At the start of 2020, the Central government made an important set of changes to India’s coal sector through an ordinance and then amendments to the Coal Mines (Special Provisions) Act, 2015. Through these, the government has expanded opportunities for privatised, commercial mining. Coal blocks can now be owned by private entities without any prior coal mining experience and any “specified end-use.”
These big shifts have raised many questions about what the government hopes to achieve by commercialising coal in this era of intense competition from renewables in the electricity sector, the rising NPAs of thermal power plants (TPPs) and a massive global withdrawal from fossil fuel for climate and environmental reasons.
In March 2020, India went into an economic lockdown to manage the spread of the COVID-19 pandemic. With the economy further shrunk and challenged by effects such as a fall in power demand, the government’s continued coal sector “reforms” have earned criticism even from the private sector. Who would be crazy enough to invest in coal now, was everyone’s question. In a shocking follow-up, the government has dangled a potentially dangerous carrot to investors in India’s coal blocks. It has done away with the regulation requiring power plants to use “washed” coal, by terming it an unnecessary cost on coal users.
The “washing” requirement was introduced in 1997, and promised the use of cleaner coal in power production. It was India’s only legitimate justification to extend the life of coal as a development fuel despite the climate crisis. Now, with this U-turn that allows private entities to dig out and burn low-grade coal to produce electricity, the Indian government stands exposed not only as an unreliable climate saviour but one that sacrifices the rights and safety of all its citizens to protect the interests of private coal mining and power generation.
The governance failure of coal washeries
Indian coal is known to contain 30-50% ash, meaning that for every two units of coal burned, one unit of ash could be produced. So, a manufacturing or power producing unit has to burn more coal and in turn generate not only ash but also noxious gases, particulate matter and carbon emissions.
Coal washeries are units that reduce the ash content in coal through a mix of segregation, blending and washing techniques. These technologies are meant to allow the conservation and optimal use of coal reserves by improving the quality and efficiency of low grade, high ash Indian coal. Washery units set up in different locations were also meant to make improved coal available across manufacturing and industrial areas and thus reduce the reliance on long distance transportation of different grades of coal to units that needed them. Most importantly, washed coal would also provide high grade “coking” coal that is essential for the steel sector.
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Despite the known importance of coal washing to our coal dependent economy, this sector made up of medium and small-scale units (MSMEs) has mostly been a governance failure. After the nationalisation of coal in 1972-73, India’s washing capacity fell out of step with the massive increase in coal mining and the consequent exhaustion of our better coal reserves.
In the 1993 amendments to the Coal Mines (Nationalisation) Act, 1973, which first legalised the privatisation of coal blocks in India, private players showing “coal washing” as end use were also given captive coal blocks. Although the legal amendments invited private actors to invest in coal washeries, it generated much less interest than expected. According to the 2017 statistics, India has a total of 60 washeries with a capacity of only 185 MT. Of these, 15 are operated by Coal India Limited, India’s largest coal mining PSU, 19 are private coking coal washeries for use by steel industries and 38 are non-coking coal washeries run by private players like Aryan, Adani and Jindal.
The tendering processes followed by CIL for washeries moved at a snail’s pace. PSU contractors and private washeries have complained of the prohibitive costs of obtaining land and environment and forest approvals. Coal price regulation did not incentivise coal washing. The sector has suffered from lack of efficient linkages in the coal supply chain and there has been no R&D that is suited to our coal and industrial needs. This is specially the case with coking coal production and so India has been importing almost all the coking coal needed for its steel industry. Due to the lack of washeries, CIL produced coal cannot be used where needed. The shortages and erratic supply of washed coal to the power sector has resulted in India importing for its TPPs also at great cost to the exchequer.
But beyond all these technical issues is the political economy of coal. The story of the coal washeries drags us back to the mismanagement of the coal sector that lay beyond what the Supreme Court observed and addressed in the historic coal scam case in 2014. The mismatch between the regulation of coal blocks by the Congress government and growth in the coal consuming sectors created a huge unmet demand for coal. The coal washeries soon became a route to divert good coal into these grey markets as coal rejects. Chandasi near Varanasi is one such market active from the days when CIL had monopoly rights to mine coal. Various grades of coal which were legally or illegally mined, diverted or stolen, would land up here. As noted by journalist Rajshekhar, this was the “market that stepped in to correct a state failure”
India’s environment ministry laid out notifications mandating the use of low-ash producing coal in TPPs in urban, critically polluted, and ecologically sensitive areas and in power plants beyond 1000 km of coal mines (G.S.R. 560(E), 19.9.1997 and G.S.R. 378(E), 30.5.1998); as well as the safe disposal of ash produced (S.O. 763 (E) dated 14.9.1999). In January 2014, at the peak of the coal scam, the UPA introduced another notification stating that only coal with less than 34 % ash content should be used in all TPPs above 100 MW beyond 500 km of coal mine or if they are in urban areas, ESAs and critically polluted areas.
Experts say this was in line with India’s committed position on climate change; that is to control carbon emissions from domestic coal use without necessarily reducing coal consumption. This regulation was also written into India’s 2015 INDCs as “Coal beneficiation has been made mandatory.” These notifications, however, have mostly remained unimplemented given the larger unaddressed problems in the coal sector. The governance failure of washeries has caused the wasteful use of India’s coal reserves, loss of foreign exchange and huge environmental and social impacts.
A U-turn from clean coal
Having come to power criticising the UPA’s system of coal block allocations, the Modi government recognised that the coal sector needed to be straightened up. The Central Bureau of Investigation continued to track companies named in the coal scam and in some instances found coal miners (also this) allegedly diverting raw coal in the name of washeries.
