Green bonds, PLI scheme, and India's moody monsoon - Issue #20
The Big Picture
As this newsletter gets written, floods are making headlines.
Large parts of Pakistan are underwater. Overflowing, the Indus has created a 100-kilometre wide inland lake in the Sindh province. Things in India are not much better. Over the last week, heavy rains have caused flooding in multiple parts of Bangalore. After a dry season, there has been flooding in Uttar Pradesh as well.
Nothing is surprising here. Pakistan’s massive glaciers are melting faster, creating large glacial lakes. We know why. Rainfall distribution is changing too. This year, North India got very little rain while the south and the northeast have been left deluged on multiple occasions. As Indian Express reported last week, “Uttar Pradesh has experienced its driest June-to-August period in 122 years... 44 per cent below normal.”
Bihar got 170.1mm rainfall, its 10th driest monsoon since 1901. Jharkhand saw its second driest June-to-August rainfall in 122 years. In contrast, south India saw heavy rains – and saw flooding. Here too, we know why rainfall distributions are changing.
We also know why cities like Bangalore, despite being built on a plateau, flood all too easily. Large open spaces, which can dampen the impact of climate shocks and stresses (be it heat or heavy rain), have been decimated. Those two hyperlinks in the previous sentence are from Gujarat, but the tale it tells is widely applicable. In city after city, open spaces have been encroached by cabals of politicians and builders, with little challenge from regulators. The all-too-convenient nexus between politicians and real estate developers is also well known.
But while India confronts yet another moody and lopsided monsoon, the political landscape in the country is undergoing another round of tumult. This past week the arenas have been the states of Jharkhand, Bihar and Karnataka. All three of which have been tormented by less than favourable monsoon weather.
The disconnect between the lived reality and the struggle to control the corridors of political power seems to signal a broken social contract between the public and the political parties that purport to represent it.
All of which draw David Attenborough’s A Life On Our Planet to mind – mentioned in last week’s newsletter. Fighting climate change calls for more than energy systems reform.
News of the Week
Here is what made the news last week.
The union finance ministry is going to issue green bonds, as a part of its efforts to raise money for climate and environmental projects. India’s hydrogen policy is finally out. Among other things, oil refineries will have to replace a third of their fuel usage with green hydrogen by 2035. By that year, fertiliser production should run on 70% green hydrogen and urban gas distribution grids should supplant 15% of Gas with green hydrogen.
Turning to fossil fuels, the global energy shock continues. Putin has indefinitely closed NordSteam 1. Companies like Arcelor-Mittal have begun idling plants. Europe is managing though, partly by getting sellers in Asia to package leftover fuel into full shipments.
And yet, Europe is in better shape than the global south. Developing countries are struggling to buy gas. Despite this indication of vulnerability, Petronet LNG wants to invest more in gas. It will invest Rs 40,000 crore in the next five years to expand import infrastructure and foray into new businesses. One of those new businesses? A diversification into petrochemicals, said Business Standard.
Little here makes sense. India’s gas import infrastructure is grossly under-utilised at present. Petrochemicals are dominated by Reliance – and Adani is mulling an entry. One doesn’t feel hopeful about Petronet’s chances.
Talking of Adani, the group’s debt now stands at about Rs 2.6 trillion, an analysis by Credit Suisse showed.
From CarbonCopy
Over the last two months, CarbonCopy has been taking a closer look at India's Production Linked Incentive (PLI) scheme.
You know the backstory. Ours is a time when the world is increasingly uncomfortable with its over-reliance on China for manufactured goods. Ours is also a time when a host of countries are vying to capture the industries of the future -- semiconductors, electrolysers, battery technologies, solar panels, the works. With the PLI scheme, India has tossed its metaphorical hat into that figurative ring as well.
The scheme, however, is substantively different from previous pushes to boost India's manufacturing competitiveness. To offset India's lack of competitiveness, it pays companies a "disability cost". Hoping to copy Korea's success with the Chaebols, it wants to support no more than 3/4 of companies in each sector. Aspiring for absolute atmanirbharta, it wants these chosen firms to straddle the entire value chain.
Hardwired into these departures are answers to bigger questions on whether PLI can make India dominant in emerging sectors, how India Inc will get reshaped, etc.
We had the first part out late last week:
We are working on part three right now.
Climate Reads
For those of you with an NYT subscription, this long read is on deep-sea mining.
Diclofenac has been banned. But three other veterinary medicines are stopping vulture populations in India from rebounding.
Meet a company working on sodium-ion battery technology in India.