The Cost of Coal

THE COST OF COAL

A coal mine in Central India is set to become one of Asia’s largest. At the heart of this aspiration lies the largest democracy’s disregard for consent. Power grids are the umbilical cords linking urban lifestyle to indigenous displacement.

ARUNA CHANDRASEKHAR   

Peering into the depths of the Kusmunda coal mine in Korba, Chhattisgarh, is like staring into an abyss. From the edge, the mine extends endlessly – like a vast city that’s bigger than Central Delhi. And just like a city, the activity and the traffic never cease. Tippers, excavators, and dumpers ply for miles beneath us into the grayscale, queuing up to carry vast burdens of dark earth scooped up from the deepening void.

Kusmunda, operated by a Coal India Limited subsidiary company, is on its way to becoming one of Asia’s biggest coal mines. At peak expansion, Kusmunda, a single mine, would leave a cavity the size of Central Delhi on Chhattisgarh’s map. Twenty-six million tonnes of coal will be mined from its folds every year.

Kusmunda’s expansion is an integral part of the Indian government’s plan to increase its coal production to a whopping one billion tons a year by 2020, to meet growing energy requirements. In the balance are tens of thousands of Adivasi and Dalit families likely to be displaced by the mine, while thousands more stand to be affected.

The four of us — director, film crew, Nirupabai and I — crouch amidst the ruins of demolished homes in the village of Barkuta , in Korba, when the blasting from the mine begins, sending earth and rock from flattened fields and forests into the air. We are asked by those whose houses tremble why the story of India ramping up its coal production at their expense is not explosive enough. 

Stripping Ratio [stripping . rey-shoh, -shee-oh] The stripping ratio, in open-cast mining, is the volume of land used by the mine to the volume of ore extracted.

Stripping Ratio [stripping . rey-shoh, -shee-oh] The stripping ratio, in open-cast mining, is the volume of land used by the mine to the volume of ore extracted.

India is the world’s third largest producer and consumer of coal. Last year, around 550 million tonnes were extracted to power our ravenous cities, (some) villages and our fabled economic growth. The WiFi, the smartphone, the air-conditioner, the local train, the factory floor, the stock exchange, the 100W bulb to study under – coal makes most of it possible. Around two-thirds of India’s energy is drawn from this dark mineral, and yet many of us fail to acknowledge its origins.

Unlike many other minerals extracted through mining, coal is physically invisible to us in the everyday. Its impact only presents itself markedly when there is talk of the windfall profit made by a company, or through a gargantuan corruption scandal. The impact of its extraction on native citizens’ lives, however, is obscured out of sight.

Nirupabai Kawar, from Barkuta, has had to learn the true cost of coal. Nirupa is what the government calls a PAP, or a project-affected-person. She is a Kawar Adivasi and the sole earner in her family of six. Barely nine days after I first met her in January 2014, Nirupa’s home was bulldozed along with sixteen others for the expansion of the Kusmunda mine, without adequate notice or consultation.

“I understand that some people must make sacrifices for the nation, but why must it always be us?”

“I understand that some people must make sacrifices for the nation, but why must it always be us?”

The next time we met, in April 2014, there was no trace of the large house overflowing with grain I had seen. Only a squat structure rebuilt from the rubble remained, with a signboard salvaged from a school next door that had pictures of former Prime Ministers pinned on it. The grain, she showed me, was mixed with the rubble. “It rained for a week afterwards, nobody came. I understand that some people must make sacrifices for the nation, but why must it always be us?”

Fifth Schedule [th uh . fifth .shed-yool] The Fifth Schedule of the Indian Constitution lists certain districts and territories where Adivasi communities live as protected ‘Scheduled Areas’, where these communities have special customary rights over…

Fifth Schedule [th uh . fifth .shed-yool]
The Fifth Schedule of the Indian Constitution lists certain districts and territories where Adivasi communities live as protected ‘Scheduled Areas’, where these communities have special customary rights over their land.

In interviews with Coal India officials, the standard state justification for the Adivasi displacement seems firmly rooted in karmic geology. “Why would God have put coal in these places if we were not meant to mine?” a senior mining official operating the Kusmunda mines once enquired.

 And so to tell you a story about people, we must peel away the sediment and begin with where coal comes from. In India, coal runs as part of a rich seam of sandstone and shale called the Gondwana Supergroup, which extends across the Southern Hemisphere. The seam draws its name from the Gonds, India’s second most populous indigenous Adivasi community, who live across the central Indian plateau, including the villages around Kusmunda.

Some of India’s biggest coalfields are located in densely forested pockets of the country, protected by the Fifth Schedule of the Constitution, which recognizes the historic and systemic oppression that India’s indigenous Adivasi communities have faced. About 70 per cent of India’s coal is located in the central and eastern states of Chhattisgarh, Jharkhand, and Odisha, that are also the sites of a decade-long conflict between security forces and Maoist armed groups.

