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CSE says Budget 2021 should support clean fuel for pollution control

by Soumadeep Bagchi

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 use,and the upcoming Union Budget 2021 is an opportunity to incentivise these fuels to make them more competitive compared to coal. This can help the countryfight 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 haveled to a distinct improvement in air qualityin 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 access to affordable clean fuelsis not scaled up across the region,”says AnumitaRoychowdhury, executive director-research and advocacy, CSE. Roychowdhury was speaking at a webinar organised here today by CSE.

She adds: “In fact, since the early 2000s, Delhi’s primary air pollution mitigation focus has been tosubstitute diesel with compressed natural gas (CNG) in the transport sector, and replace coal, furnace oil and petcoke 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 goes on to say 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 cheapcoal that undercuts the market for natural gas in India. This has been highlighted in a new CSE study Analysing Industrial Fuel Policy in Delhi and NCR States, which was released in the webinar.

The study is based on 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 bansuse 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 burdencurrently. It is taxed 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 per cent 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 favour 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, is unable to 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 are heavily dependent on coal. These are one of the key contributors to air pollution in the region. The only solution for this segment is access to affordable clean fuels.
  • Slow uptake of cleaner natural gas and electricity despite their availability: It is ironical that even after making the necessary investments in infrastructure to provide piped natural gas to industry clusters in key industrial areas and districts,the gas uptake is small due to distorted pricing. This makes investment in clean fuel supply wasteful.
  • Use of coal is predominant in the major industrial clusters ofAlwar, Bhiwadi, Sonipat, Panipat, Faridabad, Gurugramand 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 bannedthe use of coal and is expandingthe use of natural gas in its legal industrial areas. But there are difficultiesin enforcing this notification as use of banned fuels by illegal industries is rampant.
  • Use of natural gas can reduce illegal use of coal: Use of coal and other fuels in illegal industries doesnot get accounted for during taxation. But this can bechecked 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 setup infrastructure to check entry of banned fuels. In Rajasthan, Haryana and Uttar Pradesh, compulsory subsidisation of gas price is needed.

“Industry accepts that gas for combustion is more efficient, cleaner, requires less maintenance,and most importantly, 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, programme 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.”

  • Electricityadoption as a 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 sectoralreforms 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 affectthe 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 incentivise 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 per cent slab, reducing the cost of electricity supply to industries, and initiating necessary reforms.”

(By Pratyusha Mukherjee)

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