New Delhi, April 2, 2019 – Government concerns about the risk of stressed and stranded assets in the coal sector may be missing the big picture, according to a new independent study by the International Institute for Sustainable Development (IISD) and the Overseas Development Institute (ODI).

To date, discussions have focused on the right role for government in addressing the 21% of India’s coal power capacity that is stressed and at risk of entering bankruptcy proceedings. But this only makes sense if the drivers of stressed assets are indeed short-term. In fact, several drivers are likely to contribute to increasing costs for coal in future years, including concerns about air pollution, falling prices for renewables and increased water stress.

The Cabinet recently announced measures to improve coal linkages and allow greater flexibility for power producers in case of non-payment of PPAs. While this may help in the short term, it only considers the short-term needs of asset owners—and not the medium-term interests of workers. If pressure on coal costs continue, states with large coal mining sectors, such as Chhattisgarh, Odisha and Jharkhand, may be vulnerable to economic hardship as coal assets re-enter periods of stress and stranding. Rather than saving assets, smart thinking is needed to work out how government resources can be dedicated to ensuring a fail deal for workers.

Balasubramanian Viswanathan, IISD Associate, and co-author of the study says, “The financial liabilities of coal power plants are likely to increase as air pollution regulations, water scarcity concerns and competition from renewables become growing issues. It is time policy makers escalate India’s transition past coal.”

Leo Roberts, Operations and Partnership Manager at ODI, and co-author of the study says, “The growth of renewable energy will create a great deal of new jobs. But if there is a risk of coal power stranding in future, policy makers should start thinking now about the dialogue and complementary policies that will be needed to ensure a fair outcome for affected workers.”

This study follows a joint publication by IISD and ODI in September 2018, identifying Government interventions across the coal value chain and an assessment of India’s energy subsidies by IISD and CEEW in December 2018. The latter found the absolute size of the subsidy to coal-based power generation was INR 15,992 crore (USD 2.38 billion) in 2017 and has remained relatively unchanged since 2014.

Report: India's Energy Transition: Stranded coal power assets, workers and energy subsidies

About ODI

The Overseas Development Institute (ODI) is the UK’s leading independent think tank on international development and humanitarian issues. Our mission is to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement of sustainable livelihoods in developing countries.