INDIA: ADDRESSING
E N V I R O N M E N TA L I S S U E S I N T H E
POWER SECTOR
The Issues
In India, coal is abundant and still
considered to be the cheapest fuel to
generate power. However, the wide
use of coal raises concerns over the
environmental impact. In particular,
the burning of coal pollutes the air
and contributes to greenhouse gas
emissions; while the accumulation of
ash at power stations makes land inap-
propriate for other uses and endangers
both ground and surface water. Also,
when more coal is burned, more must
be produced, which in turn degrades
more land, displaces population,
destroys forest cover, depletes more
water resources, and causes more
water pollution.
The Government of India recognized
the need for an independent assess-
ment of the environmental conse-
quences of coal burning in power
plants and asked the World Bank and
Energy ESMAP to look into the issue, in
consultation with all affected groups
and people.
Sector
Management
ESMAP's Work
Assistance
In 1996, with funding from the
Department for International
Programme
Development (DFID) of the United
Kingdom, ESMAP, launched a far
reaching examination of environmen-
India
tal issues in the power sector. The
objective was to develop a decision-
making tool, which would enable
government officials and institutions
in India to evaluate alternative
options for power development. The
activity ended in June 1998, and the
results are now being disseminated to
several states.
The work started with an initial ques-
tionnaire and a series of seminars and
workshops in Delhi, to encourage the
participation and interest of a wide
audience. One workshop, for Indian
and international technicians, dis-
cussed the modeling tools available to
help in the analysis. Another involved
non-governmental organizations
(NGOs) who were invited to voice
their views and to nominate their rep-
resentatives to attend subsequent
workshops for the duration of the
study. These preliminary workshops
were followed by a major Inception
Seminar in July, 1996, attended by
key decisionmakers from the Indian
ministries and from the industry.
The decision-making tool was devel-
oped through two state-level case stud-
ies, supplemented by a set of special
studies. The case studies were done in
the states of Andhra Pradesh (AP) and
Bihar. The special studies provided
generic data and covered: demand-side
management; interfuel substitution;

market-based instruments for pollu-
tion control; welfare effects of abate-
ment policies; renewable energy
options; ash pond management, ash
disposal, and ash utilization; and miti-
gation options for power develop-
ment. A synthesis report pulled
together the findings of the work as a
whole and attempted to draw some
preliminary conclusions at the all-
India level. The case studies and spe-
cial studies were carried out almost
entirely by Indian teams, supported by
a firm of international consultants
(Environmental Resource
Management, of the United
Kingdom) which also prepared the
synthesis report
Although no two states can adequately
represent the complexity of the Indian
power sector, AP and Bihar, with pop-
ulations of 100 million and 75 mil-
lion, respectively, offered a good cross-
section of the environmental issues
and options facing India. Bihar is rel-
atively poor, and the Bihar State
Electricity Board is in a particularly
precarious financial and technical con-
dition. About 40 percent of electricity
demand comes from heavy industry.
The high degree of dependence of its
power sector on coal permits an in-
depth analysis of the environmental
impacts of coal mining and coal use in
power generation. Also, Bihar is com-
paratively remote from alternative
sources of energy, although other
options are available in the long term.
AP, on the other hand, has a wider
range of power options, including
hydropower, wind, and solar. Its good
ports offer better possibilities for
importing fuels. Agriculture accounts
for about 40 percent of the electricity
demand, and the financial perfor-
Energy
mance of the AP State Electricity
Board has been better than that of the Sector
electricity board in Bihar.
Management
Outcome and Follow-up
Assistance
The study resulted in a set of analyti-
cal tools and a decision-making Programme
process that will assist power system
planners in making decisions that are
environmentally more sustainable; the
seven special studies; two case studies;
and the synthesis report. The work is The World Bank
now being disseminated to a wider
audience, notably through a Manual 1818 H Street, NW
for Environmental Decision-making,
in which the objectives, methodology, Washington, DC 20433 USA
outputs, and interpretation of the out-
puts of the tools prepared for AP and Tel.: 1.202.458.2321 Fax.: 1.202.522.3018
Bihar will be described. The dissemi-
nation of the study also includes a Internet: www.worldbank.org/esmap
series of workshops and training activ-
ities in other states. It is anticipated Email: esmap@worldbank.org
that the analytical tools and decision-
making process will be taken up as
part of the implementation of ongoing
Bank projects for power sector reform
in Haryana and Orissa and in the
preparation of a planned project in AP.
Moreover, the experience gained dur-
ing the study and the methodology
developed for it are to be used in a
series of country energy-environment
reviews undertaken by ESMAP.
The management of this ESMAP activ-
ity was shared by Robin Bates, Principal
Economist with the Energy, Mining and
Telecommunications Department, and
Mudassar Imran, Energy Economist,
South Asia Energy Operations Unit of
the World Bank.
E-mail: rbates@worldbank.org and
mimran@worldbank.org