Request you to kindly drop in all your mails/queries to support@infraline.com or call us at
+91-120-6799125 (D); +91-120-6799100 (B)

Environmental Regulations and Naxal Movements are major risks for Energy Security , Shri R V Shahi, Former Secretary, Ministry of Power

As the Indian economy is trying to grow at a rate near about the double digit figure, the challenges associated with Energy Security are becoming more and more profound. So long as the growth profile hovered around 5 to 6%, the support of energy was at a level that, with supplementary inputs from abroad, it could be managed. Now that the requirements have multiplied, the challenges faced as outlined below are enormous:

(i)

Our dependence on oil is so substantial that almost 80% of the demands are met through imports. Unless domestic production is increased many fold, which seems unlikely in the short and medium terms, the financial burden may become unsustainable.

(ii)

Coal is the major fuel for various sectors of economy. Almost 75% of coal produced within the country is consumed by power sector and the balance by various other sectors of economic activities. Of late, coal mining has assumed highly challenging proportion in view of problems relating to land acquisition, as well as regulatory systems on environment.

(iii)

Hydroelectric potential in India, which is of the order of 150 GW, could provide a reasonably sound support for power supply and could be banked upon as a major source of energy security. With better bilateral relations with the neighbouring countries viz. Nepal, Bhutan, Myanmar, which together have another 150 GW of hydroelectric potential, the whole region could create a comfortable framework of energy security. However, in view of presence of huge dense forests as well as wild lives in these areas on the one hand and the serious issues concerning rehabilitation and resettlement of people affected in submergence areas on the other, these projects suffer strong resistance. And, even in other cases, they take unduly long time to build in view of geological surprises which keep surfacing during the entire construction period.

(iv)

Gas, which was during the 90's considered to be the fuel of 21st Century, has not only behaved erratically in terms of availability, but also its price behaviour has been highly unfavourable to consider this fuel as a reliable source of energy security on a long term basis. It would continue to play only a supplementary role in power generation.

(v)

Nuclear Energy, for India has been accepted by the Government as well as by the people to be a good source of energy supply. Its contribution, however, may not be more than 5 to 6% of the total power even in next 20 to 25 years. The management of this sector would require a breakthrough in the Fast Breeder Technology on the one hand and a more careful and empowered regulatory regime to take care of safety related concerns, on the other.

(vi)

On the new technology front, wind, solar systems, bio-mass etc. would play a very important, but only a supplementary role, in the energy strategy of the country. They must be, and are being, encouraged. In the long run in terms of power generation profile (not capacity mix), we may, at the most, meet a target of about 10% through these systems. The challenge in these areas, particularly in solar systems, is to incentivize it in the beginning and bring down the capital cost in the long run, so that these technologies become affordable for our country.

Now let us examine the emerging challenges which have arisen in view of - (a) stiff environment regulatory interventions and (b) naxal movements, and have become rather strong risk factors. Developers and investors are getting scared on account of these emerging developments. Any sustainable arrangement to enhance the level of energy security in the country, it needs to be recognized and underscored, can and should be heavily dependant upon the domestic resources rather than being reliant substantially on imports. We are paying a heavy price of minimal domestic support in the case of petroleum fuel. Both these developments, viz. extraordinary activism on environmental regulation and intervention and naxal movements have strong potential to negate any strategy based on the architecture of the domestic resources being considered as the main support for energy security.

Let us examine the recent developments in environmental regulations and interventions. In spite of the fact India's economy is heavily dependant upon its domestic coal as the primary fuel source, the Ministry of Environment has, in the recent weeks, declared more than 45% of the coal mining areas as "No-Go-Area", which means coal mining cannot be done in these coal reserves. As it is, the Chairman of Coal India has been saying for last two years that the growth in coal production is constrained because of excessive delays in clearances of these projects on the ground of environment and forest besides the issues concerning land acquisition. With accelerated capacity additions in the power sector, it is estimated that by the year 2011-12, the shortfall in coal supply may rise to almost 75 million tonnes. Availability of coal from outside, and more importantly behaviour of coal price internationally, in the wake of such massive imports, pose serious issues concerning energy security and affordability. It can be established with facts and figures that if the present stance and activism in respect of environment regulations and interventions do not get re-visited for a major change, the Government's target of economic growth rate of 9 to 10%, on a sustained basis, will be simply impossible to achieve. Either the environmental regulations, the systems and procedures and more importantly the mindset change for a more favourable support for the coal sector to grow or the planners need to re-write the future economic growth profile. Both cannot happen together.

The approach of the Environment Ministry is similarly and unfavourably placed with reference to hydroelectric projects. It has been now globally recognized that all hydroelectric projects irrespective of their size, and whether they are run-of-river or storage types, are renewable. We all know the implications of climate change on account of green house gases. Electricity generation from hydropower stations is a solid and substantial answer to carbon emissions. Yet, a large number of hydro projects wait for months together, just like coal projects, to secure forest clearance. That is why hydropower generation, as a proportion, has been declining.

What needs to be done?

No doubt, there are major issues concerning rehabilitation and resettlement, catchment area treatment, afforestation etc. These are all solvable. We may spend whatever is required for a reasonable and acceptable rehabilitation scheme. The present policy for afforestation, to compensate for the forests which are destroyed, is more than adequate, but its implementation is equally lethargic and far from being satisfactory. This can definitely be properly put in place.