Whether it was settlers from the plains or the British and their demand for timber, the Forest Department or large mining companies, India’s Adivasi communities have had to grapple for centuries with outsiders who had their eye on resources. Adivasis are estimated to comprise about eight per cent of India’s population, but make up about 40 per cent of the people displaced by development projects in India since 1951. That number is around 24 million people, roughly the current population of Australia.

Korba is a case of stark contradictions. A protected Adivasi district, Korba is home to some of the country’s densest Sal forests, and some of its biggest mines that contribute to over a fourth of India’s coal. It has over a dozen thermal power plants, supplying power to the Western grid, including the city of Mumbai and its glistening skyline, and yet is home to some of India’s most disempowered communities.

“In Korba, you’ll find villages that don’t have a single light bulb. Imagine the level of development in a place that provides so much of India’s coal and power,” says Laxmi Chauhan, an environmental activist who has been working with mining-affected communities in Korba for the last decade.

Laxmi parks his car at the edge of a small hill, which we learn is a fly-ash pond. For fun, we try moonwalking on this strange, chalk-like sand that feels like it’s part of a gigantic ashtray. We take turns to count the thermal power chimneys that pulse through the haze like modern minarets. Hills of ‘overburden’ earth dominate the topography, shifting as excavators sift the earth for coal. Pipes criss-cross the landscape like industrial entrails, carrying fly-ash over miles to waste ponds that may some day rival these chimneys in height.

Laxmi laughs at our disbelief. “It’s hard to breathe here, isn’t it? Imagine, in such a critically polluted area, there have been no health impact assessments. Look for yourself,” he says, beckoning us to turn the cameras behind him. Monsoon clouds the colour of slate have gathered above the ash dike. The wind has whipped up a blizzard of ash that heads straight for the city below. He tells us of his plan to start a toxic tourism company for gawping researchers and journalists like myself who want to see how ‘development’ can manifest itself in rural India.

Standing where we are, it’s hard to believe that Korba is still home to the Korwa tribe, from which it draws its name, just as it is home to the Kawar, the Binjhwar, the Gond, the Agaria and Rathia.

“This entire place was a jungle. Deer used to walk here, amidst our gods,” said Ramadhar Shrivas, an elder from the village of Pali, as he walked through the deserted, tree-less streets one blazing summer afternoon. “You could not step out here in the evening alone, because of the fear of being trampled by elephants in mast. All of this changed after they found coal here.”

Industrial corridors have replaced elephant corridors, and Korba today is a haphazard collection of townships that have grown and coalesced around its mines, power plants and aluminium smelters. There’s even a Domino’s Pizza outlet.

But in between are vast patches of villages like Pali that lie in a state of suspended acquisition. In the villages here, yellow signposts signal that this land is now the sovereign property of the Ministry of Coal. There is no telling when people in these villages will be adequately compensated or rehabilitated, or when the villages will fall into the dark.

Overburden [oh-ver-bur-dn] Overburden is the rock, soil and everything that lies over the coal deposit, including fields, streams, habitations and forests.

Overburden [oh-ver-bur-dn] Overburden is the rock, soil and everything that lies over the coal deposit, including fields, streams, habitations and forests.

Say coal mining, and the imagination takes the average urbanite down a dark, underground shaft. But most Indian coal is harvested from large swathes of land. In 2014-15, over 90% of coal production was from “open cast mining” — a practice which involves literally cutting and stripping minerals from the surface of the earth, after trees, vegetation and habitations are removed and broken up by explosives.

For every million tonnes of coal mined, land equivalent to over 564 Olympic swimming pools is dug up and has to be removed. Open cast mines are very land intensive, and can spread over thousands of hectares, depending on the extent of the coal deposit and the availability of cheap land. This kind of mining is done when coal lies close to the surface and where the land that lies over it is relatively thin or easy to remove. The dug up land is referred to as “overburden” in mining parlance.

“You cannot move the deposit, but you can definitely remove the people,” remarked a Coal India official.

One half of Barkuta lay flattened, festooned with explosive wires, the ground perforated in places where dynamite would be placed. Image Credits: Aruna Chandrasekhar / Amnesty International India

One half of Barkuta lay flattened, festooned with explosive wires, the ground perforated in places where dynamite would be placed. Image Credits: Aruna Chandrasekhar / Amnesty International India

In March 2015, I went back to look for Nirupa’s house in Barkuta. A tyre mark of an excavator marked where we had first met. One half of Barkuta lay flattened, festooned with explosive wires, the ground perforated in places where dynamite would be placed.

In Barkuta today, only three families remain. Families live amidst the ruins, as they wait for Godot — in this case, jobs, compensation and rehabilitation that they haven’t yet received, decades after their lands were acquired without their consent. Nirupa has rebuilt a tiny hut on the edge of the mine, to stake her last claim on her father’s land, as the mine edge draws nearer.

Public Purpose [puhb-lik . pur-pus] Land acquisition for mining under the Coal Bearing Areas Act allows for companies to acquire people’s land without their consent.

Public Purpose [puhb-lik . pur-pus]
Land acquisition for mining under the Coal Bearing Areas Act allows for companies to acquire people’s land without their consent.

