India has launched its first auction to private companies to mine and sell coal in what is seen as a regressive move in a country where renewable energy has become cheaper than fossil fuels.

The coal ministry will auction 41 new coal mines, many of which are located in the dense forests of central India. These mines will require INR 330 billion (USD 4.3 billion) in capital investment in the next five-seven years and raise the nation’s output by 225 million tonnes, the ministry said.

The opening up of commercial coal mining to the private sector, named Unleashing Coal, could mean India, which has the world’s fourth-largest coal reserves, becomes a net exporter of the fuel, prime minister Narendra Modi said. “We are not merely launching commercial coal mining today, we are unshackling it from decades of lockdown,” Modi said at the launch event livestreamed online.

Although there has been a global shift in recent years away from coal to cleaner energy like wind and solar, India wants to boost production to help it recover from the economic shock caused by the Covid-19 pandemic. The coal ministry estimates the new mines will employ about 70,000 people and earn extra annual revenue for various provinces to the tune of INR 200 billion (USD 2.6 billion).

Of the proposed 41 mines, 37 have been explored for reserves and land has been acquired for 12 of them, the coal ministry said. Companies will submit technical bids in August. This will be followed by auctions, where bidders will say how much of the revenue they will share with the government.

Ease of coal mining

The federal government has been easing rules for coal mining, which was made a state monopoly in 1973. In 1993, the government allowed private companies to mine coal for their own use. It has further eased government control over the industry since 2014.

State-owned Coal India Limited, established in 1975, still accounts for 80% of domestic production, of which 80% is sold to thermal power plants. Offering new mines to bidders does not mean they will be snapped up. An auction conducted last year among state-owned companies received bids for just six of the 27 coal blocks on offer.

“While India’s coal demand is likely to increase in next decade, investment in greenfield projects to expand production capacity must be examined more carefully,” said Karthik Ganesan, researcher at the Council on Energy, Environment and Water, a think-tank. “Import dependence is not a bad thing, especially if it defers or removes investment needs into new mines in pristine environments in the country.”

Many of the proposed coal mines are in dense forests in central India that are rich in biodiversity. “These centralised coal mine auctions open the fragile and biodiverse forest areas in constitutionally protected Scheduled V areas,” Kanchi Kohli, legal researcher at the Centre for Policy Research, told Hindustan Times. “The messaging of the auction process signals that the government sees these places as mere coal-bearing areas from where projects interested in commercial coal mining will extract for private profit.”

Viability in question

Coal is the single largest source of air pollution and carbon dioxide (CO2) in India. Of the total CO2 emissions, 50% comes from coal burning, according to BK Singh, a former forest conservator in Karnataka. Coal extraction must be phased out, he said. Estimates by other experts have placed the percentage as high as 80%.

The space for coal-fired electricity is shrinking in India, with 47.4 GW of power projects being cancelled in 2019. South Asia has long been identified as a hotspot of coal power growth after East Asia. However, a steady rise in coal power growth from 2011 to 2016 turned into a sudden and steep drop in 2017, due mainly to India, a survey has shown.

See: The uncertain death of king coal

Coal plants throughout South Asia have had unfavourable economics, with the Indian government listing over 40 GW of the country’s coal plants as financially stressed. India’s power ministry, in a recent submission to Parliament, removed more than 23 GW capacity of coal-fired power stations belonging to the private sector from under-construction category compared with earlier data.

The cost economics of coal-fired power has also turned uncompetitive compared with renewables. Tariffs quoted in solar projects, for instance, have become cheaper than thermal power in recent years. India has embarked on a path to boost renewables in its energy mix and aims to have 40% of total installed capacity from solar and wind by 2030.

India is increasingly facing the impact of climate change. The Indian government’s first comprehensive study of climate change impacts and forecasts paints a grim scenario if greenhouse gas emissions are not controlled right now. In the report published earlier this month, scientists at the Indian Institute of Tropical Meteorology said the average temperature over India could rise by approximately 4.4 degrees Celsius by the end of this century.

One of the main ways India can reduce its carbon footprint is to use less coal, or at least not increase its extraction. For the country, the only good coal is what stays underground.

This article was originally published by India Climate Dialogue, The Third Pole’s partner site

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