Wednesday, March 10, 2010

Cut Motion on the Proposed Coal Cess Gains Momentum

India last month, conveyed to the United Nations Framework Convention on Climate Change (UNFCC) that it would endeavour to reduce the emission intensity of its GDP by 20 to 25% by 2022, as compared to the 2005 levels, through voluntary mitigation actions. 
This includes targeting a near 30% intensity emission reduction of its power sector. As a result, for the next 12 years, India proposes to spend $ 22 billion  on expanding its renewable energy generation capacity  including the addition of a minimum of 10,000 MW of solar power and 31,000 MW of non-solar renewable capacity. 

The latest budget of the UPA, the ruling political coalition in India, demonstrated this commitment further through the creation of a National Clean Energy Fund (NCEF), to be funded by a proposed imposition of a Rs 50 cess on coal per ton. This cess is estimated to yield around Rs 2,500 crores this year.  

The last election gave the UPA a wafer thin majority in the lower house while it continues as a minority in the upper house of parliament. This curtails their freedom to enact new legislation without receiving broader political support. They were able to offset some of these constraints through securing outside support from smaller regional parties. Yesterday, all this changed with two of these regional players withdrawing support to the government with at least two other allies extremely upset. Though it signals a major political re-alignment is on the cards, at this moment, the UPA is in disarray and hence vulnerable - a situation the opposition can exploit to the hilt.

Under Indian parliamentary practice, if a cut motion to the budget is passed in the lower house, the government is morally obligated to resign. While this threat of a monetary bill being defeated in the lower house remains unlikely, a defeat in the upper house of parliament, can create a political gridlock. If a combined opposition threatens to introduce a cut motion, it can pressure the government to rolling back their proposed Rs 50 cess on coal per ton.

Why a Cut Motion is Necessary?

When energy efficiency increases per se, it makes for good economics and its incidental outcome is often that the carbon intensity of energy generation automatically reduces. But if India were to also cap its emissions, it would have to replace its conventional energy with something else and the renewable option would be at least 2-3 times more expensive.

Here kicks in the principle of fuel poverty - defined as one where a family spends ten per cent or more of its earnings on fuel bills. The number of estimated people living in fuel poverty in the UK is seven million which is projected to more than double due to among other things, the misguided 'Climate Change' policies of the Labour government which is on its way to a humiliating defeat this June.

(If the Labour is possibly reduced to third position to the Conservatives and Liberal Democrats respectively, it will send out a sound message to other governments the world over what a heavy  political price they have to pay for their "Climate Change' obsessions).

The problem for countries like India is that unlike the West, 60% of our population is still unconnected to the power grid. We are a populous country, the fourth largest economy of the world but also one of its poorest. Distributing Pachauri's or TERI's solar lanterns to villages as NDTV's Greenathon program does, can only be a temporary pacifier at best, and at its worst, a distraction from the ultimate challenge of linking up these villages  to the power grid, without which no real development can take place. Even if  this were made possible, i.e. power grid link up,  either most will not be able to afford it or will dig a huge hole into their family budget, creating adverse consequences in other areas of India's development priorities such as health, education, nutrition etc.
As we attempt to lift more and more people out of poverty, this will also result in an ever expanding middle class which in turn ups the demand for energy. This whole process becomes subverted if energy is priced high as it effectively consigns hundreds of millions of our people to live in continuing poverty. Accordingly, for supplying cheap energy to our people, we need to leverage the resources the country is most endowed with - coal, where we have the fourth largest reserve in the world. 

Renewables Dismal Record

The problem of renewables as Jairam Ramesh, India's dynamic Environmental Minister complained in a Wall Street Journal (WSJ)  interview is that we are being pressured to "giving up cheap energy sources in exchange for economically unproven technologies".

Wind, solar, wave etc energies are touted by NGOs and environmentalist agencies like Christian Aid, Greenpeace etc as silver bullets to sustainable energy.  Despite their public image projections, at least some of them do not at the sub-conscious level want poverty to be really eradicated  as this creates an existential problem  - the raison d'etre for operating in the country disappears. This should partly explain why they want uneconomical and unreliable energy technologies to be dumped into the country.