Catchment area treatment is a doable thing. Fund provided is reasonable but can be increased, if required. But, here again, the performance of authorities in properly structuring the schemes and implementing them is disappointing. This matter again can be fixed.

But these cannot be the reasons to develop a mindset which is opposed to utilizing such environment friendly and huge potential of energy. We also need to create better understanding and awareness among people that indigenous energy resources need to be developed for a more reliable and secure energy supply system. Dependence on outside can, at the most, be supplementary. This is important from the point of view of reliability of supply as also cost and, therefore, affordability and sustainability. There is no denying the fact that the business-as- usual approach on mitigating environmental problems is neither desirable nor can it be acceptable, and rightly so, by the society. Project developers as well as Government systems may need to re-visit their approaches and scale up suitably the budget for environment related mitigatory measures as also rehabilitation and resettlement packages. Such models of project development should emerge, with reasonable packages and schemes towards environment and rehabilitation, that it is the people who should demand for projects to be located in their areas rather than protesting against these.

Now let us examine the risks of project development attributable to naxal movements. Implication of the re-emergence of naxal activism, in a much more intensified manner, and at a much larger scale, in areas which by coincidence happen to house most of our natural resources - mineral, forest, and water perhaps has not been fully recognized. The incidences of last few months in Chhattisgarh and other parts of the country have already created shock waves among domestic and international investors. In Chhattisgarh alone several power projects, aggregating to more than 50,000 MW, are at different stages of development - most of them in the initial stage. The potential, based on coal reserves in Chhattisgarh, can lead to development of much larger power generation capacity. Similar could be the case in the State of Orissa and also in Jharkhand to somewhat lesser amount of capacity. One of the important characteristics of coal belts in India is that they have large tribal populations living in these areas. In the past it was possible to acquire land, to accommodate somewhat modest aspirations of these people and in many cases these people got reconciled, even though not satisfied, with development of these projects. The extent of land compensation and the nature of community development activities in these areas, just 20 years ago were such that they would hardly cost anything to the project development agencies. Very insignificant proportion of cost on both these heads (land compensation, rehabilitation and community development) could perhaps satisfy them. Twenty years down the line, Maslow's Hierarchy of needs are truly applicable. Their aspirations have grown and rightly so. Meager budgetary allocations by project development authorities, more importantly totally inadequate implementation and monitoring mechanism, and lesser attention of a concerned State Governments in development of these areas and in welfare of these people, have all combined together to create such a strong force that it is becoming now difficult for the Government as well as for the project development agencies to change their approach towards these projects. The mistrust has become so deep rooted and so strongly cemented that it would really require a highly innovative approach, a more than generous package of schemes and a sincere and committed mechanism to implement, to erase all that has been engraved in their minds and hearts for decades together.

While on the issue of financial allocations for rehabilitation and resettlement, I would definitely like to emphasize that while there are a large number of cases where inadequacies of fund have really been the issue there are much larger number of cases where it is the implementation which has been the real cause. In a number of hydro projects, the extent of benefit which really reached the affected people has been much less as compared to the financial allocations and funds spent.

I have attempted to work out for a typical coal bearing State (for example Chhattisgarh) what needs to be done so that we are able to re-establish credibility, gain their trust and confidence and win their co-operation in facilitating development of these projects:

(i)

Projects aggregating to 50,000 MW at about three dozen locations would mean an annual power generation of the order of 400 billion units. If we set aside 5 paise per unit of electricity to create a fund which will be meant only for development of the area and for various social and welfare schemes, the amount generated annually will be of the order of Rs. 2,000 crores.

(ii)

In a period of five years all these projects can, therefore, contribute as much as Rs. 10,000 crores only for the purposes mentioned above.

(iii)

This fund would be an additionality over and above the amount spent for land acquisition and usual rehabilitation and resettlement.

(iv)

Rehabilitation and Resettlement Schemes should be taken out of the State Government controlled Directorate. An exclusive organization should be created for every project, in which State Government representatives could be associated. But the accountability for rehabilitation and resettlement, in accordance with the policies, should squarely lie with the project development agency. Things have gone wrong, because State sponsored Directorate was to deliver and State Government was to perform the role of audit, appraisal and monitoring. Accountability, thus, could never be established. Reputed NGO's could also be represented on this organization, so that appropriate feedback is regularly received and correctives applied.

(v)

Similarly, for the fund created out of the scheme mentioned above, another organization could be created for the State as a whole with due representation from NGO's to see that development and welfare schemes in the area are properly implemented. Involvement of local people in all these would be essential.

Both these issues, viz. Environmental Regulations and interventions, and Naxal Movements need serious and urgent attention lest the entire energy development schemes - power projects, coal projects and other infrastructure projects are jeopardized, leading, in turn, to seriously affect the overall economic growth strategy. In the case of the former, it is the Environment Ministry which needs to re-visit some of its approaches, become active on issues like afforestation etc., and in the case of the latter, that is the naxal movements, there is a long way to go to regain their trust and confidence by making proper schemes, but, more importantly, by credible implementation.