Koffee with Khetan – ENERGY booster : We have to take up alternative sources of green energy with immediate effect

sumitjiIndia’s tryst with economic development is a matter that is beyond compromise. It is also a fact that this path to development will be fuelled by huge amounts of energy. Energy, that will primarily be obtained by burning fossil fuels, of which coal will constitute the lion’s share.

To put things in the right perspective, India’s power generation capacity, which stands over 168000 MW now will have to be scaled up to meet the need of 400000 mw  which will be the projected demand in the year 2020. The thermal power component, which now stands over 102000mw  may have to be increased to 300000 mw.  And herein lies the problem.

Environmentalists and various other concerned people have raised the bogey that this huge accretion will lead to an environmental disaster of unprecedented scale. The CO2 generated by the burning of such huge quantities of coal will have such an adverse impact on the environment that we are even unable to gauge its ill effects. The Earth which is already getting warmer by the minute will heat up further – climatic patterns will change, the summers will become hotter, the winters harsher and the storms fiercer. Polar caps will melt leading to the rise in the sea levels inundating huge tracts of land. In short disaster of a magnitude similar to the one that had wiped out the dinosaurs.

What then is the solution? The answers are not far to seek. We have to embrace alternative sources of energies with immediate effect– that too with a vengeance. India’s hydro power generating potential itself  over 100000 mw . However, this potential is lying untapped as most of the licenses that have already been granted for tapping this potential are rotting unused. A high powered committee constituted by the Government within the confines of the relevant laws should be constituted with immediate effect. This committee should ascertain the reasons for the delay in the implementation of projects that have already received the necessary clearances and take rectifying measures. One way out will be to ensure that each license holder partner with a thermal power producer so that the carbon footprints can be offset. The new licenses for thermal power plant may be issued together with commitment for investment in hydro energy also.

Similar is the case of solar energy. The high entry cost in the segment is currently acting as a barrier for entry. Existing thermal power generators and the ones proposing to set up power plants must invest in the creation of a pre determined amount of solar power and wind power having combined potential of over 100,000 MW .

There is an immediate need to look at the tax implications for investment in the power sector – what is the need of the hour is a “green tax” – a mechanism whereby thermal power producers burning fossil fuels will be taxed so that the benefits can be rolled on to the producers of alternative energies, so that we can have sustainable development without sacrificing our growth pangs. At present import of thermal coal attracts import duty of 5% which may be linked to inferior chemical components like high Ash, high Sulphur, etc., which results in more carbon emission. The import duty collected as “Green Tax” shall be utilised by Central Government for purchase of Carbon Credit only so that impact on environment by consumption of inferior quality of coal may be offset.

Let the industry come forward like responsible corporate citizens and take on themselves the onus of not only reducing their carbon footprints abut also to find ways and means of diverting scarce resources for the generation of electricity through alternative sources so that development can truly have a green heart.

(Sumit Khetan is the CFO of the Concast Group and is an expert in overseas acquisitions and global financing. This particular piece had appeared in the July 2010 issue of the Core Sector Communique)