On a sinusoidal trajectory

The Paris climate talks of 2015 triggered a downhill journey for coal. Even in India where coal is the only fossil fuel abundantly available, the energy narrative kept coal at a bay. A pattern, very different from those seen earlier, emerged in the area of coal production and offtake. Since 2018-19, both suffered de-growth, more for offtake. So much so, that for three consecutive years, coal produced one per cent less YoY, resulting in a surge in inventory at pithead. Coal seemed to be on a path of outright decline.

Aided by policy support, the growth of renewables gathered momentum during this period. India joined the exclusive 100GW+ renewable capacity club sooner than expected. The Paris commitment of cutting down the emission intensity of GDP growth by 33 per cent in 2030, from the 2005 benchmark level, looked attainable well in advance. Target for faster expansion of renewable capacity to 500GW was proclaimed by Hon'ble PM in COP26. The target for reduction in emission intensity of GDP was also made stiffer.

The stage was set for the coal sector to get engulfed with complacency. All credit to the government for not allowing this to happen despite apparently contrary writings on the wall. It continued with the reforms aimed at opening up the sector to private investment, urging Coal India Ltd at the same time to pursue the 1 BT target. However, with efforts towards enhancing production ending up in accumulation of coal stock at pitheads, complacency at the operating level was unavoidable.

The aggressive 'must-take' dispensation for renewable power together with capital subsidies, free from bearing any share of T&D loss etc. pushed the PLF of thermal power plants to a low of close to 50 per cent, unseen in more than a decade. At this PLF, gencos found it barely possible to meet debt service payments, not to speak of return to investors. Investment in new thermal plants became few and far between.

Aggravating the situation were the headwinds on coal. The GST compensation cess on coal raising around Rs 400 bn increased the cost of thermal power. So did the rail freight which, in terms of Rs/tkm, is possibly the highest in the world. The cross subsidisation of passenger fare by coal freight was making coal more expensive at distant locations. No wonder that distant thermal power plants, howsoever modern and efficient, were finding power evacuation a major challenge — thanks to the Merit Order System. As a result, those were constrained to operate at even lower PLF.

What kept these trends of negative growth in thermal power and coal buried under the carpet was the muted energy demand, largely due to the impact of Covid on economic activities.

Post the vaccination drive and Covid taking a turn from pandemic to endemic, economic activities surged. The pent-up demand came into play and power demand rose abruptly to all time high. The growth of renewable capacity in the intervening years fell way short of meeting the resurgent demand. Fortunately, the low PLF of the thermal plants came in as a buffer to bear the shock. Raising the PLF of these plants was indeed the low-hanging fruit that could combat the crisis, provided adequate supply of coal was ensured.

Coming out of the slumber of three yearlong de-growth till March 21, followed by the deadly second wave of Covid in Q1 FY22 as well as the extended monsoon of 2021, CIL and Railways geared up to stand like a solid rock between light and darkness. With coal stocks at power plants plummeting to a critically low four days on Oct 8, 2021, a massive rescue operation began.

To shed some light on the outcome, extract from a report of the Ministry of Coal is quoted as under:

"The total coal production during the financial year 2021-22 was 7,770.23 lakh ton (provisional) compared to 7,160 lakh ton during 2020-21, recording a growth of 8.55 per cent. Coal India Ltd (CIL) production had gone up by 4.43 per cent from 5,960.24 lakh ton in 2020-21 to 6,220.64 lakh ton during the fiscal 2021-22.

Total coal dispatch during 2021-22 touched the figure of 8,180.04 lakh ton against the figure of 6,900.71 lakh ton the previous year, an increase of 18.43 per cent. During the period, CIL dispatched 6,610.85 lakh ton coal against 2020-21 figure of 5,730.80 lakh ton."

As per the report, the trend in FY23 so far is even better.

That marks the journey of coal moving from outright decline to high growth. Understandably, this trend cannot and should not sustain if climate challenges have to be addressed within a limited time frame of a few decades. Nevertheless, it can be safely concluded that witnessing a sinusoidal trend in the coal sector for at least a decade, if not more, is inescapable.

Under the circumstances, coal should continue to form an integral part of the energy narrative. Thrust on mining and use of coal more sustainably should attract attention of all stakeholders.

The writer is former Chairman, Coal India Ltd. Views expressed are personal

Coal: not by choice!

Going by the words of the International Energy Agency, India — with a population touching above 1.3 billion — will witness an incomparable rise in its energy needs over the next twenty years. Can this energy be fully obtained from the nascent renewable energy sector? It appears less likely in the country's current energy landscape.

Numerous reports have flagged the gravity of the inequality problem in India, which puts the country's impressive growth estimates in sharp contrast to millions falling into the quagmire of poverty. Furthermore, the Covid-19 pandemic exacerbated poverty multiple folds within the nation, accurate estimates of which are yet to come to the fore. A study by Pew Research Centre revealed that the pandemic pushed 75 million Indians into poverty, nearly doubling the number. To bring back these deprived millions back to normalcy, huge amounts of energy would be required, more than ever before.

How can the discourse around abruptly eliminating coal — a fuel which is responsible for 75 per cent of India's energy production — from the nation's energy mix make sense? The calls from the West tend to ignore the ground realities and thereby add more to the nuisance rather than providing solutions.

Going by the scientific evidence, coal is harmful for the environment and must be replaced by much cheaper and cleaner renewable sources. This is one aspect of reality, the other can be found in the answer to the question why emerging economies, including India, are not willing to be blessed by the boon of 'cheaper and cleaner' energy sources!

There are realities — social and financial — without addressing which the transition from coal will remain a hollow talk, an elusive dream.

As per a report by CEEW, India requires investment support of USD 1.4 trillion in terms of concessional finance by developed countries in order to phase out coal from its energy mix. The West will have to accept its obligation towards facilitating the required finances, not as a way of charity but in a form of investment loaded with moral commitments. The state of international financing lies in shambles presently and, even if OECD countries were willing to facilitate finances, the transition would take its due time. Amid such uncertainties, India cannot abruptly move away from coal.

India's Central Electricity Authority (CEA) has projected that the country's installed capacity will increase to 817 GW with an additional 27GW of battery storage, by 2029-30 — of which renewable sources will account for 445 GW. That is a remarkable potential but, again, where are the investments in capacity building and battery storage?

Next in the line is India's ambitious electrification target — driven more out of an unavoidable necessity than anything else. India's electricity demand — majorly met through coal — is expected to double by 2040. Freezing coal production would mean disruption of electricity supply in schools, hospitals, homes and other institutions — affecting public life at the very basic level. On the contrary, the UN Secretary General noted that "the single most important step to get in line with the 1.5-degree goal of the Paris Agreement" will be phasing out coal from the electricity sector.

Another reason that prevents India from taking any abrupt decision on coal is the potential livelihood disruption in the coal belt regions of the country. As per a report by Brookings Institution, 40 lakh people are employed directly and indirectly in India's coal industry.

Certainly, this doesn't mean that the country should turn its eye away from the target of phasing out or phasing down coal. India will require a proportionate mix of conventional and renewable energy to quench the nation's deep appetite for energy. At the same time, the West must fulfil its liability by facilitating finances towards the green economy. Financial assistance will not just build up greener energy sources but can also increase the efficiency of existing coal capacities until a stage is reached where coal will no longer be required. At present, living with coal appears to be the only option for emerging economies.