The Indian government weakened rules to curb pollution caused by its expanding coal industry after lobbying by top producers, even as it agreed internationally to phase down the use of coal, Climate Home has found.

India’s coal giants pushed back hard against environmental regulation meant to tighten up the disposal of fly ash – a byproduct of coal-fired power plants known to harm both humans and the environment if not managed properly.

Letters sent by coal companies to the Indian government, and accessed by Climate Home News through freedom of information requests to government agencies, reveal lobbying efforts to weaken federal rules between 2019 and 2023 by Coal India Limited (CIL), the world’s third-biggest coal mining company, and National Thermal Power Corporation(NTPC), one of the world’s top 10 coal-fired power companies. Top management at the state–run giants claimed that their organisations would not be able to fully comply with the regulations, which aimed to control fly ash disposal after decades of public health impacts for local communities. Even after the rules were approved, the companies continued efforts to weaken them, in some cases successfully.

The coal companies argued that financial constraints would keep them from meeting the new requirements to clean up waste accumulated over decades and prevent further ash pollution, according to the accessed documents.

In some cases, lobbying got results and regulations were eased, with the environment and power ministries drawing on arguments from both companies in official correspondence between government agencies.

In 2021, while the proposed fly ash mandates were under discussion within India, the country was negotiating the COP26 climate pact in Glasgow, which calls on governments to take action “towards the phase-down of unabated coal power”.

At those UN talks, India was widely reported to have rejected stronger language on a global shift away from coal, but it agreed to scale back unabated coal power, produced without technology to reduce its climate-heating emissions.

Despite this deal, coal infrastructure around the world has since grown, mostly driven by added coal mining and power capacity in India, China and Indonesia.

The Indian documents obtained by Climate Home reveal that the South Asian nation’s coal companies lobbied against regulations on fly ash pollution while expanding coal production at record speed.

In their correspondence with ministries, they said high fines for non-compliance with waste disposal rules were a risk to their financial sustainability and raised the prospect of coal-fired power plants being shut down, triggering a power crisis in the country.

Fly Ash Pollution

When thermal power plants burn coal for energy, the fly ash they generate as a byproduct is dumped in water-filled dam-like structures called dykes.

Old “legacy” dykes store ash from previous decades and are a major source of pollution for nearby communities, explained independent air pollution analyst Sunil Dahiya. Wet ash can leach into groundwater, while dry ash can blow away, causing air pollution and damaging crops.

Functioning disposal sites are also vulnerable to heavy rains, as they can overflow and pollute nearby settlements. This happened on at least three occasions between 2019 and 2021, according to a 2021 report by the NGO Fly Ash Watch Group.

To minimise the impacts of fly ash, companies can recycle it into products like bricks, cement sheets, panels and other construction materials – a process known as “utilisation”.

Sehr Raheja, climate change officer at the Indian think-tank Centre for Science and Environment (CSE), highlighted the need to utilise “legacy” ash given “the enormous quantity”, adding there are risks involved with it staying underground, such as water and soil pollution. As of 2019, the amount of accumulated unused ash in the country was about 1.65 bntonnes, according to a CSE report, with newer estimates suggesting even more, she said.

Controlling Pollution

Fly ash regulation – known officially as the Fly Ash Notification – has existed in India since 1999, but it was not until a 2021 update to the rules that fines were introduced for failing to comply with proper waste disposal, following the ‘polluter pays’ principle.

The regulation also imposed a mandate on thermal power plants to ensure 100% utilisation of accumulated old fly ash, as well as fresh ash produced by ongoing operations.

Documents accessed by Climate Home show that NTPC exchanged letters with government agencies asking for elimination of the mandate to clean up accumulated ash.

“It is proposed that the provisions for utilization of old legacy ash may be dropped,” reads a 2021 letter from NTPC to the Ministry of Environment, Forests and Climate Change.

The 2021 rules were nonetheless passed, and they did introduce strict fines for coal companies. However, they also included what experts called a “loophole”.

The fly ash regulation exempted power plants from having to find a use for their old legacy ash as long as the ponds where it was stored were considered “stabilised”, meaning they had been secured against leakage. But the technical specifications of how that should be done were not defined, leading to concerns that arbitrary exemptions could be granted.

Yet even after these revamped regulations came into force in late 2021, lobbying intensified.

