India’s transition to renewable energy will affect 2 crore people in fossil fuel sector

As India makes a shift to renewable energy sources over the next couple of decades, at least 2.15 crore people currently employed – formally and otherwise – in its fossil fuel and allied sectors will need to be provided decent employment to prevent social and economic distress, states a recent report by the International Forum for Environment, Sustainability and Technology, a Delhi-based environmental think-tank.

Over the next two decades, the demand for fossil fuels such as coal is expected to drop 50% with a surge in the share of renewables in India’s primary energy mix, including for power supply, if the country embarks on a net-zero path, as per project modelling studies discussed later.

This transition signals a leap towards decarbonisation and climate action in line with the goals of the 2015 Paris Agreement, to which India is a signatory. At the same time, this transition must be socially and economically just and inclusive, said the report, “Five R’s: A cross-sectoral Landscape of Just Transition in India”, released in June, the first-of-its-kind study of what a just transition would mean for a country like India.

The study identified 60 districts across 16 states which need to be prioritised for this just transition. These districts have a high concentration of coal mining, coal-based thermal power plants and the automobile industry that will be impacted over the next 10 years and are in urgent need of an inclusive transition plan.

As per the Five R’s report, just transition includes economic and industrial restructuring, reskilling of the workforce, repurposing of land, revenue substitution, investments and the guarantee of responsible social and environmental practices.

Just transition has been recognised by the Paris Agreement as an important component of climate action. The lack of alternative economic activities to replace coal industry jobs is one of the three primary reasons slowing down India’s efforts at decarbonisation, concluded another study published in August and focussed on Angul, a district in Odisha with India’s largest coal reserve.

India’s transition path

Currently, about 70% of India’s energy demand is met by two fossil fuels – coal (44%) and oil (25%), as per the 2020 statistics from International Energy Agency.

A huge proportion, about 78%, of India’s electricity generation comes from thermal power, most of which is coal-based. Of the overall installed capacity as of September 2019, the share of coal-based thermal power is about 54%, show data from the Central Electricity Authority, a statutory organisation that advises the government on the development of electrical systems. The proportion of renewable energy sources is 22.7%.

However, over the next few decades, India will have to significantly reduce its coal and oil use to accelerate climate action, showed two recent modelling studies that envision India’s net-zero pathways over three to four decades. A study by the International Energy Agency (2021) showed that by 2040, the demand for coal will need to be halved.

Another key study by The Energy Resources Institute and Shell India, an energy company, also suggests a 60% decline in demand for both coal as well as oil by 2050.

Fuels being replaced

The change is already being felt on the ground. “This is not a question for the future,” said Anshu Bharadwaj, chief executive officer at the Shakti Sustainable Energy Foundation that aids design and implementation of policies on clean energy for India. “We are already in the middle of a transition.”

Solar energy is already becoming cost-competitive with solar power tariffs hitting a record low of Rs 2 per unit last year, he pointed out. “With battery costs falling and better storage capacity, the day is not far when renewable energy will compete with coal-based power,” he said. The public-run National Thermal Power Corporation, India’s largest thermal power producer, also announced that it will not invest in any new coal-fired thermal power plants and is building on its renewable energy capacity. Its target for the share of renewables in its total power-generating capacity is 25% by 2032.

Coal India Limited, the biggest public sector company producing coal in India, announced two subsidiaries for solar photovoltaic manufacturing and renewable energy projects. Apart from this, many coal mines are facing permanent or temporary closure.

“Just Transition in India: An Inquiry Into the Challenges and Opportunities for a Post Coal Future”, a study on just transition by the International Forum for Environment, Sustainability and Technology in Jharkhand’s Ramgarh district, showed that nearly 50% of coal mines in the state were closed, temporarily or permanently, due to various reasons including unprofitability. Many of these are underground mines. In its latest annual report, Coal India Limited described underground mines as a “weakness” due to their high cost of production, among other reasons.

“This is evidence enough that we are moving towards a transition and the planning of a roadmap for it must start now,” said Chandra Bhushan, president and chief executive officer at the think-tank.

Bhushan is also the founder of the India Just Transition Centre which has been set up to work on and understand just transition in the Indian context and represent a Global South perspective on international platforms.

“A just transition would involve multi-stakeholder engagement, looking at social and economic implications, opportunities and challenges and financing of the transition,” Bhushan said. “Hence, the momentum needs to be built and evidence generated for informed policy action.”

Informal workforce

The Five R’s report estimated that as India transitions to clean energy sources, at least 2.15 crore people would be directly hit as they depend on fossil fuel and allied sectors for income. The biggest proportion of these workers is informal in most sectors, said the study.

Informal workers are employed under the most precarious conditions, with no benefits, no job security and low wages.

Coal mining is among the biggest employers in India with an estimated 26 lakh people employed, of which about 70% are informal workers. The proportion of informal employment is also very high in manufacturing sectors such as the steel industry.

“Informal workers and the informal economy in the fossil-fuel dependent regions are the biggest challenge for just transition in countries like India and distinguish the [Indian] experience from [that of] Western countries, where the workforce in the fossil-fuel sectors is largely formal and needs re-skilling,” said Bhushan. “Additionally, India also has its own development challenges in these regions with high deprivation indicators and environmental pollution.”

