India’s mining sector: Present is tense and future could be imperfect

Giving a boost to the mining sector, especially commercial coal mining, and bringing in reforms to attract more investment into the sector is the direction taken by the government in its announcements intended to revive the economy following the pandemic. But a boost to mining brings with it associated troubles such as land conflicts, run-ins with communities and an impact on the environment.

According to the official government data, India produces over 85 minerals including coal, lignite, bauxite, chromite, copper ore and concentrates, iron ore, lead and zinc concentrates, manganese ore, silver, diamond, limestone, phosphorite etc. India is the second-largest producer and importer of coal in the world. Over the decades, the value of mineral production has also risen and, as of 2015-16, stands at around Rs. 2.82 trillion. There are over 33,500 mining leases that are in force in the country across 23 states covering an area of 316,290.55 hectares. Of those, nearly 70 percent are in five states alone – Madhya Pradesh (702 mining leases), Tamil Nadu (464), Andhra Pradesh (453), Gujarat (432), and Karnataka (376).

In June 2020, while launching commercial coal mining in 41 coal mines, Prime Minister Narendra Modi said India will turn the COVID-19 crisis into an opportunity and he hailed it is a major step in making the country self-reliant in the energy sector. However, the government’s decision has not inspired much confidence in investors as they feel auction in time of pandemic is a dampener . Instead, they have sought extension of the auction by a few months.

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, emphasised the extent of coal generation in India saying that the country has Coal India Limited, one of the largest coal producers in the world, that is aiming to cross one billion tonnes of coal production alongside importing coal, which is not going to stop. 

“We are witnessing a scenario wherein power assets are not being able to produce power and banks are writing off loans given to them. If we are not careful enough about coal production, we may see a similar scenario in coal mining as well because everyone would be producing more coal including CIL at a time when there is a lack of demand. As a simple business case, in today’s scenario, an increase in coal production is quite challenging,” he told Mongabay-India.

Will a shift to renewable power trigger a “just transition”?

The government’s launch of coal auctions for commercial coal mining once again triggered the debate around transition to clean energy. The shift to renewable energy from coal is one of the main pillars of a transition that is deemed to be fair to communities, protects health and environment and boosts growth. Moreover, it is also part of the global efforts to cut down on coal to control climate change. India has promised 175 GW of renewable power by 2022 and at least 350 GW by 2030. At present, India’s overall installed renewable capacity is 87.66 GW and of installed solar power capacity is around 35 GW.

However, the push and focus on renewable do not mean India is cutting down its focus on coal. According to CIL, in the next five years, it is going to open 55 new coal mines and expand at least 193 present ones. Together, these two steps will ensure an increase of 400 million tonnes in coal production. CIL has about 463 coal blocks with which the country can continue thermal power production for another 275 years.

At present, the mining sector’s direct contribution to India’s gross domestic product is less than three percent. Photo by Suyash.dwivedi/Wikimedia Commons.

Karthik Ganesan, who is a research fellow at the Council on Energy, Environment and Water (CEEW), said, “India’s coal demand could grow by upto 30% by 2030, and we need to source that coal and have reliable supply options.” 

“The new mines being auctioned are aimed at servicing the existing and under-construction plants. Across the world, there is increasing adoption of renewable energy which is displacing coal, and amidst that glut, global coal prices (naturally) must come down. Maintaining our import dependence, in such a scenario, would be a prudent move. We need a transparent exposition of the costs and benefits of our move to open up more mines. This has not been forthcoming, and that is the basic requirement of large investments in infrastructure that most other countries mandate,” Ganesan explained.

“Opening up ecologically sensitive and pristine forests could irreversibly damage our biodiversity endowments, risk our water sources and affect millions relying on these forests for their livelihoods,” he said.

Ganesan also emphasised that the recent coal auctions are unlikely to have any implications on India’s renewable energy goals and roll-out. “The growing share of renewable electricity, mainly solar, was driven in recent years solely by the cost decrease of PV panels. The increasing adoption from here on will be driven by lower risk perception, and the increasing dispatchability (reliability) through emerging storage technologies,” he said. 

On a query regarding a ‘just transition’ to cleaner energy, Sivalingam said, “globally countries are moving towards renewable as it means cleaner and cheaper power.” “If we put money where it matters, a transition that is just for the environment and people at large is not difficult to achieve. There is no dearth for opportunities but what we need is political and business will.”

By Mayank Aggarwal

Gh Extractives

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