Coal India Limited (CIL) – the world’s largest coal producer (which all Indians are in a way shareholders of) produces about 82 per cent of India’s coal. This coal is supplied at discounted prices to nearly every thermal power plant in India. Coal India, and other public sector companies, such as the National Thermal Power Corporation, can acquire land in the ‘national interest’ using an archaic law that dates back to 1957 called the Coal Bearing Areas (Acquisition and Development) Act. 

“We’ve gone from being masters of our land to being slaves at the mercy of Coal India,” says Abhiram Singh, whose home was bulldozed in the evictions in Barkuta. In the blazing summer of 2014, I found him working in a make-shift brick kiln, forging bricks to build a new home in the neighbouring village of Padaniya. The bricks under our feet were being fired from the coal that he had to steal from the Kusmunda mine that displaced him. Irony, in these parts, runs dark and unforgiving. Abhiram has never seen a copy of the notification under the Coal Bearing Areas Act from 1979, which said that his land had been acquired by the Ministry of Coal. He asks me how much it would cost to rent a place as big as his in Bangalore.

Abhiram Singh had to forge bricks in a make-shift brick kiln after his home was bulldozed. Image Credits: Aruna Chandrasekhar / Amnesty International India

Abhiram Singh had to forge bricks in a make-shift brick kiln after his home was bulldozed.
Image Credits: Aruna Chandrasekhar / Amnesty International India

The fact that this would never play out in the life of the average urban India weighs down like a thousand bricks as I walked through villages around Kusmunda, trying to understand how India’s protective laws around land are failing Adivasis.

What is it that scares so many from looking at consumption in the eye, and the displacement being carried out in their names? What is it about the consent of the disenfranchised that has some people stick their fingers in their ears, and mutter ‘anti-national’ under their breaths?

Instead, in India, the most vulnerable communities are pushed to the brink. In the last two years, the Indian government has repeatedly shut down many of the legally available platforms for Deepak and Nirupa to speak their minds about decisions that could irreversibly impact their lands, lives and environment. Public hearings, required under Indian law for development projects to get a green nod, have been done away with for many kinds of coal mine expansions. The government, in response to the World Bank’s environmental and social safeguards policy, has said that it was not ‘comfortable’ with the idea of indigenous consent.

“I did an MBA in HR and worked with ICICI bank, ma’am. But when I found out that my family was losing so much land, and people were not being given jobs, I had to come back and get involved,” says Deepak Sahu as we sit in a meeting in the village of Raliya. We are surrounded by hundreds of displaced villagers, who want to learn about what legal choices they have left.

26-year old Deepak led a strike in May in Korba this year, where over five thousand people at risk of being forcibly evicted by Coal India’s four expanding mines blocked the dispatch of coal from the mines to the railhead. “We spam the Coal Minister’s Twitter  everyday. But other than stopping production, there is no other way anyone will listen to us.”

International energy agencies predict that India will account for nearly half the increase in world coal consumption from 2012 to 2040, even as major economies like China and the United States move away from coal. The government alone estimates that 50,000 hectares of Adivasi land in Chhattisgarh, Jharkhand, and Odisha will be affected by India’s coal expansion plans.

You’d think that these ambitions would be rooted in an assessment of how much coal India actually needs. And yet, at the time of writing, around 40 million tonnes of coal lie piled in Coal India’s stockyards, with no takers. In a recent development, even India’s Central Electricity Authority, stated in its draft National Electricity Plan1 that India didn’t need any new coal-based power plants till 2022 , and that there was sufficient coal from existing mines to supply them.

India’s dependency on coal cannot be denied. But as fellow shareholders in this nation’s energy security, all Indians must push for equal opportunities and rights for those who lose the most from coal mining. Their lands make our lifestyle possible. Their consent must be sought, and their right to refuse the greater common good, respected.

India is officially out of a power crisis. But it has a long way to go before the overburden has been reclaimed, and the playing field leveled for Adivasis and Dalits to truly speak truth to power and be heard.

 

New York Times: How One Billionaire Could Keep Three Countries Hooked on Coal for Decades

This story that I collaborated with Somini Sengupta and Jacqui Williams to report appeared on the front page of the New York Times on 16th, August 2019. Read the piece here.

SYDNEY, Australia — The vast, untapped coal reserve in northeastern Australia had for years been the object of desire for the Indian industrial giant Adani.

In June, when the Australian authorities granted the company approval to extract coal from the reserve, they weren’t just rewarding its lobbying and politicking, they were also opening the door for Adani to realize its grand plan for a coal supply chain that stretches across three countries.

Coal from the Australian operation, known as the Carmichael project, would be transported to India, where the company is building a new power plant for nearly $2 billion to produce electricity. That power would be sold next door in Bangladesh.

Adani’s victory in Australia helped to ensure that coal will remain woven into the economy and lives of those three countries, which together have a quarter of the planet’s population, for years, if not decades. This, despite warnings by scientists that reducing coal burning is key to staving off the most disastrous effects of climate change.

