Category: Op-ed

The global economy is in recession, and it is predicted to be more destructive than the Great Depression of 1929 and the Global Financial Crisis (GFC) of 2007. India too has been hit hard – tens of millions have lost their jobs, and the economy is projected to shrink by 4-9% in 2020-21. The last time the Indian economy contracted by more than 5% was in 1979 when the entire country was devastated by a once in a century drought (and some regions with floods).

Both Morarji Desai’s and Charan Singh’s governments fell, and we had mid-term elections which brought Indira Gandhi back into power. The fallout of this political upheaval was the founding of the Bharatiya Janata Party in early 1980, which successfully challenged the Congress and came to power within two decades. I believe that the India in which we live in today was in many ways created in 1979. The question is: What kind of India will the 2020 economic recession create? And, can we steer the ‘new’ India towards a more just, equitable and sustainable society?

A defining feature of the current economic crisis is the unprecedented fiscal and monetary stimulus packages being rolled out by the governments to provide relief and revive the economy. According to the International Monetary Fund, the total stimulus package for G20 countries averaged 12.1% of GDP – many times more than GFC. India too has announced a stimulus package worth 10% of GDP (though there are opposing views on this number). A quick analysis of the stimulus packages shows that they are primarily targeted to revive the current economy; hardly any country has thought about the long-term transition.

In India too, the focus is on the existing ‘brown economy’ and shovel-ready projects. The attention on the immediate crisis has also relegated climate and environmental concerns to the background. This is evident in the increasing plastic pollution and investments in the fossil fuel industry. Regulatory changes in the environment and labour sectors have also been proposed for the ‘ease of doing business’. While there is nothing wrong in short-term stimulus packages to keep the current economy alive, they must not be environmentally destructive. On the other hand, we also have to ensure that the long-term economic recovery takes into account the social and environmental crisis the world is facing today.

In other words, we must differentiate between a short-term stimulus to jumpstart an economy and a longer-term strategy to transition to a sustainable society. While the former mostly requires fiscal and monetary support, the latter requires long-term investments and serious pricing and policy reforms. The current economic crisis offers us a once in a lifetime opportunity to roll out a long-term strategy along with stimulus packages in core sectors:

• Make agriculture sustainable: Agriculture accounts for 50% land, 85% water, uses a massive amount of chemicals and provides low-income livelihood to 50% of the population. Agriculture is central to building a sustainable society.
• Transform the energy sector: We are at a cusp of change in the energy sector. With stimulus and R&D, we can build a new energy architecture based on renewable electricity, battery storage, smart grids and hydrogen fuel for industries.
• Build resilient infrastructure: Massive amount of money will be spent by the government to build roads, airports, buildings etc as part of the stimulus package. We must make them ‘green’. Instead of roads, we should prioritise railways; instead of concrete jungles, we must build sustainable cities.
• Invest in nature: Reversing deforestation and desertification and enhancing soil, wetlands and forests will build resilience against climate change and also provide massive livelihood opportunities.
• Support local and small businesses: For jobs, sustainability and resilience of the supply chain, local small businesses are going to be the key. Government policies must support the development of efficient and green small businesses.
• Invest in social capital and governance: None of the above would be possible without an educated and healthy society and good governance.

If we consider the experience of the past, then the economic recovery is going to be a long haul. The New Deal enacted by Franklin Roosevelt to respond to the Great Depression lasted for seven years (1933-39). Rebuilding in India will also need time and money. We must spend these rethinking about the type of economy and social system we need and want in the future.

An oft-repeated saying in India is that our environmental laws are good, but their implementation is poor. I have always disagreed with this simply because the primary reason for a law’s poor implementation lies in its flawed design. Most environmental laws in India are designed using a top-down approach, with an inadequate understanding of ground realities, leading to failed implementation. The recent draft guidelines published by the Ministry of Environment, Forest & Climate Change (MoEF&CC) on Extended Producers Responsibility (EPR) for plastic wastes is a classic example of this approach.

EPR is a ‘polluter pays’ principle under which producers and users of plastics, especially plastic packaging, have to take back plastic waste and recycle or dispose of them in an environmentally sound manner. The first regulation on EPR was enacted almost a decade back in the Plastic Waste (Management & Handling) Rules, 2011. The rules directed municipal authorities to set up plastic waste collection centres with financial support from the producers. The problem was that EPR was vaguely defined and the municipalities were not capacitated to implement the rules. This law was repealed within five years.

The Plastic Waste Management Rules, 2016 replaced the 2011 law. It introduced a slew of provisions for everyone in the plastics supply chain. Under EPR provisions, companies were directed to work out their own arrangements for collecting plastic waste and achieve 100% collection within two and a half years of enactment of the rules. Four years later, we are in 2020, and no company has fulfilled its EPR obligations. The new draft guidelines intend to amend this very situation.

It’s crucial to understand why companies have failed to meet their EPR obligations time and again. The main reason seems to be a combination of ambiguous laws, high regulatory burden, and inadequate time for implementation. For instance, under the 2016 rules, companies were asked to develop their modalities without any proper guidance. Some companies hired third party organisations called Producers Responsibility Organisations (PROs) to collect and dispose of wastes on their behalf. But, this was a colossal failure due to lack of formal coordination between PROs and municipalities.