In eastern India’s coal region there is also a huge subsistence coal economy, the think tank’s earlier research showed. The Angul-based study also underscores this dependence of locals on coal for their livelihood and how this impedes efforts to diversify the region’s economy.

“This is true for many of the old coal mining regions, particularly in the coal-mining districts of eastern India,” said Srestha Banerjee, director of Just Transition at the think tank. “Stretching from Raniganj coalfields in West Bengal to the Jharia and north Karanpura coalfields in Jharkhand, thousands of people earn a living by manually gathering and selling coal in local markets.”

“They will require re-skilling or creation and boosting of local livelihood opportunities to not be worse-off because of the transition,” said Srestha Banerjee, director of Just Transition at the think tank. “Most of this workforce, our observations show, are poor, have low levels of educational qualifications and do not have any security or options.”

Priority sectors

Coal mining, coal-based power and road transport are the three key sectors that will need just transition planning in the next 10 years, said the Five R’s report. These sectors are high greenhouse gas emitters – coal-based thermal power plants account for 42% of India’s greenhouse gas emissions and road transport, about 10%. These sectors are also technology-ready for transition.

The report identified 60 districts across 16 states that need to be prioritised for just action, as we said. These districts account for 95% of the total coal and lignite production in the country, 60% of the thermal power capacity and 90% of automobile and automobile component manufacturing.

The highest number of these districts are in Jharkhand (8), followed by Maharashtra (6) and Chhattisgarh and Karnataka (5 each). About one-third of these districts are concentrated in the coal mining belt of Jharkhand, Chhattisgarh, Odisha and West Bengal.

Reversing ‘resource curse’

The idea of just transition offers more than a decent life for those who bank on fossil fuel for their livelihood. Fossil fuel regions, particularly coal mining and power regions in India, face a “resource curse” – the inability to make economic progress despite an abundance of natural resources. They have been faced with socio-economic and environmental distress over several decades, as per figures cited in the Five R’s study.

The report estimated that more than 50% of the population in some of the top coal districts is multidimensionally poor. The multidimensional poverty index, developed by the Oxford Poverty and Human Development Initiative, is a measure for acute poverty in developing countries and captures deprivation in health, education and living standards.

The report’s analysis showed that in 17 of India’s top 25 coal districts, more than 30% of people are multidimensionally poor. This is much higher than the Indian average of 27.5%. These districts stretch across the entire coal belt of Jharkhand, Chhattisgarh, Madhya Pradesh and Odisha. In at least seven districts across Jharkhand, Chhattisgarh, Madhya Pradesh and Uttar Pradesh, as many as 50% of people are multidimensionally poor

“This is a vast human issue concerning the lives and livelihoods of people,” said Jayant Sinha, member of parliament from Hazaribagh that falls in the coal mining belt of Jharkhand. “Across India, in the mining belt cutting across Jharkhand, Chhattisgarh, Odisha, West Bengal, there are people who depend on the fossil-fuel economy.”

“Hence, there are crores of people who will have to undergo this transition. This will need proper planning and participation of people who will go through this transition,” he said.

Sinha emphasised the need to fund this transition because it requires both an economic overhaul as well as the creation of social infrastructure such as quality healthcare and education.

“The resource curse in India’s mining regions needs to be reversed,” said Banerjee of the International Forum for Environment, Sustainability and Technology. “For that, it is imperative that ground level and inclusive planning happens and livelihoods and social infrastructure is built.”

“At the district level, there are already District Mineral Foundation funds that can be leveraged as a start for economic diversification at the local level,” said Banerjee. “Currently coal districts in India have more than Rs 184 billion in District Mineral Foundation. Additionally, state governments will also have to plan to substitute the public revenue that they stand to lose.”

How to transition

To ensure that the energy transition in India is just, the Five R’s report suggests five steps.

• Fossil-fuel districts will require a restructuring of the economy and industry as most of them currently are mono-industry – that is, they bank on just industry to generate employment. Most coal areas, for instance, rely heavily on coal mining, power plants and coal-dependent industries. Groundwork in districts such as Ramgarh (Jharkhand) and Korba (Chhattisgarh) suggested the predominance of coal mining and coal-based industry.
• Land and infrastructure will have to be repurposed in fossil-fuel-dependent areas so that it can be used for short-term livelihood generation by engaging skilled and unskilled labour. In the long term, these resources can be used for infrastructure development. An estimated 0.45 million hectares (ha) of land is available with coal mining and major coal allied industries, including coal-based power, iron and steel, and cement, as per the Five R’s report.
• To offset the impact of job losses in fossil-fuel sectors, reskilling of existing and new workforce will be imperative. In coal mining, for instance, apart from the formal workforce, there is a huge fraction of informal labour which will be hit by the transition.
• The government will have to also look at substituting public revenue accrued from fossil fuels. Coal, oil, and gas collectively contribute 18.8% of the total revenue receipts of the central government and about 8.3% of the total revenue receipts of state governments, showed the Five R’s report. The revenue from coal mining is likely to hit the state governments as they earn royalty from it and collect district level District Mineral Foundation funds.
• Responsible social and environmental practices could provide for a new kind of social contract between the people, government and the private sector. Fair decision-making, poverty alleviation, fair income distribution and investments in human development and social infrastructure have to be ensured.

This article first appeared on IndiaSpend, a data-driven and public-interest journalism non-profit.