The story of Adani and its Australian project illustrates why the world keeps burning coal despite its profound danger — and despite falling prices for options like natural gas, wind and solar.

Screen Shot 2019-09-03 at 3.57.21 PM.png

Coal is in steep decline in wealthier countries, including the United States and across Western Europe, mostly because of competition from those alternative energy sources. But in Asia, demand for coal, the main source of energy, is growing. That’s because it is plentiful, the appetite is huge and the alternatives are fewer.

Government support is also key to coal’s survival. Subsidies for coal-fired power plants have nearly tripled in recent years in the Group of 20 countries, according to a study by the Overseas Development Institute and two other groups. In rich countries, that’s helped to keep coal on life support. In developing countries, it means coal continues to thrive.

The $14 billion Adani Group — a sprawling conglomerate with interests in energy, agribusiness, real estate and defense, among other sectors — leveraged both business acumen and politics to realize its plan, securing generous support from the Indian government to build its latest coal-fired power plant.

The company’s founder, Gautam Adani, says criticism of coal use is unfair. “India doesn’t have a choice,” he said in a recent interview at company headquarters in Ahmedabad, India. Citing the affordability and reliability of coal, he said it was indispensable to feeding the energy demands of big developing countries.

Moreover, Mr. Adani said, “nation building” was part of his business philosophy. At the heart of that, he said, was the question of “how to make India energy secure.”

Regardless of whether India has a choice about coal, Mr. Adani’s empire of mines, cargo ships, ports and power plants depends heavily on it. And he has invested enormous effort to make sure coal will not go away anytime soon.

“This is the last gasp of the fossil fuel industry and they’re taking advantage of all the political capital they have to dig in,” said Rachel Cleetus, public policy director for the Union of Concerned Scientists. “Meanwhile, we are seeing climate impacts now.”

A ‘tremendous opportunity’ for Australia

From his headquarters in Ahmedabad, Mr. Adani schooled himself in the politics of Queensland, Australia’s second-largest state, 6,000 miles away. Then, when a national election was called in Australia for May this year, his team went into action.

Company representatives made the case to rural Queenslanders that they could gain from opening up the Galilee Basin, the vast coal seam that the Adani Group wanted to exploit.

Adani’s people held public meetings to explain how India’s thirst for coal could lift the area’s fortunes. They donated to community organizations, gave money to a basketball arena, made campaign contributions to politicians and hired former political aides to lobby on the company’s behalf.

“Opening up the Galilee is a tremendous opportunity for the region,” said Lucas Dow, chief executive of Adani’s Australia division. “The reality is that, if the coal doesn’t come from Australia or Queensland or the Galilee, it’s going to come from other jurisdictions.”

Coal mining has enriched Australia for decades. Ready markets in the fast-growing, energy-hungry economies of Asia have made it one of Australia’s biggest exports and it has traditionally enjoyed the backing of most major political parties.

Rising concern about climate change, though, has made coal a contentious issue in Australian politics over the last decade.

In the run-up to these elections, the country was battered by heat waves, drought and bush fires increasingly linked to climate change, and public opinion polls found that a majority of voters wanted tougher government action. Conservative politicians, in response, repeatedly warned that turning away from coal too abruptly would cost the Australian economy dearly — and that coal country, in Australia’s northeast, would hemorrhage jobs.

The Carmichael project became a symbol of that divide.

Yet before the election was called in April, the federal governmentsent a signal to those on the side of coal. It approved Adani’s groundwater plan for the Carmichael site, even though Australia’s national science agency had described the proposal as “not sufficiently robust.” The Australian Broadcasting Corporation reported that the government had leaned on the science agency to hasten its review of the plan.

When the vote came on May 18, it was not, as some had predicted, a watershed climate change election. Australians, especially in coal country, voted to keep the incumbent conservative coalition in power.

Within days, the Carmichael mine had new momentum.

First, Queensland settled a case that had accused the Adani-controlled port at Abbot Point of dumping excess amounts of suspended solids, a category that includes coal, around the Great Barrier Reef. (The company denied wrongdoing and agreed to better water monitoring in the settlement.) Then, the state issued a regulatory clearance that had long been held up over the fate of a threatened bird.

A last hurdle was Queensland’s approval for the company’s plan to monitor the fragile ecosystems that depend on multiple aquifers near the coal seam. Independent experts warned state officials that the mine could permanently dry one natural spring, the Doongmabulla, held sacred by the area’s Indigenous people. As recently as June 6, they had urged the state not to rush into a decision. The impact, they said, could be “irreversible.”

But a week later, Queensland approved the plan. The Carmichael mine could now be built.

Mr. Adani used Twitter to thank lawmakers in Australia “for believing in Adani’s vision to fortify India’s energy security & create opportunities for Australians.”

‘Throw enough subsidies and anything can be viable’

At the global level, coal faces powerful headwinds. Renewable energy is getting cheaper as it expands. Private investors around the world are shying away from new projects. At the same time, public health officials are increasingly alarmed that air pollution, including the dangerous particles that come from coal plants, is shaving years off people’s lives.

