Category: Mining

Mongabay | July 05, 2021

The government had mandated that 60 percent of the DMF contributions collected by each district should be applied in high priority areas including health care, education, skill development, and sanitation.

— India has been under international pressure to rapidly phase out coal and scale up the installation of renewable power systems. However, much work remains for a fair transition of coal-dependent communities.

— A latest study has found that close to 40 percent of India’s 736 districts have some form of coal-dependency whether it is money collected through District Mineral Foundation or the direct and indirect jobs the coal sector provides.

— Experts argue that for a just transition in the coal sector, long-term planning for a period without coal, needs to start now, while keeping in mind the interests of the coal-dependent communities.

As countries around the world are gearing up to attend the crucial 26th United Nations Climate Change Conference of the Parties (COP 26) in Glasgow this year to deliberate strategies to combat the climate crisis, there is increasing pressure on India to reduce its coal dependency. However, if India takes steps to phase out coal, it has implications for several Indian states and their local districts.

A latest study finds that close to 40 percent of districts in India have some form of coal dependency as they are either home to coal workers or pensioners, collect funds under the District Mineral Foundation (DMF) or are benefitting from coal mining companies spending billions of rupees under the Corporate Social Responsibility (CSR) programmes.

The study was published by Sandeep Pai, a researcher, as part of his doctoral dissertation at the University of British Columbia. He analysed data collected from coal-mining company Coal India Limited (CIL), power utility company NTPC, Coal Controller’s Organisation and India’s Ministry of Coal, among others. The analysis shows that India’s transition away from coal cannot be ‘just’ for people and the environment unless comprehensive interventions are planned and implemented, addressing the concerns of millions of people involved directly or indirectly.

“There are 284 districts (38.5 percent) in India that have some form of coal dependency. They are either home to coal workers or coal pensioners or collect DMF revenues, or benefit from the CSR spending by coal companies. Out of these 284 districts, I found that 33 districts are among the most coal-dependent and would be central for any just transition planning,” Pai told Mongabay-India.

In India, so far, coal mining is largely led by government-owned companies. For instance, in 2018-2019, CIL, Singareni Collieries Company Limited (SCCL), and Neyveli Lignite Corporation (NLC), the three largest government-owned coal mining companies, produced 93 percent of the total coal produced in India. According to the study, the coal sector provides millions of direct, indirect, and induced jobs. The study states that CIL directly employs 270,000 people but “the number of indirect jobs (such as people working for contractors who repair coal mining equipment) and induced jobs (involving people working in local retail industries in coal towns such as in tea shops or grocery stores) … are common in all coal-producing regions.”

In terms of jobs, the study estimates that 3.6 million people are either directly or indirectly employed in the coal mining and power sectors in 159 districts in India. Of the 3.6 million people, nearly 80 percent of these coal jobs are linked to the coal mining sector located in 51 districts while the rest 20 percent of coal jobs are linked to coal power plant jobs. “This is an important finding as it shows that the coal mining sector’s socio-economic contribution in terms of jobs is much higher than the power sector but that it is more concentrated in a smaller number of districts,” said Pai.

Some of these 159 districts exhibit a heavy coal dependency on account of direct and indirect coal mining and coal power plant jobs. For instance, there are seven districts with over 100,000 direct and indirect coal mining and coal power plant jobs while there are 43 districts (including the seven) that have over 10,000 such jobs and 83 districts have 1,000-10,000 such jobs.

According to the study, the Dhanbad district in Jharkhand is home to the largest number of coal workers at nearly 500,000, the majority of whom are employed in the coal mining sector.

The concept of ‘Just Transition’ from coal to clean energy has gained pace across the world with many governments and international organisations formulating strategies to help fossil fuel workers and their communities navigate such a transition in a fair manner.

For India, the issue is critical as the country is trying to increase its domestic coal production as well as step up the installation of renewable power. Experts have, however, said that the increase in coal mining is not in conformity with India’s climate goals and will increase the coal dependency, making the implementation of just transition harder.

In 2015, India had promised a reduction in the emissions intensity of Gross Domestic Product (GDP) by 33 to 35 percent; achieving about 40 percent installed power capacity from non-fossil fuel-based energy resources; energy efficiency; and creating an additional carbon sink of 2.5-3 billion tonnes of carbon dioxide equivalent through additional forest and tree cover.

“Beyond jobs, policymakers also need to focus on economic, social, regional, demographic, and other aspects of just transition. The study finds that just transition is not only a jobs problem. It requires a holistic understanding of different social, economic, demographic, and other issues. Just transition also requires a spatial, geographic lens. What is required for a just transition may vary at the regional level within a country; different regions may have different just transition considerations,” Pai said.

