Stressed power assets set to amplify unemployment crisis: Study

Report forecasts that if a significant volume of India's coal-fired capacity turns stranded, the phenomenon could affect labour directly or indirectly linked to the coal value chain

As India battles unemployment, the muted fresh capacity additions in coal-fired generation and stressed power assets are set to magnify the job crisis, a study said.

A report by Canada-based think-tank International Institute for Sustainable Development (IISD) forecasts that if a significant volume of India's coal-fired capacity turns stranded, the phenomenon could affect labour directly or indirectly linked to the coal value chain. 

“The large absolute numbers of workers in India’s coal sector workforce would require this to be managed in a socially just way, particularly in the most affected regions. Given the ongoing decline of employment in the coal sector, driven by mechanization and shifting relative costs of capital and labour, this should be a natural extension of existing strategic thinking on how to manage labour loss among sector workers”, the IISD report said.

New employments arising out of renewable energy installs might do some natural rebalancing, still there is no reason to suppose that job losses and creation will necessarily cluster in the same geographic areas. Most of India's coal is concentrated Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh and Andhra Pradesh. By contrast, fresh renewable energy capacities are planned in western and southern states equipped with better wind resources and solar radiation.

“The growth of renewable energy will create a great deal of new jobs. But if there is a risk of coal power stranding in future, policy makers should start thinking now about the dialogue and complementary policies that will be needed to ensure a fair outcome for affected workers”, said Leo Roberts, operations & partnership manager at UK-based Overseas Development Institute and co-author of the study.

Tim Buckley, director of energy finance studies, Institute for Energy Economics & Financial Analysis (IEEFA) said, “The stressed power sector has definitely deepened the difficulties of high unemployment, both directly and through the massive drain it has inflicted on the banking sector, particularly the public sector financial institutions like SBI, PFC and REC. This has squandered financial capital that in turn has reduced the government’s ability to expand and fund new investments, particularly in productive infrastructure. So the ongoing inability of government to have the courage to allow the RBI to enforce non-performing loan resolutions and hold promoters accountable is undermining India’s otherwise excellent longer term growth prospects”.

Buckley feels the stranded assets in thermal power sector are holding back sustainable economic growth in India. “I see the investment boom in renewables coupled with ongoing reforms of the discoms as providing a more sustainable growth platform for the Indian economy, providing a strong positive for the expanding workforce. India’s progress is held back by a banking system that is being restrained from holding bankrupt promoters accountable. Yet more bailouts of promoters who have made bad business decisions will undermine domestic and international confidence in the overall economic framework and that is the real risk to the workforce of India”, he added.

India's coal mining industry has a pool of 1.2 million workers including Coal India Ltd (CIL), private producers and informal workers. Though power production is not labour intensive coal accounts for approximately 30 per cent of India’s rail network revenue and the rail sector formally employs 1.3 million individuals.

“There is also likely to be a large shadow informal workforce, as informal labour is thought to make up 81 per cent of India’s wider industrial workforce. Much of this is likely to be clustered in specific states that possess the majority of India’s coal reserves- Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh and Andhra Pradesh”, the IISD report noted.

India’s coal mining workforce has been declining per unit of output, as mechanization of the sector has been promoted by CIL, driven by the need for economic efficiency and safety concerns.

The report pegs India's unemployed population at 31 million. Despite a host of macroeconomic policies centred on job creation, there are few schemes that could target assistance to regions where coal workers are at risk of redundancy.