Old policy contradictions rear their heads — Issue #22
News of the Week
Last week went by quietly.
Most of the news moved along expected lines. India auctioned ten more coal blocks for commercial mining. Power Finance Corporation might become the nodal agency for climate and energy transition in India. Germany is looking to nationalise three energy utilities. Russia’s largest coal supplier, Siberian Coal Energy Company (SUEK), wants to open an office in India. As we have seen in recent weeks, many local companies are sourcing coal from Russia.
More unexpected news came from the draft National Electricity Policy. India will need, it said, additional coal-based power generating capacity of up to 28 GW by FY32 besides the 25GW already under construction. The draft, as Economic Times’ Sarita Singh reported, is a “stark reversal” from a study released last year by the Central Electricity Authority. It had said new coal-based power projects were unlikely this decade.
Blame this on Russia. Thanks to the shocks that accompany its invasion of Ukraine, countries the world over are trying to reduce their dependence on energy imports. In the case of India, that means a heightened reliance on king coal.
In other news, the central contradiction in India’s solar policy resurfaced last week. The country wants self-reliance on solar equipment. It also wants a six-fold jump in solar installations by 2030. As Business Standard reported last week, solar developers say this task cannot be completed without access to imported modules. What will it choose if the government has to choose one overriding policy goal – atmabirbharta or a faster solar rollout?
Elsewhere too, an old contradiction is starting to draw blood. Under Modi, the BJP has sought to increase India’s reliance on imported gas – while trying to keep gas prices low for domestic customers. The outcome has been one where private- and state-owned oilcos have had to subsidise gas consumers.
More recently, in oil as well, the government has not allowed oilcos to raise prices despite the spike in crude prices. As this newsletter has reported in the past, oilcos have been incurring losses on every litre of petrol and diesel they sell. Now comes the news that India plans to pay about Rs 200 billion ($2.5 billion) to state-run fuel retailers, partly to compensate them for losses and partly to keep a check on cooking gas prices.
Elsewhere in the country, India’s self-reliance drive made headlines. As an adjunct to the PLI (Production-Linked Incentive) scheme, India has also rolled out a scheme to make semiconductors in India. The scheme, awarded to a partnership between Vedanta and Foxconn, eventually decided to set up shop in Gujarat. Given that Maharashtra was expected to get the project, a political firestorm broke out.
If, as alleged, the centre had a role in Vedanta-Foxconn choosing Gujarat – the state goes to polls later this year – then political compulsions are dictating industrial policy. This is not good. Also, semiconductor manufacturing requires a lot of water – and Gujarat is water-strapped.
Climate Long Reads
Since we are talking about policy incoherence in India’s solar sector, see this CarbonCopy report about bad market design in the sector.
Thanks to the Ukraine war, the world is deglobalising. As the FT reported last week, China wants to remake itself into “Fortress China”. Xi is, said the paper, “re-engineering the world’s second-largest economy so it can run on internal energies and, if the need arises, withstand a military conflict. While many in the US want to “decouple” their economy from China, Beijing wants to become less dependent on the west — and especially on its technology.
The Ukraine war, essentially, comes with a long tail. On the one hand, it’s pushing the world away from globalisation – China is one instance. On the other, it’s pushing countries to invest in domestic clean energy manufacturing, fomenting an energy equivalent of an arms race. Read Fatih Birol on this shift.
While on domestic clean energy manufacturing, CarbonCopy has published the third – and concluding – part of its series on PLI. The scheme, despite its importance, has not attracted much attention till now. And so, it’s good to see more reports elsewhere in the media as well. Here is the Economic Times, Can PLI make India the world’s factory? And here is an essay by former RBI governor Raghuram Rajan -- “Making in India. But how? PLI aims to create a manufacturing base. More evidence is needed before extending the scheme”.
What will it take to decarbonise steel?
CarbonBrief’s Aruna Chandrasekhar examines what India’s updated Paris Agreement pledge means for climate change?
“The conflict has intensified since 2015, after the state’s chief minister, K Chandrashekar Rao, launched an ambitious afforestation programme, named Telanganaku Haritha Haram, or a Green Garland for Telangana. The state claims that it is the third-largest afforestation programme in the world, ranking only behind afforestation initiatives in China and Brazil. Government data suggests that the programme has seen significant success...But these numbers conceal deep-rooted flaws in conception and execution of the afforestation programme.” Mridula Chari takes a close look at Telangana’s ambition.
“Money and labour are flowing into hydrogen companies, projects, and infrastructure, almost all of them focused on producing hydrogen supplies that emit little to no carbon, thanks to rapid and profound technology and policy advances. Since 2020, developers have announced more than 150 new hydrogen production projects, exceeding 250 gigawatts of new power production... Public policy is helping.
At least 35 countries across the globe have developed formal hydrogen strategies—including Canada, Chile, Germany, India, Japan, the Netherlands, Qatar, Saudi Arabia, and the United Kingdom—because they see clean hydrogen as both essential for addressing climate change and a huge opportunity for trade and commercial competitiveness.
” Can Green Hydrogen Save the Planet? Asks Foreign Affairs.
Book of the Week
Toxic Archipelago: A History of Industrial Disease in Japan.
The first book I read from Brett Walker was The Lost Wolves of Japan – a tale of how modernity reset old ties between humans and wolves, pushing the latter from venerated beings to a new place where they were seen as pests, and mercilessly driven to extinction. That book was magnificent. In Toxic Archipelago, Walker tells us what happened next. Having embraced modernity, Japan industrialised at a furious pace. Its environment changed in tandem, with toxins flowing freely from fields, mines and factories into bodies. Minamata and others followed.
This is another tale with global applicability.