As India Looks To Cut Coal, Is Jharkhand’s Transition Tax A Good Idea?

With the Centre amping up its drive to go from coal to renewables to meet its green goals, the Hemant Soren government in Jharkhand, which has India’s largest coal reserves, is gearing up to impose a transition tax on coal. Energy sector experts, however, are divided on whether such a tax should be levied to create a fund for the rehabilitation of mine workers.

At the UN Climate Change Conference (COP26) held in Glasgow last year, Prime Minister Narendra Modi had promised the world that India would cut its carbon emission to net zero by 2070. For that to materialise, the country will have to phase out the production of energy from coal to other renewable sources such as solar and wind. 

Today, 70 per cent of energy in the country is generated from thermal power plants which run on coal. The process of phasing out coal will render millions of coal miners and professionals jobless in states like Odisha, Chhattisgarh, Jharkhand, West Bengal and Madhya Pradesh which produce 90 per cent of coal. Though coal reserves are owned by the Centre, mining companies have to pay a royalty to the state governments which will be impacted as well.

A section of experts feels that a transition tax is a good idea and the fund generated from such an initiative should be utilised to reskill mine workers in other sectors. Such a fund will help plan rehabilitation if the closure of mines will lead to the migration of workers from one area to another, experts say.

“This seems like a good idea for a state like Jharkhand which is so deeply dependent on coal. The state needs to start planning for a transition from now on and this seems like a good first step,” says Sandeep Pai, senior research lead, Energy Security and Climate Change Program, Center for Strategic and International Studies.

Jharkhand needs a detailed plan, ideally district wise, for ensuring livelihood transition and the finance from coal would be useful to execute such a plan, he adds.

An energy expert associated with one of the eight coal-producing companies of the central government praises the initiative planned by the Soren government. “It is a very pro-people idea of the state government. I think the Centre should reciprocate with its consent and both should work out the details of the levy. Coal states must get their due,” the expert says. 

Climate experts are of the view that the onus of such a transition should be on the Centre as well as the state and both should ensure that mine workers get their due in a just and fair manner. However, the question is—will Centre-owned coal companies agree to pay any amount of tax fixed by a state?

“I agree that they may object to it. Not only that, states may find it challenging to access the fund, too,” says Pai, adding that the Centre should be equally responsible for a fair transition.

Then there are some who question if states even have the power to impose such a tax unilaterally. “States already get royalty and cess on coal. No state can take a call on this without consulting with the Centre. The Supreme Court has already decided that whatever mineral is under the ground, it is the Centre’s property,” says a senior official from a thermal power company, requesting anonymity.

“I do not think it is a feasible idea. Instead, the state government should think of ways to extract methane gas which is deep under the ground," he opines.

He fears that the move will ultimately increase the cost of electricity and common people end up paying more for the consumption of electricity.