Budget 2021 should incentivize clean fuel for pollution control, demands CSE

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CSE
CSE

Budget 2021 should reward clean fuel for pollution control, demands CSE

CSE writes to the Union finance minister asking for her to join
the ‘blue skies, clear lung’ movement by incentivising natural gas over coal

Centre for Science and Environment (CSE) has written to the Union finance minister, Nirmala Sitharaman, stating that clean fuels–electricity and natural gas — have remained unaffordable and unreliable for industrial spend the upcoming Union Budget 2021 is an opportunity to reward these fuels to make them more competitive compared to coal. This can help the countrified air pollution not only in Delhi and the National Capital Region (NCR) but across India.

Even though the proactive steps taken by the Union and state governments over the past few years had to a distinct improvement in air quality in Delhi-NCR, a lot remains to be done to meet the clean air benchmark, say CSE researchers.

“The next generation transition to meet clean air standards is not possible if it does not scale access to affordable clean fuels up across the region,” says AnumitaRoychowdhury, executive director-research, and advocacy, CSE. Roychowdhury was speaking at a webinar organized here today by CSE.

She adds: “In fact, since the early 2000s, Delhi’s primary air pollution mitigation focus has been to substitute diesel with compressed natural gas (CNG) in the transport sector, and replace coal, furnace oil, and pedagogy with natural gas in industrial areas and power plants. This has been primarily responsible for bending the pollution curve in Delhi.”

Dr Anumita Roychowdhury, Executive Director – Research and Advocacy and head of the air pollution and clean transportation, CSE says that “this is an important learning for the rest of the country as 122 cities are currently implementing clean air action plans to reduce particulate pollution by 20-30 per cent by 2024 under the National Clean Air Programme”.Such a clean fuel strategy is also consistent with the global trend.Some of the most polluted regions of the world like Beijing have had to replace coal with clean fuels to achieve good air days.

To make this critical and necessary transition to cleaner industrial fuels, it is necessary to address the roadblock from cheap coal that undercuts the market for natural gas in India. We have highlighted this in a new CSE study Analysing Industrial Fuel Policy in Delhi and the NCR States, which was released in the webinar.

I base the study on-ground survey of industry clusters in Delhi-NCR. It has uncovered widespread use of coal in industry. In fact, Delhi, even after notifying the approved fuel list that bonuses of dirty fuels across all sectors, is finding it difficult to enforce this in dispersed small and medium scale units.

Based on this assessment, CSE director general Sunita Narain has written to the Union finance minister. Her letter says: “Natural gas has a high tax burden currently. I tax it both at the point of sale and purchase, and this means that tax as a component of the final prices can be as high as 18 percent or more.

“Gas, unlike coal, is not included in GST.The state tax share of natural gas relative to the total petroleum product revenue was roughly 20 per cent for Gujarat and 7 per cent for Maharashtra in the past year. Replacing this for such large industrial states should not be an obstacle.

“Our understanding is that with 5 per cent GST (instead of 18 per cent state VAT and other taxes), the price for the industry consumer will reduce by 17 per cent.As gas has a higher calorific value and lower management costs, it will become attractive for industries to switch from coal to this cleaner fuel.”

Narain’s letter points out that the ‘second clean fuel revolution’ is possible only with taxation and pricing reforms in favor of cleaner fuels. It adds: “Then, the displacement fuel was diesel for the transport sector. Now, the displacement fuel is coal. Its price is so low that natural gas, with its high tax burden, cannot compete.”

Key highlights of the assessment:

  • Clean fuel is the only solution for small and medium-scale units: Emissions in medium and small-scale industries that dominate the landscape in Delhi-NCR are very difficult to monitor. These units do not have the wherewithal to control basic air pollution and heavily depend on coal. These are some key contributors to air pollution in the region. The only solution for this segment is access to affordable clean fuels.
  • The slow uptake of cleaner natural gas and electricity despite their availability: It is ironic that even after making the investments in infrastructure to provide piped natural gas to industry clusters in key industrial areas and districts, the gas uptake is small because of distorted pricing. This makes investment in clean fuel supply wasteful.
  • The use of coal is predominant in the major industrial clusters of Alwar, Bhiwadi, Sonipat, Panipat, Faridabad, Gregarinida Ghaziabad. While coal use is as high as 1.41 million tonnes annually, consumption of natural gas is only 0.22 tonnes. This trend will have to be reversed.
  • Only the Delhi region has a comprehensive clean fuel plan, but enforcement is a challenge: Delhi is the only city that has banned the use of coal and is expanding the use of natural gas in its legal industrial areas. But there are difficulties in enforcing this notification as the use of banned fuels by illegal industries is rampant.
  • Use of natural gas can reduce illegal use of coal: The use of coal and other fuels in illegal industries does not get accounted for during taxation. But I can check this if industries switch to natural gas, as gas connections are well-metered and can be easily monitored. Delhi has to take measures to close illegal industries and set up the infrastructure to check the entry of banned fuels. In Rajasthan, Haryana, and Uttar Pradesh, I need compulsory subsidization of gas prices.

“Industry accepts that gas for combustion is more efficient, cleaner, requires less maintenance, and will reduce regulatory costs as pollution control is much simpler to do. At current fuel prices, however, shifting is difficult. Cost reduction is the key,” says Nivit Kumar Yadav, program director, industrial pollution unit, CSE.

Yadav adds: “We have compared the use of coal and gas in industrial areas around Delhi. Currently, fuel would cost industry one-two times more if it uses gas instead of coal. This high cost of input-fuel would make industry uncompetitive with its counterparts in other states and countries.”

  • Electricity adoption as fuel is rare: “Improper electricity supply planning in the region has led to frequent power cuts. High electricity cost to industrial consumers has also been a barrier,” says Yadav. This demands sectoral reforms to make electricity reliable and affordable while expanding the industrial consumer base.

Need urgent steps for blue skies and clear lungs

Burning of coal releases toxic particulate matter, sulphur dioxide and oxides of nitrogen–all criteria pollutants that affect the health of millions in the region. Given the extremely high pollution levels and health emergency, not only in Delhi and NCR but across other regions of the country, it is necessary to reward clean combustion. This requires structural changes to make clean fuel affordable and reliable and clean power generation a priority. The Union Budget 2021 needs to address this challenge.

Says Dr.Narain: “We have, therefore, called for bringing natural gas in GST under the 5 percent slab, reducing the cost of electricity supply to industries, and starting necessary reforms.”

(By Pratyusha Mukherjee)

Pratyusha Mukherjee
Pratyusha Mukherjee

By Ms. Pratyusha Mukherjee, a Senior Journalist working for BBC and other media outlets, also a special contributor to IBG News & IBG NEWS BANGLA. In her illustrated career, she has covered many major events.