He said proper implementation of just transition strategies for fossil fuel workers and their communities may help “increase the general acceptability of climate policies among fossil fuel-dependent communities.”

Coal mining contributes heavily to the DMF funds and CSR

In June 2015, through an amendment in India’s central mining law – the Mines and Minerals (Development and Regulation) Act (MMDR Amendment Act 2015) – DMFs were introduced in all districts in the country that were affected by mining-related operations. These district mineral foundations were tasked with managing and utilising the funds for the interest and benefit of people and areas affected by mining.

The government had mandated that 60 percent of the DMF contributions collected by each district should be applied in high priority areas including health care, education, skill development, and sanitation.

Pai’s study claims that in at least nine Indian states, the coal mining industry pays considerable taxes and royalties to state and district governments. The royalties paid at the district level are direct contributions to the DMF funds.

For instance, in 2019, the CIL paid approximately Rs. 500 billion (Rs 50,000 crores) in total taxes and royalties to federal, state and district governments – which is about three percent of federal governments’ annual revenue collection. According to the study, the coal industry collectively contributed Rs. 33.46 billion (Rs. 3,346 crore) towards DMF in 52 districts in India. In 2019-2020, coal mining and power companies also spent Rs. 10.11 billion (Rs. 1,011 crores) as CSR spending in sectors such as health, education and infrastructure development.

Of Rs. 10.11 billion, about Rs 6.8 billion (Rs. 680 crore) was spent by companies in 90 districts while the remaining Rs. 3.3 billion (Rs. 330 crore) was spent on national and state projects that were not tied to any particular district, the study said. The study shows that “some districts are more heavily dependent on jobs, while others have large numbers of pensioners or depend more on DMF contributions or CSR spending.”

Pai said that “money collected and spent under the DMF or CSR component is critical for development work in some districts.”

“Take the case of Angul district in Odisha – it has the highest level of CSR spending. In 2019-20, about Rs. 1.31 billion (Rs. 131 crore) were spent. So, if a state in India loses coal royalties and this revenue is not replaced by other sources, overall cuts in state spending may impact coal-dependent districts as well. This might be more severe in states like Jharkhand where there is heavy coal dependency in multiple districts and the state government itself relies on coal royalties,” the study notes.

Srestha Banerjee, who is the Director, Just Transition at the International Forum for Environment, Sustainability and Technology (iForest), a think-tank working on issues related to the environment and ‘Just Transitions’, said the DMF funds are not going to dry up tomorrow but what is needed is proper planning.

“DMF money is not going anywhere for the next 15-20 years (this depends on the district’s mining activities/ mine life) at least. What is required is to plan about its proper usage right now so that there can be a focused endeavour on creating long-term assets, and diversify income opportunities at the local level. Once such provisions are carved out then even if the DMF money is not there tomorrow the villages or towns won’t feel their absence,” Banerjee told Mongabay-India.

She explained that many local officials also explain that the DMF money comes without any conditions attached and they can do wonders with that but what they lack is their capacity to plan with long-term goals.

“Districts should use five percent of the DMF annual budget for proper planning and implementation. There is a need to create dedicated capacity for DMF planning and implementation. Also, our districts should create a future corpus using DMF funds for long-term security. We also need to ensure the participation of the public, specifically from mining-affected communities, in the bodies deciding the usage of the DMF funds. Basically, we need to plan for the future and maximise the resources by ensuring optimum usage today,” she said.

About 500,000 people depend on pensions from the coal sector

According to Pai’s study, there are nearly half a million coal industry pensioners in India living in 199 districts, whose pensions depend on the continuation of the coal mining industry.

The pension fund for coal miners is run by Coal Mines Provident Fund Organisation, a government organisation that collects equal contributions from coal mining companies and workers, then pays pensions to coal mine workers after their retirement. This means that money from existing workers and coal companies is paid out to retired workers and thus any transition away from coal would lead to consequences for coal industry pensioners.

Sanjay Namdeo, who is the head of the Communist Party of India (CPI) in Madhya Pradesh’s Singrauli, a district with high coal dependency, said: “The conversation around energy transition is good but we need to remember that a coal sector worker who spends his or her entire life working in the coal mines should get the pension or health benefits. Taking that right away from them is not right.”

“If that happens their life will be in a disarray. When a politician who is elected can get a pension why not these workers who spend their entire life in this sector. Any plan for the transition of such workers or areas needs to focus on ensuring that the workers get these benefits till they are alive,” Namdeo told Mongabay-India.

Pai said that it is important to understand the socio-economic dimensions of coal transitions in order to create just transition plans for coal-dependent communities that will facilitate justice in transition, and help mitigate potential political resistance these communities may raise against such low carbon policies.