Likewise, the regulatory burden was very high. Companies selling their products in multiple states had to register themselves in each state and meet state-wise EPR obligations. This became a logistic and accounting nightmare as companies now had to account for every kilogramme of plastic packaging sold through dealers/ sub-dealers in different states and collect back the same amount. Alongside this, the timeframe of two and a half years was just too short a window for companies to enact an EPR-compliant system.

It seems that MoEF&CC hasn’t learned from past failures – the 2020 draft guideline is prescriptive, top-down, and onerous. It proposes to register every producer/ brand owner/ importer, even those using a small amount of plastic for packaging their products. Similarly, it hopes to trace and account for every kilogramme of waste, through a system of multiple certifications and third party audits, using blockchain technology.

To compensate for the vagueness in 2011 and 2016 rules, the draft guidelines have allowed all possible EPR models without deciding which one is best suited for Indian conditions. Additionally, it has proposed a maze of licensing procedures, authorities, and committees at the Centre and in states to implement the law. In a nutshell, the draft EPR guidelines, if enacted, will likely again fail in implementation because it has ignored ground realities and put a high regulatory burden on companies.

If 20 years of plastic waste legislation has taught us anything – the first law was enacted in 1999 to ban (the still widely available) thin polythene bags – it’s that regulations and penalties are not sufficient to manage plastic waste; we need to transform the market and municipal services to solve this problem. Without strengthening and improving city waste management, we cannot hope to manage plastics. Moreover, the best way to reduce plastic waste is to find an alternative to plastics. An EPR policy that doesn’t recognise the need to decrease the use of plastics or create a straightforward, accessible model to support municipalities is bound to fail.

As part of the stimulus package to revive the economy, the Union government has announced a slew of measures to boost production and reduce imports of coal. It has liberalised the sector, curtailed the monopoly of Coal India Limited (CIL), and has announced an investment of Rs 50,000 crore for coal transportation infrastructure. All this has been done to double coal production in the next four years – from 730 million tonnes in 2019-20 to 1.5 billion tonnes in 2023-24. The question is: Can India afford such a massive increase in coal consumption?

Till three years back, coal was the cheapest source of electricity. Then in May 2017, the solar power tariff nosedived to Rs 2.62/kWh – 20% lower than the coal based power tariff of NTPC – and changed the energy market forever. Since then the coal power prices have kept increasing because of the increase in coal mining and transportation costs, while the costs of renewable and energy storage systems have continued reducing on the back of global and local innovations.

Just three weeks back, the Solar Energy Corporation of India awarded a project to ReNew Power to supply 400 MW of renewable energy, round the clock, at a tariff of Rs 2.90/kWh. Very few, if any, new coal power plants can compete with this tariff. In fact, the business case to install a new coal power plant is fast vanishing with such steep reduction in the prices of renewables with storage.

The business case entirely erodes if one includes health and environmental costs. Coal is the single largest source of air pollution and CO₂ emissions in India. About half of all the CO₂ emissions come from burning coal, and coal power plants account for 60% of particulate and 50% of sulphur dioxide emissions of the entire industrial sector. Deaths and diseases due to air pollution cost India a GDP loss of more than 5% and coal-related pollution constitutes a significant proportion of this. If we add carbon price and pollution cost to coal, then we should be shutting down even the existing power plants.

The private sector understands these risks and has practically stopped investing in coal power. According to a report published jointly by Global Energy Monitor, Sierra Club and others, a staggering 47,400 MW worth of coal power projects, mainly of the private sector, was scrapped in India in 2019. The private sector, instead, is now investing in renewable energy. In 2019, more than two-thirds of all the new power plants constructed in India were based on renewables, with the bulk of investments coming from the private sector and FDIs. The question, therefore, is why in the face of an overwhelming case against coal, the government is still promoting it?

The reason seems to be twofold: One, coal is viewed as the foundation of energy security and self-reliance (Atmanirbhar Bharat); and two, it is considered as a shovel-ready venture to revive the economy in parts of central and eastern India (about 25 districts) that are primarily dependent on coal for growth and employment. While these reasons can be justified as short-term expediency, they would become a liability very soon.

We need to understand that the investments made today will lock our economy to expensive coal for the next 20-30 years. This will limit our scope of innovation and reduce the pace of transition to clean and cheap renewable energy. We will, therefore, be paying a high cost of energy even when much more affordable options would be available. Can India, which already has one of the highest costs of energy in the world, afford this?

As far as coal mining areas are concerned, they have been suffering from ‘resource curse’ for decades. Most coal districts are polluted and poor with some of the worst human development indicators.

More coal mining will perpetuate the status quo. The need, therefore, is of economic diversification and a ‘just transition’ plan for these districts to reduce their dependence on coal.

If Covid-19 pandemic has taught us anything, it is that our current economic system is akin to ‘sawing-off the branch on which we are sitting’. By investing in coal, we will exacerbate climate change, increase air pollution and make energy more expensive in the future. We need an Atmanirbhar Bharat, but atmanirbharta (self-reliance) must also be affordable and sustainable.