Persistent Lobbying

In 2022, NTPC was still concerned by a deadline of 10 years to utilise all legacy ash accumulated over decades, according to a letter addressed to the environment ministry. This would force them to transfer large quantities of fly ash to end users like brick-making kilns or ceramic product makers — or pay fines.

NTPC met with regulators at the Ministry of Power and agreed an extension to the period for stabilising old ash dykes from one to three years.

In the case of “operational” ponds, officials were persuaded not to label them as legacy ash, exempting them for the requirement for full utilisation. These changes were included in a 2022 amendment to the rules.

Shripad Dharmadhikary, who leads a civil society research group Manthan Adhyayan Kendra and has worked on fly ash management, said the unclear definition of stabilisation and longer timeframe for doing it provide “a loophole for power plants to evade use or proper disposal of legacy ash”.

The lack of technical parameters meant government authorities could struggle to guarantee that no more leaks would occur even if they certified the ponds, he added.

“Threat” to coal finances

The powerful companies also managed to limit the level of fines for non-compliance in a prolonged effort that began in 2020, when the first draft proposal on the new fly ash rules was circulated among coal companies.

That included a fine of Rs 1500 per ton, which was cut to Rs 1000 in the final 2021 rules after NTPC and other coal companies opposed it and asked for it to be removed entirely.

Even after this, executives from both Coal India and NTPC expressed alarm about the financial implications of the fines.

In a February 2022 letter to the Ministry of Environment, for instance, NTPC’s then director of operations Ramesh Babu V. wrote that the company could end up paying Rs 76,000 crores ($9 billion) over a decade – an amount “significant enough to threaten financial viability of NTPC and country’s thermal sector alike”. He warned the penalties could make large power stations at mining pit heads commercially unviable, leading to a “power crisis”.

Similarly, in a 2023 letter, CIL chairman and managing director Pramod Agrawal estimated that the “financial penalty” on only one of its subsidiaries (NCL) for failure to comply with the regulations could cost the latter Rs 38,145 crores (at least $4 billion) for just the 2022- 2023 financial year.

Coal expansion

However, the threats the executives outlined to the companies’ bottom lines do not seem to have translated into lower capacity to mine coal and produce thermal power, with both ramped up drastically during and after discussions on the Fly Ash Notification.

Expansion efforts were redoubled especially after an unprecedented power crisis in late 2021, which was attributed to logistical issues causing a shortage of coal supply.

In a January 2024 conference call with investors, NTPC’s management said it was considering awarding thermal power capacity of 15.2 GW in the near future, on top of the 9.6 GW thermal capacity already under construction for the group.

CIL, in its latest annual report, announced plans to increase coal mining capacity to 1 billion tonnes by the financial year 2025-26.

A previous investigation by Climate Home News showed that European asset managers had invested substantially in both NTPC and CIL, helping India’s coal industry to expand rather than phase down in line with international commitments.

Air pollution expert Dahiya said that, while India has lower historical emissions than countries in the Global North and requires flexibility to meet its energy needs, as well as international support to move away from fossil fuels, that did not mean coal companies should be “free to pollute”.

Raheja, of the CSE, said better controls on pollution are also a matter of justice for those living near coal-fired power plants.

“The environmental regulations are critically important for maintaining the health of the environment and of communities residing near coal facilities – even of people far away – as pollution, both through air and water, can be carried to a distance,” Raheja told Climate Home News.

This article was first published on The AIDEM

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In the year 2020, the central government decided one of the myriad ways in which Bharat could become Atmanirbhar or how India could become self-reliant, was by further liberalisation[1] of the coal sector. By the end of the year, it had additionally deregulated environmental standards pertaining to fly-ash content and coal-washing. Those who consider economy to be a zero-sum game that excludes environmental considerations, hailed such steps and contended that revenue would flow in.

However, a closer inspection presents a slightly different tale. For example, ever since the auction for coal blocks began, actual revenue has fallen far short of estimates. In fact, in 2018, a report[2] found that only 3% of the projected revenue was met. The projected claim was INR 3.35 trillion, but collections amounted to INR 56.84 billion only. In the end of April 2021[3], the government itself decided to come up with project, financing policies to encourage private investment in coal mining, seeing the general hesitancy.

