation of domestic coal reserves.”

For ensuring the energy security of India, over the last year, the government of India has taken a series of measures to increase the domestic production of coal and stop imports, despite objections and pressure from the environmental groups.

Nandikesh Sivalingam, who is the Director of the Center for Research on Energy and Clean Air (CREA), a think-tank working on clean energy issues, said the argument makes “no rational sense whether it is in terms of cost or demand and will only lead to more trouble for the power and coal sector.”

“Energy security should be corresponding to the demand – coal or solar. So, blindly pushing for more power and expecting the demand to pick up doesn’t make sense. In fact, the entire mess that India’s power sector is in today is because without having a proper understanding of how demand is going to increase or not we went on building coal power assets and now we are doing something similar with solar power,” Sivalingam told Mongabay-India.

“Everybody in the power sector is under distress and what eventually happens in such cases is that banks end up writing off huge loans which are essentially public money – this needs to stop. Saying that energy security means more coal is irrational. In fact, right now, we have a lot of overcapacity … Thus building more coal will only impact the coal sector negatively. Moreover, the cost of new coal plants in terms of tariff per unit is high when compared to solar power so why would you build more coal? Nothing justifies it,” he said.

Panel says coal to remain crucial to India’s energy security plans

The parliamentary committee, however, maintains that despite substantive augmentation in the generation of renewable energy and planning for its massive addition in coming years, coal will continue to be the mainstay of India’s power generation in this decade.

According to the Central Electricity Authority’s assessment, the installed capacity of coal-based thermal power generation capacity may increase to 267 gigawatts (GW) by the year 2029-30 from the present installed capacity of 206 GW, which will result in a spurt in the requirement of coal by the power sector during the present decade.

By 2030, India’s target is to install the capacity of 450 GW of renewable energy including about 280 GW of solar energy. As part of commitments to global climate goals, India has committed to enhancing the focus on renewable power over the next decades.

The committee also emphasised on poor utilisation of coal blocks allocated to the power sector. It said that it is “aware that the main purpose of allocation of coal mines to the power sector was to address the paucity of coal for the CPSUs (central public sector units), as Coal India Ltd. was not able to fully cater to the demand by themselves” but “despite the lapse of several years since the allocation of coal blocks especially to CPSUs, the pace of work is extremely slow, as most of the coal blocks are yet to be developed for excavation of coal.”

The panel noted various reasons for this delay by the central government which included longer than average time for obtaining statutory clearances like environment clearance and forest clearance, delay in land acquisition, non-availability of land records, adverse law and order problems, among others. It called for “vigorous efforts” by those allotted the blocks for “expeditious and time-bound development” in a stipulated time frame.

It called for a comprehensive effort by all stakeholders to resolve the issues and expedite the development of coal blocks. The standing committee said that the union ministries of power and coal should “jointly formulate a strategy and evolve a specialised mechanism or a Special Purpose Vehicle (SPV)” to help the central public sector units that have not been able to develop and utilise the earmarked coal blocks.

Delay in power projects costs India dearly

The delay in the completion and execution of power projects, ranging from one year to 15 years, has cost India dearly with an estimated cost overrun of over Rs. 726.3 billion (Rs. 72,630 crore) as well as time overruns.

The panel’s analysis of power projects over the last 20 years revealed that 12 out of 13 hydro projects, 30 out of 34 thermal projects, 18 out of 42 transmission projects and 1 out of 26 renewable projects were delayed in their execution. It revealed that 12 delayed hydro projects resulted in a cost overrun of Rs. 315.3 billion (Rs. 31,530.03 crore) and 30 thermal power projects (both central and state sector projects), resulted in the cost overrun of Rs. 411 billion (Rs. 41,100.20 crore)

The panel explained that besides law and order/local issues, natural calamities, inadequate infrastructure facilities, shortage of skilled manpower, forest & environment clearance etc., “contractual and land acquisition are the main impediments faced by the implementing agencies.”

It said the “contractual issues/disputes arise due to poor cost estimation of projects, poor cost management, contractor’s poor site supervision and inadequate funds or budget allocation” and thus a lot of contract-related disputes could be easily prevented with proper planning and diligence during the preliminary stage itself.

To address issues in the hydropower sector, the panel called for a “review of the financing policies” to provide longer tenure debt with softer interest rates. It is because hydropower projects have a long construction period and interest on loan plays a very critical role in the operation period and higher interest on outstanding loans leads to a higher yearly tariff.

The panel also noted that inadequate infrastructure like roads, bridges particularly in Arunachal Pradesh and north-eastern states result in a longer construction period thereby increasing the project cost. It said agencies such as the Border Roads Organisation implementing the road sector projects need to be provided adequate support to complete the projects expeditiously.

“National Clean Energy Fund (NCEF) could be used for the development of roads, bridges and infrastructure common for hydropower projects. Considering the long gestation period and large investment involved, a single-window clearance mechanism becomes necessary to reduce the cost and time overrun by a considerable margin. This will encourage developers to undertake projects and make large investment in hydropower sector,” recommended the panel.

Amarendra Das of the School of Humanities and Social Sciences at the Indian government’s National Institute of Science Education and Research (NISER) said community involvement is crucial in ensuring the projects are run properly.

“In all mining projects, whether it is coal or any other mineral, the whole approach needs to undergo a paradigm change. The local community needs to be involved from the very start in a mining project whether it is monitoring the coal production or ensuring compliance of environmental issues as such issues often go unmonitored by the regulators,” Das told Mongabay-India.

This story was first published on Mongabay, click here to access it.