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Developing Better Policies in the Indian Coal Sector Ananth Chikkatur & Ambuj Sagar Belfer Center for Science & International Affairs Kennedy School of Government, Harvard University Conference on Managing the Social and Environmental Consequences of Coal Mining in India Nov 20, 2007, New Delhi Nov 20, 2007 Chikkatur and Sagar 1 Outline • Role of Coal in India’s energy sector • Key Challenges – Demand for coal – Environmental and Social Issues • Institutional and Governance Issues • Key Policy Focus areas Nov 20, 2007 Chikkatur and Sagar 2 Role of Coal in India’s Energy Sector Primary Energy Consumption 600 b) 350 Electricity Railways Steel Cement Other industries 300 500 250 Million Tons 400 300 200 Coal Consumption 200 150 100 100 50 Source: Planning Commission. 2005 Wind 2000 Hydro 1995 Nuclear 1990 Natural Gas 1985 Oil 1980 Coal and Lignite 1975 Non-comercial 0 1970 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1970 0 Source: MOSPI • More (and better use of) energy is critical for India’s development • Coal: 53% of commercial energy; 71% of electricity generation • 80% of domestic coal is used for electricity Nov 20, 2007 Chikkatur and Sagar 3 Increasing demand for coal • Electricity generation expected to increase sixfold by 2030 • Future growth of electricity in India to rely heavily on coal – Other sources are uneconomical or have insecure supplies or are complex to build Î Expansion of coal exploration, mining & use Also consistent and high quality of coal needed Nov 20, 2007 Chikkatur and Sagar 4 Future Coal Demand Forecasts 2500 Actual Production Coal Vision 2025 (8% GDP) IEP Report IEP--Scenario 5 WG for XI Plan 5.35% growth EIA-IEO2006 (ref) EIA-IEO2006 (high) EIA-IEO2006 (low) IEA-WEO2006 (ref) Million Tons 2000 1500 2004 China: 1.8 BT U.S.: 1 BT 2030 China: 3.9--4.2 BT U.S.: 1.3--1.6 BT 1000 500 2035 2030 2025 2020 2015 2010 2005 2000 1995 1990 0 • Indian projections higher than IEA/EIA • Domestic production might be unable to cope with demand Æ Rising imports More coal mining Æ Better management of environmental and social costs Nov 20, 2007 Chikkatur and Sagar 5 Environmental & Social Costs • Loss of land Æ Large scale displacement – Mining (12%) is second compared to dams (77%) – 30 million people displaced from all development projects (Fernandes/Sethi) – 55% of displaced are scheduled tribes (Sethi/Bhusan) – Only 29% are ‘rehabilitated’ – 13 million uprooted • Social Costs – Breakdown of social and economic structure • Environmental Costs – Loss of forests and land degradation – Dust from mining operations – Impact on water resources (aquifer loss, runoff, acid mine drainage) – Adds to further forced migration – Impact of biodiversity and wildlife corridors Nov 20, 2007 Chikkatur and Sagar 6 Institutional and Governance Issues • Government Dominance – MoC controls nearly all policy related matters on coal • Others: MoP, MoM, MoEF, MoL, MoF, PC – Changes require agreement among many actors • Bureaucracy has resisted changes • Legislative changes difficult Æ reforming coal sector within existing framework leads to convoluted policies • Governance and Corruption – Illegal mining – Lack of accurate data on depleted reserves – Fear of retribution and loss of private gains Nov 20, 2007 Chikkatur and Sagar 7 Key Policy Issues (1) Systems level perspective: • Manage Coal Demand in Power Sector Æ Breathing room for coal sector to make changes • Efficiency improvement • Reducing T&D losses and theft • Demand management and end-use efficiency • Better data collection and assessment – Some data available with CCO/CIL – Critical data missing • Economically mineable resources, depleted reserves, number of displaced people, abandoned mines, etc. – Important for improving efficiency of mining and R&R policy implementation Nov 20, 2007 Chikkatur and Sagar 8 Key Policy Issues (2) Role of coal mining technology – reducing environmental impacts Technology and policy roadmapping process: • Need for visioning exercise with stakeholders Vision Led by government, participation by all major stakeholders Technology assessment/policy options analysis Technical personnel and analysts from govt., industry, utilities, academia, NGOs Roadmapping and Planning Technical personnel and analysts from govt., industry, utilities, academia, NGOs • Planning with people, rather than planning of people or planning for people • Technology development, acquisition, adaptation and deployment Nov 20, 2007 Chikkatur and Sagar 9 Key Policy Issues (3) R&R policy context – Recent policies perceived to support industry, rather than affected people – Policy formulation process has been contentious – Big gap between CIL R&R policy and implementation – SEZs have raised many flags on the land acquisition process – Demand for jobs has been a show-stopper • Alternative economic activities and community development – Locations of mines determined by geology • No siting flexibility • Some flexibility through mining technology and mine planning – Atmosphere of mistrust exists between people/NGOs and coal companies • NRR2007 – Improvement, but questions remain on implementation Nov 20, 2007 Chikkatur and Sagar 10 Key Policy Issues (4) Environmental Impact Assessment – Complex, laborious process – data intensive, takes time – Extensive stakeholder input necessary – Need to be performed by accredited agencies • Not directly funded by project proponent – Problems with fraudulent EIAs • “cut-and-paste” • Incomplete data – Project proponents: • Want timely action and clear guidelines • Clearance process is viewed as being arbitrary and not transparent • Public hearings agenda often dominated by R&R issues – EIAs are now done after project preparation • Techno-economics and environmental assessment in parallel Nov 20, 2007 Chikkatur and Sagar 11 Key Policy Issues (5) New approaches – Reclamation bonds (outside of CFoI) – Green credits (afforestation) – Revenue sharing between community and projects – EIA and SIA prior to project formulation – Involvement of local community in EIA preparation – Use of satellite imagery to build data sets – Land leasing, instead of acquiring Need to experiment with new ideas – Policies must allow space for that Nov 20, 2007 Chikkatur and Sagar 12 Conclusion • Mining of coal is bound to increase • Impact mitigation requires both: – Managing coal demand (coal per unit energy service) – Managing mining impacts (impact per unit coal extracted) • Process is critical in developing better policies • Policy space needed for exploring new ideas Nov 20, 2007 Chikkatur and Sagar 13