Another point that often finds mention is that coal is good for job creation in local communities. While this may be true to some extent, any gains in the present scenario are going to be temporary. The coal sector is fully staffed[4]; in fact, Coal India began looking at human resources restructuring for its more than 3.4 lakh employees in 2014. As a simple statement of fact, as further plants get decommissioned, it will exacerbate the already existing over-staffing problem. All this points to an unavoidable truth: trying to liberalise coal is not just bad for the environment; it is bad economic policy too.

However, reaching a conclusion is one matter. Providing alternatives is quite another. There are communities that depend on coal, and reducing dependence on coal, without investing in other forms of energy can be catastrophic. Therefore, planning is essential on two fronts: energy supply, and energy transition.

Even today, energy supply in India is plagued by distribution issues more than generation issues[5]. This is because its last-mile infrastructure is poor. A staggering 305 million people[6] still do not have access to electricity. Therefore, the primary sector where the government should look at investment is in distribution networks. Because the last-mile is generally in neglected places where private players might not find much value, such as at sub-village levels, the investment must directly come from government coffers.

Another reason for poor distribution, despite surplus production, is the debt distribution companies have taken on by supplying free electricity due to various government schemes. Governments must take immediate steps to eradicate such misuse by stopping all policies where free electricity is provided to people who are rich enough to use beyond a certain threshold.

Furthermore, for all populist schemes such as free electricity for irrigation, it must be counteracted by profit-centres. This means allowing distribution companies to diversify. It can mean allowing them to foray into broadband across the country, which is still clustered around urban areas[7]. Of the 922 million rural people in 2014-15, only 129 million had access to the internet, of which 80 million was mobile internet. Distribution companies should also be allowed to enter the off-grid electricity markets, which can be more profitable in isolated areas. It can also mean allowing them to build distribution networks in other countries, especially those that have contiguous borders with India. This will expand India’s global influence across its borders; especially in its neighbourhood, where it needs to counter a growing dependence of other countries on China.

At the same time, generation must shift from coal towards other renewables, especially where the marginal cost of production is less than coal, such as in solar energy and lithium-ion batteries. To give an estimate of the projected median Levelized Costs of Electricity (LCOE) in 2030[8], we see that while coal would be around 50 Eur/MWh in India, Photovoltaic Rooftop, Photovoltaic Utility and Lithium-ion batteries will be around 35 Eur/MWh, 25 Eur/MWh, and 30 Eur/MWh respectively. China and USA have already achieved this price inversion in the last decade and India must speed itself up.

Hence, it is not a surprise that while coal is unable to find foreign investors[9], solar energy faces no such problem, indicating investor confidence. That Dutch investors are investing in Indian solar power, a week apart from the government trying to find project finance for coal, points to the state of both energy sources in May 2021. However, transition to solar energy means building a proper global supply chain and taking a lead in the manufacturing process.

The other energy source with lower projected LCOE in the future is Lithium-ion battery. These batteries require rare metals[10] such as Lithium and Cobalt. Previously linked reports already point to nationalised banks withdrawing from overseas coal projects due to environmental impacts. They should concentrate that energy instead in investing in rare metal procurement by tying up with local investors. That would build a global footprint for India, especially in Africa and Latin America, in this sector as well. To counteract existing Chinese influence in this region, Indian banks can also take the lead in drafting trade finance requirements which can counteract unethical purchase[11].

Taking these steps will ensure that India leads in this century instead of playing last century’s game. It will create new jobs, make itself a market leader and improve infrastructure, all in a single attempt. Authorities must not squander this opportunity to become a self-reliant and environmentally responsible nation.

The author is a professional in Energy, Trade and Finance, City University London

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“24×7 power” is the government’s priority, India’s new power minister Raj Kumar Singh said on May 30, 2019. His predecessor, Piyush Goyal, declared India “power surplus” two years ago, and a government dashboard says 99.99% of rural homes–which account for nearly 7 in 10 Indian homes–now have grid power.

At the root of the contradictions between almost-universal electrification, “surplus” electricity and the inability to supply it around-the-clock to Indian homes is a debt that burdens state-owned electricity distribution companies (DISCOMs) nationwide, impairing their ability to build and maintain power grids and equipment.

The inability or refusal of state governments to increase power bills, as we explain later, has led to more borrowing and power shortages and made DISCOMs reluctant to buy available electricity, which means continuing blackouts and erratic power supply.  