“If you just looked at the social costs of air pollution, coal is so bad that, if those are added in as a tax, no coal plant would make economic sense,” said Anant Sudarshan, an economist at the University of Chicago who studies energy policy.

While Mr. Adani leveraged local politics to beat those headwinds in Australia, the key to success in India was different. There, his company has demonstrated an unusual ability to extract good deals for itself and has thrived with the help of generous state backing.

On many levels, those good deals have come at the expense of some of the poorest people in the world, who inhale the pollution that coal-fired power plants produce, drink water tainted by ash, and, often, support those coal projects with their tax money.

Mr. Adani, a native of Gujarat State, began business there nearly 40 years ago as an importer and exporter, including of coal for state-owned power plants.

It wasn’t long before coal became central to his enterprise. India’s hunger to extend electricity to its people helped.

With land from the Gujarat government, the company built the country’s largest private port in the western city of Mundra and next to it, the country’s largest private coal-fired power plant.

It also built a close relationship to Narendra Modi, the man who, in 2001, became the top elected official in Gujarat, and, in 2014, the prime minister of India.

Mundra- Rebbeca Conway for NYT

The Adani Group went on to build a necklace of ports along the Indian coastline, enabling it to deliver coal to virtually any part of the country. The company bought an Indonesian coal mine, and, in India, it acquired coal mining contracts across thousands of hectares in a vast and previously off-limits forest.

When coal prices rose a few years ago, causing deep pain for power producers, the company secured an unusual reprieve from Indian regulators: the ability to charge its electricity customers more than it had originally contracted with the government.

The company, for its part, argued that without the higher tariff, it could not operate the plant.

Separately, the Indian Directorate of Revenue Intelligence has accused the company of overcharging taxpayers for imported equipment and coal. The agency lost its case in a customs tribunal and is now appealing in a higher court, where it accuses the company of impeding the case.

One of the biggest boons for the company has been the government benefits associated with the huge new coal-fired power plant under construction in India, near the town of Godda. The coal from the Carmichael mine could be burned there, company executives say.

The land for the plant, acquired by the government from a swath of lush paddy fields, was home to some of India’s poorest farmers.

The earthmovers arrived to begin construction during the last monsoon, accompanied by the police. Coconut palms were uprooted. Paddy fields and a mango orchard were removed. A cellphone video taken at the time shows local women screaming, pulling their saris over their heads in deference and falling at the feet of a company representative, begging him to spare their land.

Soon, a concrete boundary wall went up. Then, makeshift offices. Then, a chilling message went out to locals who dared protest: The police charged five men, who did not want to give up their land, with criminal trespassing.

“They’ve got the plot surrounded,” said Balis Pandit, one of the accused, who has migrated to another part of the country to find work. “There’s no way we can enter the land.”

Godda- Saumya K for NYT

The Godda power plant is unique because it will be built as part of a special economic zone. But unlike other such zones, where factories make duty-free goods for export, this one would generate electricity for export. It would be the country’s sole special economic zone with only a power plant. And it was made possible only after a change in Indian regulations in early 2019, to allow the Adani project to go forward.

For the company, that brings significant gains. It would be exempt from several levies, including on imported coal and equipment.

The project has also been approved for a roughly $700 million loan from the state-owned lender that funds power plants and for another $700 million loan from a second state-owned company designed to help electrify Indian villages.

This plant, though, is not meant to electrify a single Indian village. As the Indian news site Scroll first reported last year, power generated in Godda would be exported to Bangladesh, a low-lying delta nation threatened by a rising sea.

The people who live near the site would receive none of the electricity, just the pollution.

The power export deal was announced by Mr. Modi on a visit to Bangladesh in 2015. Mr. Adani was part of his business delegation.

It was the final link in a long, sooty — and, for Adani, lucrative — chain, one that critics say could only be made possible by government assistance.

“Throw enough subsidies and anything can be viable,” said Tim Buckley, an analyst at the Institute for Energy Economics and Financial Analysis. “If they did not have special treatment back in India they wouldn’t be able to use expensive Australian sourced coal viably.”

Somini Sengupta reported from Sydney, Australia, and Ahmedabad, India; Jacqueline Williams from Sydney and Clermont, Australia; and Aruna Chandrasekhar from Bangalore, India.

Rs 7,410-crore question: Jharkhand amended energy policy to buy power from Adani at higher price

Located on the easternmost tip of Jharkhand near the border of West Bengal, Godda is a district of rolling grasslands and thick forests, punctuated with palm trees and paddy fields, underneath which runs a rich coal seam. The district is home to one of India’s oldest coal mines. But it has one of the lowest electrification rates in the country.

Adani Power Limited, which is part of the Adani Group, is constructing a 1,600 megawatts coal-fired thermal power project here. But the electricity won’t be for local use: it will be supplied across the border to Bangladesh.

Under state policy, Jharkhand is legally entitled to buying 25% of the electricity generated by thermal power projects built within the state. Adani Power Limited has said it will meet this requirement, but from another source, which it has not specified.

