India still relies on the labor-intensive coal sector and coal-based thermal power plants to meet most of its electricity demand for sustaining its economic growth. In 2023-24, 997.826 million tonnes of raw coal was mined in India. Out of 973 MT dispatched raw coal, 859.336 MT went to the power sector alone.
Understanding likely scenarios of peak coal demand and how the coal phasedown will be paced is important for the future of labour engaged directly and indirectly in the coal economy.
The 2023-24 electricity generation target was fixed at 1750 billion units, of which 1324 BU is expected to come from coal-based thermal power plants. Projection for electricity demand is likely to be 1907.8 BU for 2026-27 and 2473.7 BU for 2031-32, with steady growth in the coming decades.
While the power sector remains the major consumer and driver of coal demand, renewable energy sources will increasingly play a bigger role in electricity generation, impacting future coal demand and associated labour demand for the economy.
Millions of workers are engaged directly in coal mining, transportation and associated industries. Over 69 percent of all mines are open cast mines, where at least 25 percent of the total workforce is directly employed. With the projected coal phasedown, a large number of workers may lose their livelihoods over the coming decades.
Challenges to Change in the Energy Mix
Despite India’s energy transition gaining momentum with installed capacity of renewables across states at 203 GW in October 2024, the power sector remains reliant on thermal power, particularly coal-based generation. The intermittent availability of solar and wind and lack of large-scale battery storage solutions prevent them from fully replacing traditional power sources such as thermal power.
Coal-based generation dominates the energy mix, ensuring grid stability and reliability for its consistent and controllable power output. Other thermal sources such as gas and diesel-based power plants contribute only a marginal share to overall electricity generation. This dependence on coal-fired power plants underscores their critical role in meeting India’s growing energy demand.
Given the current infrastructure, policy landscape and energy demand projections, coal-based electricity generation is expected to continue as the dominant power source for at least the next decade, even as states push for greater renewable energy integration.
Rising climate commitments, stringent policies and declining cost of renewables suggest investors are hesitant to fund new coal exploration projects despite the recent global shift towards coal- and fossil-fuel based production. With India’s push for a clean energy transition, coal may become a less attractive investment, making way for renewable energy sources to take centre stage in the distant future.
Ensuring a stable, uninterrupted power supply will require significant advancements in energy storage, grid modernisation and flexible generation technologies to support this transition.
More clarity is required on the future trajectory of renewable energy and alternate sources like nuclear, along with the gestation period for commissioning before a market signal for a complete transition away from coal. This transition must also be balanced by concomitant social safety nets such as compensation packages, reskilling and rehabilitation programmes, addressing workers’ rights through the National Commission for Enterprises in the Unorganised Sector, labour regulations, job security, minimum wage guarantee—to maintain the equity goals of developing countries.
Impact on Employment Generation
The burden of phasing down coal as part of India’s decarbonization pathway will fall primarily on semi-skilled and unskilled workers. The renewable energy sector does not offer the same level of employment as coal. Coal mining requires a vast workforce for extraction, processing and logistics while renewables, particularly solar and wind, rely on technology, automation and intermittent maintenance, with lower employment opportunities post-installation.
Given the rise in coal production alongside decline in employment, macroeconomic research conducted at Ashoka Centre for a People-Centric Energy Transition (ACPET) shows that output per worker in the coal sector has increased exponentially over the past 44 years. This can be attributed to more efficient and advanced mining technologies, AI-driven resource optimisation and mechanised mining which enhance productivity while reducing labour intensity. As mining operations become more digitised, this trend of higher productivity with a smaller workforce will continue, increasing the likelihood of future job losses in the coal sector (see below).
A majority of rise in productivity (as seen above) is matched by drop in labour intensity of production (see below) proxied by daily employment of the sector.
ACPET Estimates
ACPET’s research highlights how various macroeconomic sectors and households are impacted by this drop in labour intensity of coal production. This leads to an envisaged net welfare loss of the economy — the net value of job loss created by one unit of coal production phasedown against net welfare gain, the net value of job creation enabled from one unit of renewable energy production— arising from a future coal phasedown in the absence of social safety nets, reskilling and rehabilitation measures.
With more physical capital being used for each unit of coal production, output per worker is increasing, leading to a decline in overall employment within the sector. Within mining conglomerates, miners who constitute the highest proportion of employment in the coal sector are the most vulnerable to this transition because they have the lowest skill profile, far below managers and professional technicians, power plant employees, administrative and repair staff.
If left unaddressed, the phasedown may lead to labor displacement from the organised sector, job displacement, regional economic distress and increased inequalities, particularly in coal-dependent communities.
An Untapped Opportunity
The renewable energy sector holds significant potential for job creation. However, transitioning the workforce from the coal sector will require massive reskilling and structural economic changes.
Coal sector jobs are often region-specific and labor intensive, making direct absorption into the renewable energy sector challenging. While roles in solar and wind energy are growing, they may not align with the technical skills and experience of coal workers. Alternative job opportunities will not only depend on reskilling the workforce but also the development of new economic activities to repurpose the existing skill pool and prevent welfare losses to the economy.
Timely and appropriate policy intervention can address this welfare loss, which will need some time to realise the potential of green job creation towards employment and minimise the socio-economic impact of energy transition. The Skill India Mission and skilling programmes of the central and state governments can be leveraged to make the youth in the coal economy ready for the renewable energy sector and use the gradual phasedown of coal as an opportunity for a people-centric just energy transition.
At the current state, the coal phasedown and its subsequent substitution by the renewable energy sector will have to be delayed a little further beyond 2040 to reduce the potential macroeconomic welfare losses that might emerge from an immediate phasedown.
Originally published under Creative Commons by 360info™.
Discussion about this post