Two of India’s biggest Central Public Sector Undertakings and Indian Railways—can help the country reach its climate goals while seizing a share of the clean energy market and mitigating an estimated 22%–28% cash flow gap by 2050 as India gears itself towards net-zero, according to a new report by the International Institute for Sustainable Development (IISD).
The study, India’s State-Owned Energy Enterprises, 2020-2050: Identifying Evidence-Based Diversification Strategies, uses public sector undertakings (PSUs) in the coal sector to show how energy businesses can identify their future uncertainties while also identifying opportunities in the changing energy system.
“State-owned companies can be part of India’s clean energy future while continuing to bring revenues to the government, creating jobs, and supporting local mmunities,” says co-author of the report Balasubramanian Viswanathan, Policy Advisor at IISD. He further added- “Our evidence-based approach shows pathways for how this can be achieved.”
The study finds that between 2020 and 2050, under the net-zero-aligned pathway, CIL and Indian Railways could face a INR 415 billion (28%) and a INR 2,112 billion (22%) reduction in cash flow, respectively, while NTPC’s cash flow could drop by INR 404 billion (22%) compared with a business-as-usual scenario.
But taking a few concrete measures in the next few years to diversify their businesses can allow these firms—and other similar PSUs in India—to alleviate future uncertainty and avoid revenue gaps, argue the authors of the report.
Early diversification For instance, the study finds that it is critical for PSUs to create net-zero roadmaps with interim targets for the firm—which can become a guide for future decisions—and develop in-house estimates on the financial impact of the changing energy landscape.
They can also use their ability to raise capital at favourable rates to identify diversification strategies and become early adopters of clean energy technologies. To do so, firms should set clean energy targets in proportion to the potential scale and speed of the financial implications, and periodically increase the ambition of these targets, the experts recommend.
Furthermore, building strategic partnerships among PSUs to exchange expertise and investing in research and development can help PSUs build internal capacity in new and emerging clean energy technologies. Finally, making their ambitions toward achieving a clean energy transition, the public can send positive market signals that can further strengthen previously mentioned measures.
“As major employers in the conventional energy sector, PSUs are key actors in reaching India’s climate and energy targets, and they should involve other relevant stakeholders in the decision-making process,” says Viswanathan.
The authors of the report encourage all state-owned energy enterprises to adopt this approach to produce their own detailed internal assessments and an evidence-based strategy for transition into a clean energy business.
The writer of this article is Dr. Seema Javed, a known Environmentalist, Journalist and Communications Expert