'India cannot survive without coal'

‘You cannot survive without coal. 2/3rds of our electricity comes from coal. Coal is the most important in our energy basket. Without coal there is no energy security for India’

‘We need to value energy and the only way we can value energy is if we pay the price for it. We do not value energy today because we are not paying the price for it. So if actually energy costs rise, we will use energy efficiently.’

‘One thing we must understand is that in India most power pricing policy is actually distorted. Domestic consumers pay less and industrial commercial consumers pay more. Globally it is the exact opposite.’

In the second and final part of this interview, energy and coal industry expert Sunjoy Joshi tells Sheela Bhatt/Rediff.com that we need to take a comprehensive view of the entire energy sector and how piecemeal reform won’t take us very far.

Part 1: 'Our whole concept of coal mine allocations is wrong'

Is India’s energy scene going to improve after the e-auction of coal mines?

We have to see the evidence of it improving. We have to get out of this quotas and allocations. The ‘captive blocks’ is a system of allocation of quotas. You are not allowing the actual use of a resource which determine its best use and value in an economy. You are not allowing it to happen. You are actually going back to licensing systems. If you are talking of reforms, you have to move away from these licensing systems.

Union Power and Coal Minister Piyush Goyal has said that India will stop importing thermal coal in three years.

I will believe the statement when the industry, Coal India, makes it. I cannot believe a statement if it is made by a minister.

Why?

Because the minister won’t do the mining. The mining will be done by entities who are involved in mining operations. And they are the ones who must come forward and say these are the right policies. The statement will have meaning only if the industries come forward and say, yes with these policies we would be able to ramp up production.

Once this e-auction process is over, how long will it practically take for India to use coal mines, coal reserves at the optimum level?

That’s a very big question because now India is also coming under increasing pressure, on the climate front and reducing coal use rather than expanding it. The point is we have not been able to utilise our coal reserves so far.

We say we still have a hundred years of coal reserves, someone will say we have 200 years of coal reserves. The point is, again, the same question, that those reserves are useless until we can mine them, produce them, use them.

The window within which we can use them and mine them is getting smaller year by year. The longer we take, the more difficult it will get to justify internationally our burning coal, say, 20 or 30 years from now.

Now the point is, when you are setting up a coal power plant today means someone is investing in that, he is investing over a 30-35 year cycle. Both the coal miner and the power plant operator are investing in the future.

If coal is only going to be available for the next five years, then there is no point in making that kind of an investment. He is not going to make any money but rather lose money in the short term. So we do not want any stranded assets left there again in the absence of coal. So we need a far more long term vision.

How long does it take to get an operation started?

In coal mining, the gestation period need not be too long. You can start coal mining after two years. Gestation period here rises majorly because you get into problems of land acquisition, you get problems of environmental clearances, then you get into the problem of whether you have a rail link, how are you going to transfer the coal out and where will you take it.

Rail, where are the tracks, where is the infrastructure to evacuate the coal. Many of the coal mines are without evacuation facilities. So all these things only add to the gestation period.

So in that case I would presume Adani’s idea of importing coal, of getting the mine and now getting the money for the operations from Indian banks, make sense.

It does make sense. See, you are not able to produce coal within the country in a short time, and you see a huge demand for coal within the country, so what else do you do?

What is the demand-supply gap?

Last year we imported 180 million tonnes. We do not know how it shapes up this year. But you know coal imports are steadily rising because of rising demand and because our coal production has stagnated over the past few years. It is sheer incompetence.

Now that e-auction is in place, do you think it is very imperative to have a coal regulatory bill?

Provided we understand what regulation means. Unfortunately in this country, the dividing lines between administration, regulation and policy making are not very clear. And that is not a problem in just coal, it is a problem across sectors. It is a problem we’re facing in aviation, in telecom, across the whole energy industry.

Let us first be very clear in our head as to which direction we are going in this long-term vision of coal and power business. Long term meaning, I’m not even talking of 30-40 years. Let us have a clear vision of what we are doing for the next 10-15 years.

In India’s energy basket, how important is coal?

You cannot survive without coal. Two-thirds of our electricity comes from coal. Coal is the most important in our energy basket. Without coal there is no energy security for India. You can keep talking about everything else. But until you wean the country away and move into diversifying the energy basket, coal will be important. And diversification is really, really far away -- the problem that exists in coal, exists in many other sectors of the energy industry.

So you do not have primary fuel availability. It is only coal that you have in plenty and hence have a huge capacity which is based on coal.

Now that internationally climate change and sensitivity for environment issues are so high, what will be India’s position over coal use?

India needs to negotiate very carefully on this front. Basically we have been lagging in developing our coal reserves. Our per capita consumption is still very low compared to international standards.

China did the very opposite. When the Rio declarations came, China used those 20 years to grab as much carbon space as it could. So it went on a mining spree extracting as much coal as it could. And then putting as many power plants as it could, forget the right technology, inefficient power plants etc...

And it was just a grab of carbon space that China did. China then reached there and now it has started talking about efficiency, cutting down emissions and moving onto a different cycle. We have missed that bus.

