India’s shift from coal to renewable energy is accelerating amid climate goals. This transition, while environmentally urgent, poses economic and social challenges. Coal currently generates over 70 per cent of India’s electricity. Several states like Jharkhand, Chhattisgarh, and Odisha depend heavily on coal revenues and employment. Managing this shift requires balancing environmental priorities with economic stability and social welfare.
Economic Reliance on Coal
Coal is crucial for India’s economy and state finances. Jharkhand receives about 30 per cent of its tax revenue from coal royalties. Chhattisgarh and Odisha also gain substantial funds from coal production. These revenues support local development, health, education, and infrastructure. The financial dependence on coal makes the transition regionally sensitive and economically complex.
Financial Scale of Transition
India needs an estimated $900 billion to $1 trillion over 30 years to move away from fossil fuels. Nearly half of this amount is for non-energy costs such as worker reskilling, land repurposing, and livelihood support. These investments are essential to ensure the transition is socially inclusive and economically viable.
Employment and Social Impact
Coal supports over 13 million jobs directly and indirectly across mining, transport, power, steel, and related sectors. Many workers are informal or contracted, making them vulnerable to job losses. In Jharkhand alone, formal coal employment is nearly 300,000 with over a million indirectly dependent. Sudden coal closures risk economic stagnation, inequality, and social unrest in these regions.
Renewable Energy Job Prospects
The renewable sector employed over 1 million people in 2023 and could create 3.4 million jobs by 2030. However, these jobs require new skills like digital literacy and formal training. Most renewable investments are in western and southern India, while coal regions lie in the east and centre. Coal jobs often provide better wages and security than many clean energy roles, which tend to be contractual.
Fiscal and Financial Challenges
Coal royalties contribute billions to state budgets, supporting essential services. The District Mineral Foundation (DMF) funds are insufficient for the transition scale, holding only about $3.7 billion versus the $420 billion needed for social and economic adjustments. Indian banks remain heavily invested in coal, with $29 billion lent since 2016. Redirecting finance to clean energy is critical.
Skilling and Economic Diversification
Large-scale reskilling is needed to help coal workers transition. Programmes like Suryamitra (solar), Vayumitra (wind), and Jal Urja Mitra (small hydro) exist but require expansion. Coal states must diversify into green manufacturing, agro-industries, and services to create stable jobs. Social protection must extend to informal workers with health, pension, and income support.
Policy and Community Involvement
Fiscal support from the central government is vital to offset shrinking coal revenues. Compensatory transfers or green revenue-sharing can stabilise state finances. Transition strategies must involve local communities, trade unions, and workers. Inclusive planning is essential to prevent social fractures and ensure equitable growth alongside environmental goals.
Questions for UPSC:
- Taking example of India’s coal transition, analyse the economic and social challenges of shifting from fossil fuels to renewable energy.
- Discuss in the light of India’s energy sector reforms, how can financial systems be realigned to support sustainable development goals?
- Examine the role of skill development programmes in facilitating labour transitions during industrial transformations. How can these be improved for inclusivity?
- Critically discuss the impact of regional economic dependencies on natural resources in shaping national policy decisions. With suitable examples, suggest ways to balance growth and equity.
