India’s king coal is well on its way to being dethroned.
First, the World Bank Group’s International Finance Corporation (IFC) refused to finance an expansion of the dirty, destructive Tata Mundra coal-fired power plant back in May. Now it seems Indian courts have agreed that the wide-reaching effects of this coal project are too controversial to move forward with the proposed expansion.
Last week, the Indian Supreme Court delivered a one-two punch to the Indian coal industry in a series of landmark rulings that further call into question the viability of the nation’s faltering coal industry. In particular, the Tata Group received a major setback when the Supreme Court stayed a planned rate hike for its economically struggling 4,000-megawatt Tata Mundra Ultra-Mega Power Plant.
This week didn’t start off any better for Tata or its Mundra coal plant.
The recently released minutes from the July 31-Aug. 1 meeting of the Ministry of Environment and Forests’ (MoEF) Expert Appraisal Committee (EAC) reveal that the EAC refused to greenlight an expansion of Tata Mundra, citing the company’s failure to meet the conditions set in the existing Environmental Clearance (EC) for the project. This includes providing for mangrove preservation and the establishment of a greenbelt. Instead, the EAC tabled the decision, pending the development of a detailed action plan to bring the coal plant into compliance with the EC, the creation of an action plan with budgetary information for public hearings, and a recommended site visit by an EAC subcommittee.
It’s clear that Tata Mundra has become the poster child for poorly thought out coal projects. Tata initially low-balled its bid for construction costs in order to win the contract for the project, using estimates for imported coal that allowed no room for increase. That rate increase is exactly what happened when Indonesia decided to link the price of its exported coal to the price on the international market. This led to the Tata CEO calling the Mundra project “financially unviable” and the company asking the Indian government for a bailout in the form of higher rates, which would have allowed Tata to pass on the cost of its mistakes to consumers.