Vijay Jayaraj: India Crafts Fossil Pathway to Secure its Future

  • Date: 13/07/20
  • Vijay Jayaraj, GWPF Energy

India is on the way to become a fossil fuel-based energy powerhouse of the 21st century.

India’s developmental goals for the future are quite ambitious. They ought to be: From tackling the surging poverty rates to providing affordable utilities, the country faces a steep challenge. The key to achieving any of its developmental goals is a strong energy sector. India is the third largest energy consuming nation and is following the fossil fuel pathway (like the West did during the 20th century) to achieve energy independence in the near future.

Relationship to Paris Agreement

The transformation of the energy sector in 21st century India is a remarkable story and it can be singularly credited to fossil fuels, especially coal and oil. The predominantly fossil-based energy sector has grown by leaps and bounds in recent decades. But ever since the country’s membership in the Paris agreement, and its decision to pursue billions of dollars’ worth Renewable projects (like the Asia’s largest Solar Plant that was inaugurated this week), there were doubts and uncertainty surrounding how the country would move ahead with its fossil fuel sector. Green crusaders believed that India’s inclusion in the agreement and their proclivity to large renewable projects would make them a major player in the global effort to offset fossil fuel dependency.

However, that has not been the case. Anti-fossil fuel lobbyists and international bodies like the UN have had zero success in limiting India’s coal use. This is because the country’s “Nationally Determined Contribution (NDC)”—a set of promises that were pledged as a part of Paris agreement—clearly states that the country has sovereign rights to excavate, import, export, and use fossil fuels, and that it will not be determined by non-binding treaties made with UN or other developed countries.

No Holds Barred

India’s recent approach towards fossil utilization can be summed up in three words, “No Holds Barred”. The country has been unapologetic in its pursuit of fossil fuels, especially coal. This attitude was more evident than ever during the recent global COVID-19 lockdown. Despite staring at a big slump in GDP for the foreseeable future, the government allocated a significant sum of its COVID-19 stimulus package to enhancing coal productivity in the country. In May 2020, the country’s Finance Minister Mrs. Nirmala Seetharaman announced a massive stimulus package for coal infrastructure. The Rupees 500 Billion plan (USD 6.7 billion) was directed at improving evacuation of the mined coal at India’s coal mining blocks.

The country’s Prime Minister Narendra Modi has been unequivocal in his support for coal and oil. In the recent move to enhance coal production and make the sector more competitive, the government decided to auction 41 coal mining blocks to private miners. During the inauguration of the auction process, PM Modi commented, “Allowing private sector in commercial coal mining is unlocking resources of a nation with the world’s fourth-largest reserves.”

India’s Coal Minister Pralhad Joshi said that these measures are unprecedented and will give a boost to the country’s coal sector: “Allowing commercial mining in the coal sector, the Govt has completely opened it up for investments. Several restrictions have also been removed, promoting free trade of coal. These are some of the biggest-ever reforms in the coal sector to boost Ease of Doing Business.” As of July 5, 2020, there were 1140 bidders, including 60 international companies. The mines are expected to make up 15% (225 Million Tonnes) of the country’s total coal production in 2025 and generate 280,000 jobs.

Last year alone, India imported 235 million tonnes of coal to meet demand-supply gap, costing the country USD 23 billion. Despite the COVID-19 lockdown and the subsequent drop in energy demand, Coal India Limited’s production dropped just by 11% in April and May 2020. GlobalData has predicted that India’s increased coal production in 2020 (forecasted to be 8.3% higher than previous year) will offset the slight global pause in coal production due to the lockdown, resulting in an overall global coal production of 8.1 billion tonnes by the end of this year. In order to meet the growing demand, India has set a target to produce 1 billion tonnes of coal by 2023-24.

Oil and Gas

The import and production of oil and natural gas have skyrocketed too. Gas accounts for 6% of the total energy demand in India and will more than double in the coming decade. To meet growing demand, India has increased its oil and gas imports from the U.S. significantly and also announced a string of measures to increase production. . Last week, India announced that it will pump USD 140 Billion of new direct investments in gas over the next eight years. Gas production is predicted to reach 90 billion cubic metres in 2040.

The ministry of petroleum and gas has reported that 859 oil and gas related domestic projects, valued at approximately Rupees 3.57 Trillion (USD 48 Billion), are currently being pursued to improve the oil and gas accessibility in the country. The Minister of Petroleum & Natural Gas Dharmendra Pradhan said that, “India plans to almost double its oil refining capacity to 450-500 million tonnes in the next 10 years to meet the rising domestic fuel demand as well as cater to the export market.” The current refining capacity stands around 250 million tonnes and exceeds the domestic fuel demands.

Beyond Imports

Besides increasing imports, the country has also earned global recognition as a fossil fuel destination. Despite sacking employees from the COVID-19 fallout, the European Oil and Gas giant British Petroleum (BP) is set to hire 2000 workers for its upcoming new global business service center in India. Earlier this year, Royal Dutch Shell’s Indian arm entered into partnership with an Indian firm to provide door-step delivery of Natural gas to customers who do not have access. Saudi Aramco, the oil company with the highest revenue in the world, has entered into a USD 60 Billion deal with India to build an oil refinery. The refinery will be based in the coastal state of Maharashtra and will produce 1.2 million barrels per day.

India, like its neighbour China, is aware that energy independence and rapid poverty alleviation can happen only with the complete utilization of fossil fuels available in the country. In order to rescue its dependency on imports, India is also opening up more coal mines, oil refineries and hydrocarbon wells. With a strong fiscal support from its government and continued investments from major fossil fuel enterprises, India is truly on the way to become a fossil fuel-based energy powerhouse of the 21st century.

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