The power won’t come cheap. Government documents accessed by Scroll.in show that Jharkhand has amended its energy policy in 2016 to allow the company to charge a higher price than what other thermal projects bill the state.

Older agreements signed with existing thermal power projects allow Jharkhand to buy 12% of the electricity at a price that covers only variable costs – mostly the cost of fuel. The remaining 13% comes at a price that covers both fixed and variable costs – the cost of fuel plus the cost of building and running the project – with the actual tariff determined by the state electricity regulatory commission.

The first stage agreement signed with Adani Power Limited in February 2016 was on similar lines – it said Jharkhand could buy 25% of the electricity based on existing regulations. But the company asked for a change in the terms in the second stage agreement. It wanted the availability of 12% electricity at purely variable costs to be made conditional on the state providing concessional coal for the project. In other words, Jharkhand would have to pay both fixed and variable costs for the entire 25% of the electricity, or supply concessional coal for the Adani project.

Until 2014, many state governments in India, including Jharkhand, enabled thermal power projects within their states to get cheap coal by recommending them to the Centre for the allotment of a captive coal mine – a mine that they could use strictly for their project. But in August 2014, the Supreme Court cancelled such discretionary allotments of coal mines, describing them as arbitrary and non-transparent. In 2015, the Centre amended the law to make auctions mandatory for coal mine allocations.

In its correspondence with Jharkhand government in 2016, Adani Power Limited cited this change in India’s coal mining law as the reason for seeking amendments in the agreement for the Godda project.

Jharkhand’s Bharatiya Janata Party government amended the state’s energy policy on October 6, 2016, in keeping with the changes proposed by the company. The changes were also reflected in the second stage agreement that was prepared the next day itself, and formally signed by both the parties on October 21.

A confidential government audit report, of which Scroll.in has a copy, calculates that the revised terms could cost the state an additional Rs 296.40 crore every year. Over the course of 25 years – the duration of Adani’s power purchase agreement with Bangladesh – Jharkhand could end up paying the company an additional Rs 7,410 crore.

The office of the state accountant general, which reports to the Comptroller and Auditor General of India, raised queries about the agreement with Jharkhand’s energy department on May 12, 2017. It said the agreement with Adani amounted to “preferential treatment” and would result in “undue benefits” to the company. It pointed out that older thermal power projects were selling electricity to Jharkhand at a lower price based on the earlier formula. The amended energy policy did not retrospectively apply to them, even though they had been stripped of their captive coal mines following the Supreme Court’s 2014 judgement.

“It is desirable that there should be consistency and uniformity in the clauses of MoUs between the parties identically situated,” the audit report said.

Jharkhand energy department’s response to the audit enquiry is not in the public domain. Neither the energy department nor the Chief Minister’s Office responded to questions emailed by Scroll.in. This story will be updated if they respond.

Adani Power Limited did not answer specific questions emailed by Scroll.in. A company spokesperson said since the Godda project “will not have connectivity with Indian Grid, the 25% power to Jharkhand Govt. will be supplied from alternate source but at the tariff of Godda Project; and the said tariff will be determined by State Regulatory Commission.”

“The Godda Power Project is conceived based on imported coal,” the spokesperson added.

At the time of signing agreements with Bangladesh, the Adani Group had not disclosed the coal source for the Godda plant. To India’s environment ministry, Adani Power Limited furnished an agreement in April 2017 with a coal trading firm in Indonesia, PT Limas Tunggal, for the supply of nine million tonnes of coal, while also citing mines in Australia, Indonesia and South Africa as possible sources. In March 2018, the chief executive of Adani Enterprises in Australia, Jeyakumar Janakaraj, announced that coal from its Carmichael mine in Queensland state, which is still facing roadblocks, would be used to produce electricity in the Godda project for Bangladesh.

Coal shipped from Australia would raise the costs of producing electricity in Godda, said a report published in April 2018 by the Institute for Energy Economics and Financial Analysis, an international non-profit research organisation.

“The idea of importing coal at great expense into India’s biggest coal mining state makes no strategic sense,” said Simon Nicholas, an energy finance analyst at IEEFA.

The agreement with Bangladesh

The Godda power project took shape in June 2015, when Prime Minister Narendra Modi travelled to Dhaka to meet his Bangladeshi counterpart Sheikh Hasina and made a pitch for Indian power companies.

Bangladesh is power-starved. With barely any hydro-power potential or fossil-fuel deposits, the country needs to import electricity from its neighbours, or seek technical and financial support to build power-generating projects of its own.

In 2010, India extended a billion-dollar line of credit to Bangladesh to set up infrastructure projects. The same year, India’s National Thermal Power Corporation and Bangladesh Power Development Board signed an MoU to build two coal-fired power plants of 1,320 megawatts each in Bangladesh.

For the next four years, India’s contribution to Bangladesh’s grid was state-driven. But the dynamic changed in 2014, when India elected the Modi-led National Democratic Alliance to power.