This debt will reach Rs 2.6 lakh crore ($37 billion) by 2020, according to a May 2019 study by Crisil, a market research agency. When that happens, the debt will be the same as in 2015, which is when the Ujwal DISCOM Assurance Yojana (UDAY), the government’s bailout programme for DISCOMs, began.

“The much bigger need [other than DISCOM inefficiencies] is to address the large amount of free power that is distributed for irrigation and for rural households in the country,” Vibhav Nuwal, director, REconnect, a Bangalore-based energy solutions company, told IndiaSpend. Only if this electricity is metered and billed will DISCOM losses reduce, he said.

We sought comment from Vishal Kapoor, director, UDAY, at India’s power ministry over email and followed up with phone calls over two weeks, but there was no response. His office declined a request for an appointment. If and when there is a response, we will update this story.

The looming DISCOM debt of Rs 2.6 lakh crore will be more than the Centre’s combined 2017-18 spending on: highways; national railways; metro-rail systems; national food subsidies; cash transfers for national social-security schemes (direct benefit transfers); cooking-gas subsidies; capital expenditure for the defence services; space technology, applications and satellites.

India’s “traditional model” of managing the electricity distribution sector, warned a May 2018 paper by Prayas, a nonprofit that advises government, “is on the verge of collapse”, which means much of India’s electricity gains are threatened.

“Crucially, it is not just the fate of DISCOMs that is at stake—as electrification accelerates and millions of newly electrified households join the grid, also at stake is the fate of all the small, rural, and agricultural consumers,” said the Prayas paper.

The return of DISCOM debt to pre-UDAY levels does indicate the failure of UDAY, but this borrowed money, said experts, also allowed India to build more power plants and expand India’s electricity network, which is why many states now have “surpluses”.

The expansion costs could have been offset, if UDAY had kept to its other aims, such as getting states to increase power bills by 6% a year for four years till 2019. But the average increase over the period was half that, and supply losses by October 2018 were 25% instead of 15% as they were supposed to be by March 2019.

We sought comments from Aparna U, managing director, Uttar Pradesh Power Corporation Limited, an amalgam of seven state-owned DISCOMs, over email and followed up with phone calls over two weeks. There was no response. Other officers from UP DISCOMs refused comment. We will update this story as and when we receive a response.

Does India have surplus power?

By the end of March 2019, India would have a 4.6% electricity surplus and a “peak power”–the maximum electricity demands–surplus of 2.5%, India’s Central Electricity Authority (CEA) predicted in July 2018.

Despite surpluses in some states and Goyal’s 2017 claims, India is not a power-surplus nation officially, although it has hoped to be one for three years since 2016.   

India’s “power deficit”–the difference between the demand and supply of electricity–is not zero. India’s electricity deficit in the financial year ending March 2019 was 0.6%, and the “peak power deficit”–shortfall from the maximum electricity demand in a year–was 0.8%.

“Power deficit is primarily due to the reluctance of debt-laden states’ DISCOMS in buying more power,” said Prateek Aggarwal, an expert on the power sector at the Council on Energy Environment and Water (CEEW), a Delhi-based think-tank.

India currently has around 356 gigawatts (GW) of installed generation capacity against a peak demand of about 177 gigawatts.

The nub of the issue: Power generation cannot be increased unless DISCOMs pay their dues.

It is also difficult to calculate how much electricity India needs for the 24×7 promise, said Aggarwal, “because most of rural and agricultural connections are not metered, and India does not really know how much power it needs to supply 24×7 electricity to all its connected homes”.

Despite UDAY, darkness

When Prime Minister Narendra Modi began his first term in 2014, 70% of India’s homes had been connected to the grid. His government accelerated that programme and connected 26 million more homes over 16 months to December 2018.

But thousands of Indian villages receive 12 hours or less electricity a day–because of DISCOM inefficiencies, as we said–and India’s per capita electricity consumption was 14% of the average per capita consumption of the rich countries that comprise the Organisation for Economic Co-operation and Development (OECD), IndiaSpend reported on November 3, 2018.

In 2015, India’s DISCOMs collectively recovered less than 80% of their operational costs, we reported. On March 2015, DISCOMs had accumulated losses of about Rs 4.3 lakh crore.

