Last year, India joined the Paris Agreement to tackle climate change. India accounts for 4.1% of global emissions, and the country opted for increased use of clean and green energy to reduce its emissions relative to GDP, rather than an outright cutting or capping of emissions.
Last year, India joined the Paris Agreement to tackle climate change. India accounts for 4.1% of global emissions, and the country opted for increased use of clean and green energy to reduce its emissions relative to GDP, rather than an outright cutting or capping of emissions. Experiences from the recent past suggest that the favourite solution to tackle pollution and emissions appears to be a ‘ban’. The Delhi government, for instance, implemented the odd-even traffic rule last year and the Supreme Court recently banned the use of petcoke. While the realisation and the will to curtail pollution is much appreciated, what we need is a clear and a well-thought-out policy to handle the problem.
The government introduced a clean energy cess of `50 per tonne on coal (produced or imported) in 2010, which served as a carbon tax. This was increased to `400 per tonne in the 2016-17 Union Budget. The proceeds of the same were to be transferred to the National Clean Energy and Environment Fund (NCEEF) and then to be invested appropriately. The cess was essentially to discourage the use of coal and promote the use of clean renewable energy. With the implementation of the goods & services tax (GST), the clean energy cess has been subsumed under the GST Compensation Cess. This cess feeds the GST Compensation Fund—a fund meant to compensate various state governments for any loss in revenue arising out of GST.
An article earlier this year, on Scroll.in, mentioned that the unspent funds under the NCEEF to the tune of `56,700 crore had been diverted with the implementation of GST. The article also mentioned that, of the total cess collected during the 2010 to 2017 period, the government allocated only 37% to the NCEEF. It spent even less—under 30%—on clean energy and environmental projects. By subsuming the clean energy cess under GST, not only have the past collections been lost, but future revenue from the cess for promotion of clean energy would also be unavailable.
An easy substitute for coal is petcoke, or petroleum coke. Being a by-product of crude refining, petcoke is available at a discount as compared to coal. However, it is more polluting than coal. Coal-fired electricity generation is the largest source of greenhouse gases globally, and petcoke blending only increases these emissions. Petcoke also has higher carbon content than coal. In fact, a 2013 report mentioned that on a per-unit of energy basis, petcoke emits 5-10% more carbon dioxide compared. And one tonne of petcoke yields, on average, 53.6% more carbon dioxide than a tonne of coal. Petcoke also has high sulphur content, which, in turn, means more sulphur dioxide in the atmosphere when petcoke is burnt. While coal attracted the additional cess in India, petcoke, which is a dirtier fuel, was exempted. It was only recently that there were talks on imposing a similar cess on petcoke.
India consumes around 23 million tonnes of petcoke annually. All of a sudden, in October 2017, the Supreme Court banned the use of petcoke in Haryana, Rajasthan and Uttar Pradesh, to tackle the problem of air pollution in Delhi NCR. Immediately after the ban, there was a confusion as to which exact industries it applied to, and to which regions (across the states or just the NCR?).
Consequently, there were some representations made to allow its use in industries where it does not adversely impact the environment—for example, cement and limestone kilns. Cement accounts for nearly 8-9 million tonnes of petcoke consumption. However, the Supreme Court upheld that the ban is a blanket ban across industries and across states. There are talks of extending the ban to other states along with banning the imports of petcoke. However, under the World Trade Organisation (WTO), the import ban might not be possible as long as we continue to use domestically-produced petcoke.
In the aftermath of the ban, many industries in the aforementioned states have been adversely affected. Now, these industries have to shift their fuel to coal, which a costlier option. In addition, one must ask, is coal easily available in the country? The answer is ‘no’. In fact, in recent months, there has been a severe coal shortage in the country, and coal stocks at many major power plants across the country reached critical levels. Coal India Ltd has been trying to increase its production and dispatches, but that again is constrained by poor railway infrastructure. The quality of coal available in India also fails to meet the requirements of many users. Imported coal prices are close to $100 a tonne, and will surely impact the viability of these industries. The Supreme Court is now expected to reconsider its ruling and allow the use of petcoke in industries where there is no adverse impact on the environment.
With respect of electric vehicles, too, there appears to be a lack of clear policy direction. The National Electric Mobility Mission Plan (NEMMP) was launched in 2013 aimed at bringing 6-7 million electric vehicles on the road by 2020. The NEMMP sought to reduce the dependence on fossil fuels and develop cleaner technologies. In 2015, the FAME India scheme—Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India—was launched under the NEMMP with an initial allocation of `75 crore. With the FAME India scheme, the government sought to push early adoption of electric vehicles through demand incentives and promotion of in-house technology development and domestic production. Auto manufacturers were given subsidy for discounted pricing of hybrid and electric vehicles. Earlier this year, the NITI Aayog proposed a roadmap towards going all-electric by 2030.
According to the Society of Manufacturers of Electric Vehicles (SMEV), electric vehicles account for less than 1% of vehicle sales in India. More than 95% electric vehicles on Indian roads are low-speed electric scooters that do not require registration or driving licence to run. In fact, in 2015-16, 22,000 units of electric vehicles were sold in India, of which only 2,000 were four-wheelers. The high initial buying cost and lack of infrastructure (charging stations, batteries etc) are the biggest roadblocks to electric vehicle adoption in India, and there are no prescribed standards as yet for powertrains and batteries with regards to these vehicles. There is also no long-term comprehensive policy to promote electric vehicles both from demand as well as supply side. In addition, almost 40% of the funds under FAME India were used to subsidise diesel mild hybrids, which are much closer to conventional cars because they run on internal combustion engines—the electric motor in a mild hybrid cannot (and does not) actually propel the vehicle on its own, it serves only to assist. The full hybrid cars attract 43% duty under GST, while electric vehicles are being taxed at 12%. Even though the technology is still evolving, India seeks to bypass the interim technologies (full hybrid) and head straight to electric. With regards to the proposal by the NITI Aayog, there is a lack of political consensus, and the ministry of road transport and NITI Aayog are not on the same page.
While the government appears to be in favour of cleaner energy, realisation of the same will depend on how the policy space pans out. Ad hoc policy moves will not lead us anywhere, and policy flip flop will only serve to disincentivise adoption of clean technologies. A well-thought-through and a comprehensive medium- to long-term policy is the need of the hour.