Their behaviour is  also partly driven by the hidden agenda of many of these foreign funded NGOs have  - to expand the export markets of their country of origin. For instance, Christian Aid’s neo-imperialistic agenda shows its real face in their document: Capturing India’s Carbon: The UK’s role in delivering low-carbon technology to India  (2009). India plans to install 80,000 MW of super-critical thermal capacity by 2022. Climate Change then becomes only a mask for agencies like Christian Aid to lobby for a slice of this carbon sequestration market on behalf of UK firms.  

Jairam Ramesh in the same WSJ interview further argues that India has more urgent environmental problems to tackle and that climate change cannot arrogate itself as the main environmental priority. What he didn't say was technologies like carbon sequestration are highly expensive while its capacity to check emissions remains highly questionable. This results in the  wastage of funds that could otherwise be deployed to tackle more genuine and urgent environmental problems - stinking gutters, overflowing garbage, polluted rivers/other fresh water sources, arsenic poisoning of groundwater, pesticide residue in agriculture etc.

Besides, the Guardian and the New York Times, who had been till recently the most staunchest media allies of the warmist lobby, both recently published scathing articles on how the hype on solar energy is an out and out economic scam: 

Wind and other Renewable fare no better: 
  • Read here: Britain’s only wind turbine plant to close, The Guardian. Due to collapsing demand, UK’s only wind turbine manufacturing plant is to close, dealing a humiliating blow to the government’s promise to support low-carbon industries. 
  • Read here: Renewable energy – our downfall?  Article written by Ralph Ellis who himself promoted renewable energy in Denmark, even putting his money where his mouth is, now lives to regret it. 
  • Read here. The Heavy Price We Pay for Windpower.  "Now do you still believe in wind power? It appears to me you would have to believe in this great swindle, otherwise why would you ever do it?" 
  • Read here. Drax suspends plan to replace coal with greener fuel. Times-online: "Britain’s biggest power station has suspended its plan to replace coal with greener fuel, leaving the Government little chance of meeting its target for renewable energy. The power station, which is the country’s largest single source of CO2, has invested £80 million in a processing unit for wood, straw and other plant-based fuels, known as biomass. Drax’s decision will make it almost impossible for the Government to meet its commitment to increase the proportion of electricity from renewable sources from 5.5 per cent to 30 per cent by 2020. Drax has bought two million tonnes of biomass, but Ms Thompson said that it was considering selling it overseas because it no longer made economic sense to burn it in its six boilers." 

A Call for Combined Opposition to Introduce a Cut Motion on the cess on Coal
From Jairam Ramesh’s interview to the Wall Street Journal, it is obvious that the Environment Minister is cynical of the viability of renewable energy, particularly its potential to offer our poor, cheap energy. All over the world, particularly Europe, there are ample signals that governments are increasingly giving cold shoulder to renewable energy due to the dismal performance of their experimentation with these technologies. When countries like Sweden, Germany and US are giving nuclear energy a renewed thrust, the fund allocation for nuclear power in the Budget 2010-11 has been slashed by over 10 per cent. The state owned Nuclear Power Corporation is sitting on cash reserves of Rs 14,000 crores which the budget considers sufficient enough to self-finance 10,000 MW power generation capacities over the next few years.

Surely, the Government of India (GoI) cannot claim to be oblivion of these trends that  is prompting governments the world over to re-think renewable energy. The only reason why the GoI is pushing renewable energy is to meet India's international commitment as given to the UNFCC. The question arises, when other major polluting countries are jettisoning their emission cutting programmes, why should India remain the exception, particularly when we were not historically part of the problem?  

Through this blog, we call on the combined opposition to call for a comprehensive debate on the country's energy security strategy before passing the finance bill. A cess of Rs 50 on coal per ton will have a high inflationary impact, which will rear its ugly head three to four months down the line when energy suppliers would be forced to raise their unit price of energy.  

If the UPA is insistent of meeting its commitments to the UNFCC, then we call upon the combined opposition led by the BJP to devise a floor coordination strategy to try to pass a cut motion on the cess imposed on coal. Though the government may not fall, the very threat of the finance bills being stalled at the upper house of parliament should itself create the required pressures to get the ruling coalition to meet at least some of the opposition's key demands. This comes a time when the ruling coalition is particularly weak on numbers in parliament and a cut motion would prove a major embarrassment for the government at this juncture.