So, DISCOMs borrowed money from banks (with interest rates as high as 14-15%) to cover their costs, their cycle of losses cancelling out India’s other gains: more coal, more power plants and more transmission lines, IndiaSpend reported on April 13, 2017.

Under UDAY, the power ministry, state governments and DISCOMs signed memoranda of understanding that said state governments would take over 75% of DISCOM debts–outstanding as on September 2015–through bonds with a maturity period of 10-15 years.

DISCOMs were given goals: reduce power and interest costs, monitor and reduce transmission losses and power theft, and fix faulty meters. By charging more, DISCOMs were to wipe out the difference between the cost of supply and average revenue by 2018-19.

In 15 states that account for 85% of national aggregate technical and commercial (AT&C) losses, despite the debt takeover, UDAY failed, said the Crisil report we cited earlier.

National AT&C losses were 25.41% on October 2018, or more than 10 percentage points more than they were to be by March 2019, and instead of hiking tariffs by 5-6% every year, the 15 states increased bills by 3%, said the Crisil study.

How success drove failure

Why could UDAY not help DISCOMs be more profitable?

The answer, said experts, lies in the success of India’s electrification drive.

In 2016, a year after UDAY began, the Indian government launched another flagship programme to connect all the villages and households to the grid and to provide them with around-the-clock power.

“The time-bound objectives [of electrification drives] and UDAY were converging and diverging on certain aspects, which resulted in a haywire situation for the implementation agencies, such as the DISCOMs,” said Aggarwal of CEEW.

The government electrified 26.30 million rural households to achieve 99.93% electrification over 16 months to January 2019, a  “mammoth exercise” whose implementation created problems for DISCOMs: higher costs and reduced revenues from the newly connected households, mostly rural, paying low or no bills, said Aggarwal.

The blackouts continue primarily because DISCOMs are reluctant to buy more power, either because they do not have the money or are afraid consumers will not pay, said Aggarwal.

Your bills don’t reflect costs

Another reason why UDAY could not bailout DISCOMs is infrequent tariff hikes.

“Consumer tariffs are still not cost reflective,” said Vibhuti Garg, a senior energy specialist with the Global Subsidies Initiative at the International Institute for Sustainable Development, a think-tank.

India’s electricity regulatory agency allows DISCOMs to recover “regulatory assets” (the cost of power consumption) at a “later stage” from the consumer through higher bills.

Due to sporadic tariff hikes, India’s consumers owed DISCOMs Rs 76,963 crore by March 31, 2019, since DISCOMs were not allowed to raise tariff.

DISCOMs in three BJP-ruled states—Uttar Pradesh, Jharkhand and Maharashtra—are responsible for 87% of the outstanding amount, said a May 20, 2019 study, by the India Ratings and Research, a market research agency.

The inability of DISCOMs to recover unpaid bills has been a long-standing concern for the government, which blames state regulators for not raising tariffs to cut losses, The Indian Express reported on May 27, 2019.

The DISCOM mess is often caused by populist measures. In many states, successive governments have kept electricity prices low for political gain, keeping DISCOMs in the red, IndiaSpend reported on April 2, 2018.

Better meters will also help, said Garg.

“The poor levels of metering across various electricity categories [mostly domestic and agricultural consumer], the lower billing and collection efficiencies resulting in limited fund inflow for DISCOMs will have to be fixed, if DISCOMs are to progress towards financially stable balance sheets,” said Aggarwal.

What can the government do?

If the government wants to fulfil its promise of “24×7 power”, said experts, it must accelerate the process of installing electricity meters in all homes, replace defective meters, ensure unpaid bills are paid and end electricity theft–which is easier said than done, as one UP police officer found on June 9, 2019.

The government will also need to address the problem of ensuring power stations are profitable before building more, or reducing “stranded assets” and “low utilisation”, as Aggarwal put it.

Since 2010, India has seen the cancellation of proposals to build power plants worth 573 gigawatts—1.5 times current national capacity—according to a 2018 report by Global Coal Plant Tracker, the End Coal advocacy group’s global repository of information on coal.

The lack of “long-term power-purchase agreements” was cited as one of the  leading causes for this “financial stress”, said the report.

(Tripathi is a principal correspondent with IndiaSpend.)

Courtesy: India Spend

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