So we have lost about 20-25 years in the development cycle which has actually deprived our country of a cheap energy source at a time we needed it the most. There is a high economic cost to it in terms of the development of the country. So the people of this country have been deprived of a cheap energy source. Now the price of that energy resource is on the rise and it is going to be borne by the people of this country -- the consumer.

Tell me the dos and don’ts to do things faster.

If you want to enhance coal production, then you need to get professional mining into the operations. That is the first thing. You have to sort out your land acquisition laws, you need to sort out the issues of environmental clearances which are all the bottom lines that are occurring.

You need to allot more on getting infrastructure in. Hopefully with a new railway minister there will be more dynamism and we’ll start getting investments flowing into the system because the railways are absolutely vital for moving not just coal but everything. But they become absolutely vital for coal because reserves are concentrated in particular pockets. So they need to be transported around.

But don’t you think one of the dos should be that India should, increasingly, in the coming years, lessen dependence on coal?

India simultaneously needs to diversify its fuel basket.

But what I’m seeing is that for next 20 years you cannot run away from coal. No matter how hard you try. You can keep talking of renewables, it makes a lot of sense to go to international fora and talk of the number of solar power plants you are going to put in.

But eventually, if you look at the bigger energy picture, the bulk of your electricity will continue to come from fossil fuels. You will be adding capacities in solar and wind. But first of all you must remember that five megawatt capacity put up, say, in solar or wind is equal to one megawatt capacity put in coal. That’s the difference due to plant load factors. So if you’re seeking the same generation, forget about base load and everything.

If you’re looking at the same generation from renewables, you’re investing five times in capacity than you would be investing in fossil fuels. India’s energy demand is not at peak as yet and if you see an expansion, then you will definitely see coal capacities rising, not falling. Renewables will rise very fast as well. But as I said, they need to run five times faster.

Recently we heard from Adani and Tata about the demand for energy. On one side India wants to increase coal production, on the other India will be importing coal which will be a little costlier than local coal. So in view of that, what will happen to the consumer? They will keep paying more, right?

The consumer cannot run away from the prices of primary fuel. If the price of primary fuel rises, someone will have to pay the bill. Eventually even if you‘re thinking of moving away from coal, consumers need to understand that energy is only going to get expensive.

We need to value energy and the only way we can value energy is if we pay the price for it. We do not value energy today because we are not paying the price for it. So if actually energy costs rise, we will use energy efficiently, you will also see greater incentive for renewables.

Today if coal prices suddenly start dropping, renewables lose. Who is going to invest in renewables where the costs are going to be far higher? So you’re knocking renewables out of the market.

Today we talk the other way -- that if you want renewables to come in, you should be taxing conventional energy like coal. So raise prices. Yes, resources are expensive and energy is expensive. And we need to use less of it, use it more efficiently and we will probably do it when we pay more of it.

On the political front, the Narendra Modi government, before the next election comes in 2019, will try very hard to separate the grid for commercial use and domestic use. India will aim to have 100 per cent electricity connections in homes. So do you think it is a feasible target as it has happened in Gujarat?

See, separation is essential also for other reasons -- for differential pricing, etc. One thing we must understand that in India most power pricing policy is actually distorted. Domestic consumers pay less and industrial commercial consumers pay more. Globally it is the exact opposite.

You want to make India a manufacturing hub. How are you going to compete with people manufacturing abroad? Find out the prices in global markets. Your entire dream of turning India into a manufacturing hub with these kinds of distorted pricing policies, will not go very far.

Is it possible for Modi to go to the next polls giving maximum number of houses power through a separate grid? Is that an achievable goal?

First of all, is electricity going to be available? Are people going to be on the grid across the country? Some parts of the country are so distant that they are better of not being on the grid. For them it is going to be very expensive. And it might be cheaper for them to stick to renewable, biomass energy.

So there are different models which can be proposed and which I’m sure any rational government would think of optimising the cost when you’re supplying modern electricity and fuels to the bulk of the population. The statement should be written in context of the larger picture.

Do you think the political target is achievable on this issue?

If you’re talking about the grid then it is not possible. If you want to get the grid into the remotest village then it is a tall order and it is not even a wise decision. And when they say getting grid into every household, to every person’s house, there are limitations to it. And those limitations, within the political system, should limit them.

In balance, as of today, the way things stand on the issue of coal mining, the demand of power and the issue of tariffs for the consumer, are you optimistic about India’s coal scene?

No, I’m not.

Why?

We have a long way to go and it is a tough task and there are strong legacy issues. And till those legacy issues are hit head on, these are issues where jugaad is not going to take you very far. You are stuck with certain cancelled coal blocks which have come through the Supreme Court, and you have the coal nationalisation act, you bring in an ordinance and then you continue with the system of allocating coal to the end-users. This is all changing through jugaad, move this here, push this out of the way.

So we need to use a lot of rethinking on how we envision our grid, we should be maybe go in for distributed power generation using various other kinds of fuels. We should be going in for reforms that allow peak time tariffs, so that at peak times you have higher rates of tariffs, that conserve energy which also make sure that alternate fuels like natural gas and all can kick into the grid at the right time.

So the weight is taken off coal which you do not have enough of at the moment. A lot of balancing needs to be done. So unless we take a comprehensive view of the entire energy sector, this piecemeal reform, doesn’t take you very far.