India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned mines, though most lenders remain far from ditching fossil fuels for good, analysts and officials said.
Of the 87 mines auctioned to private companies in the past three years in a push called “Unleashing Coal” - part of India’s energy self-sufficiency plans - only four are operating, with the rest awaiting financing, a federal coal ministry official said, asking not to be named.
Coal officials and banking executives in the world’s second-largest coal producer discussed the issue at a June meeting called by the government in a bid to ease the funding deadlock.
Bankers’ wariness is partly seen stemming from India’s parallel push to boost renewable energy - which raises questions about coal’s long-term viability - and from global investors’ demands for lenders to limit their fossil fuel exposure.
Past legal troubles on mine block allocations also explain funders’ caution, analysts said.
“Going forward, everyone knows coal is a financially risky bet,” Saurabh Trivedi, research analyst with the Institute for Energy Economics and Financial Analysis (IEEFA), told Context.
Global investors who fund private banks increasingly consider coal “a no-go asset class” as they align with ESG (Environmental, Social and Governance) values, Trivedi added.
Climate campaigners and investors are asking banks globally to rein in funding to coal, oil and gas - the leading sources of the man-made greenhouse gas emissions heating up the planet, but reports suggest money continues to flow.
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