In June 2016, the coal ministry had a detailed presentation and meeting to decide on a way to regulate coal rejects or middling. The meeting’s objectives were narrowed down to articulate a clear policy on how “the quantity of washery rejects generated by a washery” should be monitored. The minutes of the meeting state that “apprehensions” were voiced during the meeting that bidders who get coal blocks under a new system of coal auctions “might sell coal under garb of washery rejects.” The government was concerned that leakages would defeat the purpose of making coal accessible to power producers below the market price to keep coal power cheap.
At the same time, more initiatives were devised for the washeries sector. Media reports state that in 2017, Coal India’s Vision 2030 argued for the need to increase coal washing capacity through Public Private Partnerships. To bring them online, environment approvals for washeries were made easier through generalised Terms Of Reference for EIAs in 2018. Between December 2019 and January 2020, at least six coal washeries were listed for environmental approvals for capacity enhancement, validity extensions and new projects. Pollution Control Boards (PCB) allow washeries to function even though their operations are highly polluting and they guzzle water.
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As recently as January 2020, the NITI Aayog stated in a report that all new coal plants need to use super critical technology and washed coal. But after all this acknowledgement of the importance of coal washeries, the government surprisingly issued new notification in May 2020 without seeking any public inputs. On May 21, the environment ministry undid the January 2014 notification that required TPPs to use of coal that has less than 34% ash content.
The ministry’s new regulation allows TPPs to now use low-grade Indian coal that produces more fly ash. The regulation, however, states that TPPs will have to comply with emission norms, fly ash utilisation norms and use transportation with safeguards or means that are less polluting. This sudden, unplanned environmental policy on coal threatens all the planned and in-process investments in washeries like CIL’s plans for expansion.
The ministry’s justification for allowing the use of high-ash coal are two-fold. The economic debacle caused by the COVID lockdown is its first pretext. In its interest to generate new private investments in coal, the government would like to liberate the coal mining and thermal power sectors from the costs of washing and transporting washed coal. But experts state that the cost of washed coal does not add even 10% to the cost of electricity.
The ministry also states that coal washeries cause pollution. However, this problem is not unique to washeries alone and applies to the entire supply chain that supports India’s economy. In the latest notification, the government makes coal washeries the only culprit of the problems that plague coal use and shifts the burden of managing pollution from the use of coal to TPPs.
The new notification states “(i) The extent of ash content in mined coal remains the same. With washeries, the ash content gets divided at two places (washeries and the power plant), whereas if unwashed coal is used in power plant, the ash content is handled at only one place viz. the power plant”. According to the government, TPPs are now well equipped to manage fly ash and emission norms through better technology. However, these claims that pollution even from low grade coal use can be managed by making it the responsibility of TPPs is not tenable. According to IEA’s 2020 report, TPPs with their stressed finances, low water and fuel supply, cannot bear even the existing environmental costs.
Impact of dirty coal
The government’s explanations undermine the huge environmental challenge of coal use in India. Private TPPs are particularly hard to regulate because of their contradictory objectives of provisioning of electricity, a politically sensitive subject, and making profits. The new notification pushes the burden of pollution reduction to TPPs when they have shown no intention to comply with existing environmental laws so far. Between the government’s permissiveness on coal use and TPPs impunity to flout pollution norms, coal washeries were the only bridge to address coal efficiency and air, land and water pollution by coal power.
Fly ash is the worst form of waste generated by dirty coal in TPPs. It is produced and collected in towering, open landfills called ash ponds. The breaching of these landfills lead to large scale disasters. They inundate large areas with toxic materials that can render farmlands and water bodies polluted on a large scale. Besides the creation of poisonous landfills in the ground, the burning of poor quality coal increases carbon emissions and air pollution, a danger to public health. There is enough evidence to show that fly ash management by TPPs has failed and the environment ministry has dragged its feet on implementing the emission standards. Despite these large-scale violations of environmental laws by TPPs, there are few and piece-meal responses from judicial agencies to these issues that affect millions of people and their environments in India’s coal bearing states.
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The states of Jharkhand, Chhattisgarh and Odisha that have large agglomerations of coal mines and power plants will become more unliveable by the burning of bad coal. While more deaths and disease by air pollution are a distinct possibility, the spread of unmanaged fly ash will turn these rice growing regions into wastelands.
The land provided to TPPs through acquisition, sale or lease includes the space needed to construct fly ash ponds. Over the years the lands approved for TPPs have reduced due to land conflicts and the fly ash management measures put down on paper. As a result, ash will continue to be indiscriminately dumped.
These coal and pollution management policies that fail by design is an attack on the right to food, work and life of people in the coal regions. India’s entire coal network is ultimately set up to meet the expectations of a growing consumeristic society addicted to cheap power. It was a welcome surprise to hear a chief minister of a mining dependent state finally speak up against a national extractive economy that keeps mineral rich states poor with very low and often unpaid royalties.
Conclusion
While economic reforms at this crucial time should have focused on reducing coal and extractive minerals in the power sector and in the economy altogether, the government has shown that it continues to support mining and coal use. This points to the salience of the extractive industry in India’s political economy.
The BJP rode into power at the Centre on the back of the coalgate scam, but since then its has been able to do little to govern the coal sector better. While its big declarations on renewables received accolades from the international climate community, domestically the government’s support for coal continues despite all the socio-economic and environmental rationale against it. The much hyped coal auctions of 50 new coal blocks are due “soon”.
Indians are resigned to the use of coal for some more years because it is enmeshed in the country’s political economy of development. But in this context, the new notification’s permission to use low grade coal in power generation is dangerous and discriminatory. By denying – and refusing to remedy – the governance problems of coal use and allowing rogue coal power plants to bypass washeries, the environment ministry has put on the line the lives of the poorest people residing in the country’s coal enclaves.
Kanchi Kohli and Manju Menon are with the Centre for Policy Research.
