The Indian states that solar is forgetting

Akshara (0:04)

In today's episode, we will do one deep dive and cover another story for the day. First, we'll talk about the Indian state's solar risk for getting, and then we'll talk about why power plants run short on coal sometimes.

Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Tuesday, 29th September. Coming to the first story. So at Markets by Zerodha, we've been hosting an expert each week on our podcast series Subtext. One such guest was Dr. Rohit Chandra, an authority on India's energy sector based out of IIT Delhi.

It was a fantastic episode that we still can't stop thinking about. And one such quote from him that is still stuck in our head was this.

Rohit Chandra (0:51)

You go to one of these power plants in Bhadla and Kharra and all, and you tell me what's going on there, right? It's not like there's some massive consumption, there's a mandi there. No one's opening a tanishk near those power plants, right?

Six states are responsible for 97 percent of India's grid-connected renewable energy.

Akshara (1:11)

Similarly, in our most recent episode, we had Trishant, Dev, and Avantika Goswami from the Climate Think Tank CSE who were also concerned about Korba, which is Chhattisgarh's largest coal producing districts.

SPEAKER_3 (1:23)

You have to ask questions like, what does a place like Korba do for a living in 2045?

Akshara (1:28)

So Jharkhand, Chhattisgarh, and Odisha sit on the bulk of India's coal. Coal royalties, CESSES, GST, and other contributions add up to 7 to 12 percent of Jharkhand's and Chhattisgarh's own revenue. Nearly a third of Jharkhand's state-owned revenue is directly linked to fossil fuels, especially coal. But these are also among India's poorest states. They also bear all the environmental costs associated with coal mining. Meanwhile, the six states where solar is concentrated Rajasthan, Gujarat, Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh are already among India's richest. They attract the bulk of our FDI, capture most of the renewable investment, and now stand to gain the jobs that come with it. And this had us asking, what happens to these coal-bed states if renewables like solar and wind becomes India's primary source of energy?

Now, to be clear, India's coal production is still rising, and coal still generates over two-thirds of our electricity. This is not a decline that's already underway, but solar share in our energy mix has also never been higher. The trajectory is visible, and with each passing day, coal-bed states find themselves between a rock and a hard place. As coal's dominance diminishes, the coal belt faces three scenarios. The first is a loss of GDP. State revenues collapse, regional inequality widens, jobs are lost, and the states that fuelled India's industrialisation get left behind the most.

The second scenario is subtler. Assume these states maintain their economic output by diversifying away from coal successfully. But it is possible that jobs will vanish anyway if the coal industry becomes a fraction of what it is today.

Then there's the third scenario. Both jobs and GDP rise. But as we shall show in detail eventually, that is perhaps extremely unlikely because the diversification wasn't enough to replace the employment scale of coal. So reality will land somewhere between these scenarios. But addressing them requires planning that, as of today, barely exists. Let's start with the possibility that economic growth or GDP itself is at stake for these states. Now, everyone agrees that coal states need to diversify. And it's not as if the raw material isn't there. Jharkhand hosts Jamshedpur, India's original steel city, and the state sits on 40% of India's mineral wealth. Ion ore, copper, bauxite, uranium, graphite. Odisha has a genuine non-coal mineral base, including iron ore, bauxite, chromite, manganese. Jatisgarh has limestone and iron ore.

But potential and realisation are separated by decades of structural neglect, and the barriers run deeper than a lack of political will. So in 2022, Jharkhand became the first Indian state to constitute a just transition task force.

It was ambitious on paper. But in practice, India spend reported that the task force had remained largely inert while the state continued opening new coal mines. Now part of the problem is fiscal. The district mineral foundation or DMF trust of each state has collected significant sums. Odisha alone has accumulated over Rs 25,800 crore, the largest of any Indian state. But state revenues from coal are simply not large enough to fund the scale of transformation these regions need. These are among India's poorest states, and DMF spending itself has largely gone towards basics like roads and drinking water. But the larger issue at hand is historical.