By Mrinalini Shinde:
The Adani Group of India is in the process of building Australia’s largest coal mine at Carmichael in the Galilee basin. The venture has drawn flak from across the world for its potential impact on the ecology and rights of indigenous people in the region. Not only is the project being investigated for grossly overstating the jobs and revenue it would create, but is also being protested against for the disastrous impact it would have on natural treasures like the Great Barrier Reef of Australia. Moreover, the land rights of indigenous citizens would face severe threat if the proposed plan continues.
Although this seems like a concern for the Australian people and its government, it’s the Indian government’s problem too.
This is because the Indian government, through its public sector bank the State Bank of India has previously been involved in a memorandum of understanding, providing for a credit facility of up to a billion U.S. Dollars for the project. Though, it is unlikely that the SBI will uphold the financing plan. While last month, there were reports of the SBI shelving the financing plan, SBI Chairperson Arundhati Bhattacharya strongly denied these rumours. However, in May 2015, Livemint reported that the financing MoU between the Adani Group and the SBI had died a natural death with neither party willing to follow up on the same.
In light of the controversy surrounding the project, eleven international lenders have refused to finance the ‘carbon bomb‘ as the Carmichael mine is being called. These lenders include Barclays, Goldman Sachs, Citigroup, Deutsche Bank AG, Morgan Stanley and J.P. Morgan. Meanwhile, Standard Chartered is being put under tremendous pressure to severe ties with the Carmichael project. Local and international NGOs are trying to convince banks to not finance the project, and it is clear that the financiers are succumbing to the public pressure; a victory for the local community.
However, apart from public pressure, it makes little financial sense to extend credit to a coal project at a time when the coal industry has been facing a global downturn. Analysts expect the project to be profitable only if coal prices trade about $100/tonne as opposed to the current $60.
The Carmichael mine is still going ahead on the assumption that its market in India would remain intact and it intends on supplying to India, China, Korea and other Asian nations. However, China’s coal imports decreased by 10.19% last year and the Indian government has expressed strong commitment towards investing in renewable energy sources. Just last week, the Union Power Minister, Piyush Goyal, said that the government is going to push hard to make India the largest producer of renewable energy in the world. There has also been a general trend of high profile investors replacing their interests in fossil fuel companies to those of renewable energy companies. Therefore investing in coal does not seem like a financially viable and advisable decision at all. It is in India’s interest that its public sector institutions do not finance the detrimental coal industry.
As India is shifting its focus towards renewable energy, and divesting from fossil fuels, it is also important that our public sector banks do not contribute to the destruction of the environment in other nations. Not only is it indicative of crony capitalism, but also will be a foreign policy disaster. Moreover, such catastrophic mining is being perpetrated owing to India’s potential market for coal. It is time that we, as consumers changed the script, and as a country reduce our consumption of coal as much as possible. Not only will it be in accordance with India’s larger climate goals in light of the climate talks to be held in Paris in December 2015, it will also ensure that communities and species are not destroyed on foreign shores to feed its hunger for coal.
This article has also been published here.