The cut motion should aim to reduce the amount of cess proposed on coal. Whatever budgetary allocation to renewables should be limited for supporting evaluation of existing projects and R&D support. None of the NCEF funds should go to subsidizing green field solar or wind power projects until these technologies prove themselves as commercially and technologically viable alternatives to conventional energy. If we don't, we will end up as Spain having to indefinitely subsidize non-viable energy projects that end up as white elephants!


  1. Thought the coal cess was minor in effect. Thanks for the enlightenment.

  2. These maybe turbulent times for the UPA. But politics remain politics. They may kiss and make up. What will then happen to the cut motion?

  3. The party that came on the slogan of the common man seems to have lost sight of his woes. Certainly the cess on coal will add to his inflationary worries

  4. I learnt from this article that imperialism has changed its colour - now Green. Thanks

  5. You can be sure there will be cut motions. But I haven't heard yet of any opposition leaders raking up the coal cess. Maybe your blog will open their eyes? And maybe not

  6. I sent your blog to Arun Jaitley of the BJP. He should be pleased.

  7. When Gov. Arnold Schwarzenegger signed the Global Warming Solutions Act of 2006, Californians were told that their state would become a font of green jobs churned out by the growing green economy.

    Well, here's the reality: The cost of going green is actually lost jobs.

    Read this excellent article:

  8. Glad to come across your blog and to be ensured that scientific skepticism is alive and kicking in India as well

  9. Yes it is crazy investing in renewables particularly after UN’s flagship climate body, the Intergovernmental Panel on Climate Change (IPCC), has now become a laughing stock as revelations pile up about dodgy science, erroneous forecasts and outright manipulation of data.

    Great article. Thank you

  10. George Monbiot railed against the UK government’s feed-in-tariff (FIT) scheme – specifically how it encourages the installation of photovoltaic (PV) panels in middle class houses – as a scam that rewards those with money while punishing the poor.

    "Had this money been spent instead on insulation or double glazing, it could have helped relieve fuel poverty at the same time as cutting emissions. But the feed-in tax is both wasteful and regressive. The government has now decided not to oblige people to improve the efficiency of their homes before they can claim a tariff: you’ll be paid to put a solar panel on your roof even if the roof contains no insulation."

    This irony is that solar power silly in countries with little sun. The whole Climate Change hullabaloo is a scam to benefit "Green" businesses

  11. @ Agnes You missed to highlight the main limitations of wind and solar power:

    - Energy generated from wind\solar is variable as these sources are reliant on factors such as wind velocity, wind availability and sunshine.

    - Wind and solar renewable energy sources are not scalable i.e. electricity generation cannot be ramped up to meet the fluctuations in demand.

    The main limitation is technologies of storage are still lagging. Only by storing energy during the off peak hours or surplus time and by making it available when demand occurs, can these technologies be viable.

    Therefore for me, as and when storage technologies advance, that's the time for India and rest of the world to go renewable in a big way. Not now! We should be focusing on financial support to developing storage technologies instead of expanding renewable capacities.

  12. Which fossil company pays you to blog? Kindly appreciate that future generations will be even more imperiled by it if urgent steps are not taken now!Instead you propaganda against climate action agains. Sad! Very Sad

  13. Hi Rajan! Good to see your blog taking shape and growing in following. This might interest you - it is from the herald sun down under

    "There is no evidence that industrial wind power is likely to have a significant impact on carbon emissions… Denmark, the world’s most wind-intensive nation, with more than 6,000 turbines generating 19% of its electricity, has yet to close a single fossil-fuel plant. It requires 50% more coal-generated electricity to cover wind power’s unpredictability, and pollution and carbon dioxide emissions have risen (by 36% in 2006 alone)."

  14. So the bottomline as lessons we can take as lessons from California and Spain is that going "Green" is going broke! Is the government and the opposition listening?

  15. One needs to know both side of the coin and this is another side of the coin about which we were not aware before. Very educative posting indeed!
    Chaman Pincha