How India is getting gas and coal policy wrong

EDITORIAL: How India is getting gas and coal policy wrong
by Sunita Narain
======================================================
Two monopolies. One private and the other public; one in gas and one in
coal. Both equally disastrous for the environment. I speak here of
Reliance Industries Ltd and Coal India Ltd.

We know that air pollution in Indian cities is hazardous. We need urgent
solutions to cut emissions from all sources so that we do not lose this
critical health battle. In Delhi and its surrounding region, for
instance, we know that air toxins are a clear and present danger. The
tiny particles of PM 2.5 that can go deep into lungs and cause serous
health impairment are several times higher than standards during
winters. In addition, nitrogen oxide (NOx) levels are rising because of
the burning of diesel and coal. A new danger is lurking: ozone, a deadly
pollutant, which targets lungs and is linked to high NOx emissions.

We need to find urgent solutions. We know that one big part of the
solution is to reinvent mobility and to phase out diesel use in
vehicles. Another part of the solution is to phase out coal use in
thermal power stations in densely polluted areas and to run them on
relatively cleaner natural gas. Gas-based power stations have no
particulate emissions and much lower NOx emissions. They can achieve 20
ppm NOx levels where coal-based power stations have no standards but
emit between 100 ppm and 300 ppm. Coal-based power plants are regulated
based on their stack height—the assumption is that the higher the
dispersion of pollutants, the lesser the problem. But this worked when
there was cleaner air for dilution. It does not work now. So the
transition done in the case of vehicles to compressed natural gas (CNG),
which helped the city leapfrog to cleaner air, is needed in power plants
as well.

This has been accepted. So, for the past few years, Delhi and its
surrounding region have invested in building gas-based power plants.
Delhi has shut down its coal-based IP power plant and is waiting to
close the Rajghat power station. It has built Pragati, Bawana and
Rithala plants. The combined installed capacity of these gas-based power
plants is over 1,730 MW. In addition, the city is ready to invest in a
plant of 700 MW at Bamnoli and to convert three units of the Badarpur
power plant to gas.

But there is a small hitch. There is no gas to run these commissioned
plants. The country, they say, has run out of gas. Oops! This is exactly
what was said over a decade ago when demand was raised for natural gas
to run vehicles. Then, gas became available; there was talk about huge
finds in the Krishna-Godavari basin. But now the wells have mysteriously
dried up, gone kaput.

Or so it is said. According to the Ministry of Petroleum and Natural Gas
(MoPNG), India's gas output is expected to fall by a whopping 35 per
cent in this fiscal and another 12 per cent next year. Nobody cares to
explain this. But it is clear that the new monopoly player—Reliance
Industries—is not playing ball. The Comptroller and Auditor General of
India's (CAG's) report on hydrocarbon production sharing contracts has a
damning indictment of the loss to the exchequer in the allotment of the
gas field and of the manner in which the capital costs have been rigged
to reduce the sharing with government. The widely held belief is that
exploration is down and gas is drying up because Reliance Industries
wants prices to be hiked. It wants control over the sale and allocation
of gas. Its partner in this is oil major BP, which picked up 30 per cent
stake in it for US $7.2 billion. Clearly, this investment would not have
been made if the fields were dud.

In coal the story is same and different. It is said that thermal power
plants are running out of coal because environment and forest clearances
are holding up projects. So there is a clamour to open up more forests
to private players. The leaked draft report of CAG on allocation of coal
blocks reveals dirty secrets. What is worse is that Coal India, which
produces 90 per cent of India's black gold, has under its control some
200,000 hectares (ha) of mine lease area, including 55,000 ha of forest
land. Still it produces only about 500 million tonnes annually. So it is
convenient for all to not fix this supply problem, but ask for even more
forests to be mined.

The environment is hurt in both ways—by the unavailability of natural
gas, which would have cleaned up emissions; and by the demand to destroy
more forests, surrounding water bodies and livelihoods of people,
because of our inability to use the existing coal fields optimally.

The issue also hides the serious problem of pricing power at affordable
levels, given the rising price of coal and gas. Currently, imported and
re-liquified gas price is touching US $17-18 mmscd. Imported coal price
has also spiralled out of control. In this scenario, the options are as
follows: one, to maximise domestic resources and operate them at tight
capital and operational costs; and two, pay for higher raw material
costs in power generation by investing in reducing inefficiencies,
including losses in transmission. As yet, there is little evidence that
we are moving in any of these directions. The only evidence is that the
big monopolies are taking us for a ride with disastrous consequences for
our health and environment.

--
Gopinath S
Chief Executive
nRG Consulting Services, Bangalore
http://in.linkedin.com/in/gopimysore
http://nrgcs.blogspot.com/
+91 99161 29728