India’s large-scale power generation infrastructure has predominantly relied on domestic solid fossil fuel resources for the past 50 years, providing access to electricity to millions of people, even in remote areas of the country. However, as India moves on the path of low-carbon development through its ambitious clean energy targets, net-zero emission goals by 2070, such a transition would require a significant shift in the country’s energy mix, which includes moving away from fossil fuels to greener energy sources.

About 85% of India’s solid fossil fuel production is concentrated in a few mineral-rich states— the five eastern states of Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, and West Bengal.  These states rely heavily on solid fossil fuel mining and their downstream industries (mainly electricity generation) for output, employment, state revenues, and social welfare funding. The low-carbon transition is likely to be accelerated by the falling costs of renewable energy generation compared with that of fossil fuel-based energy generation. Fossil fuel-reliant states could face competition from renewable energy-rich states, and the viability of many economic activities revolving around solid fossil fuel mining and consumption could be fundamentally altered. Amongst the mineral-rich states mentioned above, Jharkhand is most likely to face adverse short-term impacts of a low-carbon transition; it is also the first Indian state to set up a task force to enable a Just energy transition so that the economic and social impact of the energy transition is minimized.

The cumulative economic implication of the low-carbon transition for stakeholders, ranging from Public Sector Undertakings (PSUs) and their workforce, the state government, and the community at large in Jharkhand is significant, amounting to INR 725.9 billion per year (USD 8.7 billion). While this is a gross measure of the economic impact on the state, the fiscal implication for Jharkhand includes the following: (a) impact on state revenues could be in the order of 5% of its current revenue levels (b) loss of livelihoods could contribute to erosion of 7% of the state’s output- GSDP (Gross State Domestic Product).

To offset the adverse effects of the transition, several policy and financing interventions would be needed, including investment in alternative industries and livelihoods; large-scale reskilling of workforce, job creation, and targeted social spending.

This report provides the following broad recommendations on how the adverse effects of an energy transition in the state of Jharkhand could be minimized which include: 

• State-owned mining and power generation companies leveraging their large balance sheets and in-house expertise to diversify into other related businesses, that are likely to gain from the transition, such as energy storage, green hydrogen, clean mobility, and solar energy.
• The state government of Jharkhand needs to develop a transition plan that bridges the gap between projected revenue and expenditure in the medium-to long-term by attracting new low-carbon businesses, and creating new opportunities that foster sustainable economic pathways.
• State-owned large employers such as NTPC, DVC, CIL, and its subsidiaries, etc., along with the state government, could develop initiatives /programs for skill development and reskilling of the entire workforce, including for contractual or indirect employees.

An overarching Just Transition (JT) plan could be the first step for the state government to ensure a more diverse, resilient, and sustainable economy. This plan should explore measures (such as obtaining central financial assistance) to compensate the state exchequer for loss of revenue, as the state may not be able to cover such losses in the short term. In addition, the JT plan would need to provide for social safety nets; provide financial support to affected employees; and at the same time, create new investment opportunities in sectors that are likely to benefit from, or remain unaffected by, the transition. Other important considerations are investment in skill development of local people, increased public spending on districts likely to be affected by the transition, and preparation for internal migration of workers to new economic centers.

This report and CPI’s subsequent Just Transition work programs aims to support the state government in designing suitable policies and programs by developing differentiated approaches; enabling discussions with relevant stakeholders; facilitating capacity-building and skilling solutions, while driving economic growth and development. Public policy interventions and financial support could be based on the ILO’s principles of justice- recognition, distributive, restorative and procedural.

While the report provides a first-cut assessment of the adverse economic implications of energy transition in Jharkhand, a detailed analysis of transition trajectories would follow in the next phase of CPI’s Just Transition work, along with an estimate of financing requirements and institutional mechanisms for a Just Transition Finance Facility that would endeavor to facilitate a just and equitable energy transition for Jharkhand.

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