On June 6, 2015, on his first visit to Dhaka, Prime Minister Modi said India could be a major partner in helping Bangladesh achieve its goals of having 24,000 MW of power by 2021. He sought Prime Minister Hasina’s help for “facilitating the entry of Indian companies in the power generation, transmission and distribution sector of Bangladesh.”

The same day, Bangladesh Power Development Board announced separate agreement to buy electricity from thermal power projects to be built by Adani Power Limited and Reliance Power Limited.

Prime Minister Narendra Modi and the Bangladesh Prime Minister Sheikh Hasina exchanging the memorabilia, in Dhaka, Bangladesh on June 6, 2015. Photo: IANS/PIB

The Memorandum of Understanding was signed by Adani and Bangladesh two months later, on August 11, 2015, while the implementation agreement was inked two years later, during Hasina’s visit to New Delhi on Modi’s invitation in April 2017. The tariff was left to be determined during the negotiation of the power purchase agreement, which was signed in early November at an event that most of the Bangladesh Power Division’s officials were unable to attend, according to this report in The Daily Sun.

Power-purchase agreements essentially spell out how much power will be supplied and at what rate. They should ideally have short lock-in periods, to account for the fluctuation in energy markets, with firms picked through competitive auctions to keep power prices low, rule out corruption and encourage competition, experts say. Adani’s agreement with Bangladesh has a 25-year lock-in period.

Estimates on the price under the power purchase agreement signed with Bangladesh vary. “The Bangladesh Power Development Board has stated that the agreed tariff is 8.6127 US cents per unit, equal to Rs 5.82 per unit although no details over what is and isn’t included in this cost have been made available,” said Simon Nichols of IEEFA.

In recent months, Bangladesh has chosen to use the competitive bidding route to purchase power from Indian power companies. In February 2018, the National Thermal Power Corporation won a bid to supply Bangladesh 300 MW of power at Rs. 3.42 per kilowatt hour, much lower than Adani.

The cost of power

Despite hosting the largest reserves of coal in India, Jharkhand is power-starved. Only 59% of its households have electricity connections, against the national average of 82%. The average per capita consumption of electricity in the state is 552 units, nearly half the national average.

The state’s energy policy, formulated in 2012, offered several incentives to thermal power companies to set up projects in Jharkhand, on the condition that they offer up to 25% of the electricity generated to the state, which has the first right to buy or refuse this power.

There are chiefly two kinds of costs that power producers bill to governments: fixed costs and variable costs. Fixed costs typically cover land and capital infrastructure. Variable costs include fuel, labour and maintenance expenses.

IEEFA’s report pointed out the Godda project has already seen significant delays, which could lead to a rise in fixed costs.

The variable costs of coal plants are extremely price-sensitive, since fossil-fuel prices are constantly fluctuating. If coal prices spike – such as in the case of imported coal from Australia or Indonesia – this would mean high fixed and high variable costs, making power prohibitively expensive for governments to buy.

A tale of two MoUs

On February 17, 2016, during the government’s Make In India week in Mumbai, Adani Power Limited signed the first stage Memorandum of Understanding with Jharkhand government for the Godda power project. It states that power from the project would be wholly supplied to Bangladesh, while the company would give Jharkhand its 25% share from “other sources”, with the price determined as per existing policies.

This is a departure from the normal practice of power companies supplying the host state’s share of electricity from the project itself.

Energy researchers say this could have serious power-pricing implications. “For instance, if Adani were to supply power from an old plant, such as the Korba (West) plant in Chhattisgarh it is in the process of acquiring, it would have markedly lower fixed costs than what setting up a new plant like Godda would cost, and a much lower cost of coal,” said Tim Buckley of IEEFA. “Billing the cost of power from such a plant as equivalent to Godda would again result in a huge benefit for Adani, and possibly subsidise another loss-making power plant.”

Soon after the first stage MoU was signed, on April 21, 2016, Adani Power Limited wrote a letter to Jharkhand’s energy department, expressing its reservations over the terms of the second stage MoU, and seeking a meeting to discuss possible amendments. A month later, the Business Standard and the Telegraph reported that SKG Rahate, then the state’s energy secretary, went on long leave after flagging concerns over the changes Adani was suggesting to the MoU. Rahate, who is now the home secretary of Jharkhand, declined comment when contacted by Scroll.in.

On July 13, Adani wrote to the energy department again, seeking discussions “so that MoU draft can be amended appropriately”, because “it is noticed that it is not aligned with the current rules and regulations of Government”.

On August 10, Adani sent a third letter to the department – this time spelling out a specific set of amendments, with a column citing their rationale.

The key amendment it asked for:

 “Out of said 25%, under first right of refusal to the State, the rate of 13% share will be as approved by JSERC [Jharkhand State Electricity Regulatory Commission], and 12% variable cost will also be approved by JSERC, subject to allocation of suitable coal source by Govt. of Jharkhand at concessional price…”  

The rationale Adani cited for this:

“With the enactment of the coal mines (special provision act 2015), allocation of coal blocks under the Government Dispensation route, based on the recommendations of State Government is not possible. In order to provide a level playing field, GOJ should provide suitable coal source at concessional price for meeting the entire requirement of the project.”  

