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India’s 7th-largest commercial bank, Federal Bank Limited, has turned its back on new coal, according to a new report released October 7, 2021.

The bank is a key lender to firms such as Jindal Steel Works (JSW) Energy Ltd and Adani Power Rajasthan Ltd. The report was released by Centre for Financial Accountability India (CFA) and Recourse, an independent watchdog.

The bank’s green twist is in response to the International Finance Corporation (IFC), the World Bank’s private sector arm, that invested $126 million (Rs 942 crore) in it.

IFC had demanded in July 2021 that the financial institution should put a stop to coal financing.

The Federal Bank provided $14 million in loans to JSW Energy in the last three years, according to the Global Coal Exit List, a database of coal companies and their financiers. JSW Energy runs coal plants, imports coal from Indonesia and South Africa and has shares in coal and lignite mines in India and South Africa.

India will need to add 150,000 megawatts of coal-based thermal capacity in addition to the operating 209,412 MW and 32,285 MW under construction. This capacity addition means an infusion of Rs 7.5 lakh crore into the sector, assuming new capacity addition cost at Rs 5 crore per megawatt.

Coal-fired thermal power capacity addition has slowed down in the last few years. Between 2012 and 2016, about 20,000 MW was added each year, which has now dropped to less than 4,000 MW / year.

India’s largest power company National Thermal Power Corporation Ltd (NTPC) has not conceptualised any new coal-based thermal power station projects in the last five years, according to sector experts.

However, another 17,570 MW was conceptualised earlier and can be readily constructed on need. Seven different companies are prepared to construct these projects as demand sets in.

New coal power stations conceptualised

Company Capacity in MW Number of new projects
MAHAGENCO         4,870 4
DVC         3,580 3
NTPC         3,000 2
ADANI         3,200 2
HPGCL         1,600 2
UPRVUNL           660 1
WBPDCL           660 1
17,570 15

Source: Centre for Science and Environment, 2021 

The new coal additions plans may derail if similar trends continue. IFC’s recent project documents ask Federal Bank to “terminate financing of development of any new coal-related assets, including coal-fired power plants once IFC becomes a shareholder in the bank.”

Federal Bank’s own Environmental and Social Management System confirmed the step, adding to its exclusion list new thermal coal mines, new coal-fired power plants or significant expansion of existing mines and plants.

CFA and Recourse urged the bank to address the social and environmental harms its support for coal has already caused to communities, while welcoming Federal Bank’s commitment to shun new coal investments.

The report catalogues Federal Bank’s extensive exposure to coal over the past 15 years. IFC has provided over $200 million in loans and equity to Federal Bank since 2006, when the bank backed coal mine and power plant expansion.

Resonance of the policy and adherence to the commitments of IFC is felt on the ground.

JSW, one of the bank’s borrowers, is moving away from coal and will completely switch to renewable sources of energy at the earliest, said Prabodha Acharya, chief sustainability officer, JSW Steel Ltd.  

The article published in DownToEarth can be accessed here.

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