India's thrust on renewable energy to reduce viability of thermal projects: CEA

18 Aug 2017 Evaluate

Chief Economic Adviser (CEA) Arvind Subramanian has stated that India's thrust on renewable energy would create a 'double whammy' for the government by reducing the viability of coal-fired thermal power plants and rising non-performing assets (NPAs) of state-run lenders. He also noted that while renewable energy sources must be tapped to bring down the fuel import burden, in short-to-medium run the country ought to focus on traditional sources of energy like coal.

Subramanian has said that over-expansion, fuelled by the growth optimism of the mid-2000s, combined with stresses in the discoms and slowdown in the economy has led to plummeting Plant Load Factors (PLFs), declining profitability, and the spectre of large amounts of stranded power assets, and consequentially stranded coal assets as well. He pointed out that all this can have a harmful effect on the health of the banking sector, especially the public sector banks, in the country, which in turn can adversely impact the health of the Indian economy, already affected by the Twin Balance Sheet challenge. Adding further, he said that the financial impact for the government arises from having to recapitalise the public sector banks that have lent to power companies and to the reduced profitability of the coal industry.

Noting that both coal and renewable sources should be the focus of power generation, CEA said that for India today, the social cost of renewables is higher than that of thermal power and it is highly unlikely for the converse to be true, at least for some time. He stressed that the world collectively needs to embark on a programme similar to the Manhattan project that produced the first nuclear bomb. He further pointed out that for India, which is struggling to provide basic electricity to about 25 per cent of the population, coal will provide about 60 per cent of country’s power needs until 2030. He noted that coal will and perhaps should remain the country's primary energy source because it is the cheapest fuel available. He added that India must shape the national and global narrative and not be stampeded by the rhetoric of carbon imperialism.

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