In August 2014, the Supreme Court had cancelled discretionary allotments of coal mines, describing them as arbitrary and non-transparent. In 2015, the Centre amended the law to make auctions mandatory for coal mine allocations.

In the absence of coal mine allocation, thermal power companies turned to imported coal or sought coal linkages or contracts with the government-run Coal India Limited. In 2016, the government made electronic auctions mandatory for coal linkages.

In the first round of auctions of coal mines auctions held in March 2015, Adani Group won the bid for Jitpur coal mine. This mine is located in Godda district, but the company won the bid strictly for the supply of coal to its thermal power project in Mundra, Gujarat.

Months later, when it signed agreements with Bangladesh for the Godda power project, the company did not disclose the source of coal. In correspondence with Jharkhand government, however, the company asked for the supply of domestic concessional coal for its project, despite the fact that the electricity generated would not be used domestically but would be exported to another country.

A week after it sent a letter to Jharkhand energy department asking for amendments to the second stage MoU, on August 17, 2016, Adani Power Limited wrote to the government-run Jharkhand State Mineral Development Corporation, asking it to obtain a coal linkage for the Godda project. In its reply on August 2, the corporation turned down the request, stating that this could only be obtained from Coal India Limited through electronic auctions.

On October 6, 2016, the Jharkhand’s energy department issued a resolution amending the state energy policy, with the consent of the council of ministers secured in September. Even before the resolution could be notified in the state gazette, the next day itself, Adani Power and the state government prepared an amended draft of the second stage MoU.

Section 10.2 of this MoU cited the freshly inserted clause in the energy policy, word-for-word.

The amendments in Jharkhand’s energy policy and the terms under the second stage MoU have resulted in this: the state government will now have to buy electricity from the Adani project at fixed and variable costs, instead of 13% at fixed and variable costs, and 12% at purely variable costs. Essentially, this means that the state will pay nearly double the fixed cost compared to earlier, unless it allocates Adani a coal linkage, which it cannot legally.

According to calculations made by auditors in the office of the state accountant general, under the earlier arrangement, Jharkhand would be buying power at Rs 72.4 crores a month, but now it would have to pay Adani Power Limited Rs 97.1 crores a month. This comes to an extra Rs 24.7 crores every month, which translates into Rs 296.40 crores every year and Rs 7,410 crores for the 25 years of the power purchase agreement that Adani has signed with the Bangladesh government.

For the calculations, the auditors used estimates based on fuel and fixed costs in existing MoUs signed by Jharkhand with two private companies – Adhunik Power and Natural Resources Limited and Inland Power Limited. Together, these two projects supply nearly a third of Jharkhand’s electricity.

The table showing detailed calculations made by government auditors.

After the Supreme Court’s 2015 judgement, both the projects were stripped of their coal blocks and landed in an advanced stage of debt. Both have switched to buying coal from Coal India Limited in e-auctionsthrough the government’s SHAKTI scheme, launched in 2017.

Neither of the two companies – or any other thermal company supplying power to Jharkhand – has benefited from the state’s amended energy policy, since it solely applies only to MoUs signed after the amendment was made, not those signed earlier.

Jharkhand continues to buy power from the older projects on the basis of the earlier formula – 12% power at variable costs and 13% at fixed and variable costs – even though they no longer have access to concessional coal.

As of March 2018, Inland Power was still complying with the earlier tariff structure as stated in its MoU and receiving its coal supply via e-auctions. However, in February 2018, Adhunik Power cited the cancellation of its coal block as reason to relinquish its long-term bulk-power transmission agreement for the supply of 250 MW of power.

Larger questions

Jharkhand’s amendment of its energy policy raises a larger question: with thermal power projects no longer getting concessional coal, should they be freed of the obligation of providing electricity to state governments at lower rates?

Ashok Khurana, the director general of the Association of Power Producers, an organisation representing private power companies in India, certainly thinks so. He described Jharkhand’s decision to amend its policy as “correct”.

“No concession is being given [to thermal power projects] by the state government other than helping out,” he said.

But energy researchers point out coal is not the only concession that thermal power projects get from host states, and the absence of it should not be a reason to revise electricity prices upwards. In fact, Jharkhand’s changed policy sets a bad precedent, they argue.

“Power plants are already getting large numbers of concessions from governments, from land being made available and acquired on their behalf, and huge quantities of water allocated to them,” said Shripad Dharmadhikary, an energy researcher at the non-profit organisation Manthan.

Adani’s Godda project has been given permission to annually draw 36 million cubic metres of water from river Chir. This, after it had failed to submit details on the river’s flow pattern and catchment areas for four times in a row before the Environment Ministry’s expert panel.

“This project got stalled at the environment ministry specifically because of its enormous water consumption,” said Dharmadhikary.

Jharkhand government is also acquiring land for the project as well as the private rail line the company is building for the transport of coal.

The land acquisition is contentious under both state and central laws, and the company is facing stiff resistance from local residents, as the next story in this series reports.