Updated: November 5, 2019 10:31:44 am
In the Hollywood classic Groundhog Day, the character played by Bill Murray finds himself waking up every morning to the exact same day as yesterday. Delhi and North India has its Groundhog Day moment every October, when stubble burning from paddy starts and blankets the already toxic air with a fresh inflow of aerial sewage. Like Murray, the residents of Delhi wring their hands while coughing their lungs out in total frustration. However, unlike the movie character, we do control our destiny and can break out of this vicious circle. The solutions are within our grasp provided there is political will and a willingness to use our purse to fund our way out of this problem.
Let us first understand the problem. Every year, when farmers harvest their paddy crop in north India, they are left with an annoying stubble that is hard, expensive to pull out of the ground and has no commercial use after extraction. The problem has progressively gotten worse over the years as the stubble has gotten even harder with increased use of fertilisers and pesticides, resulting in cattle instinctively avoiding rice straw and increasing farmer costs by dulling implements when cutting this straw. In order for Delhi to breathe better, this farmer needs to personally incur the cost of pulling this stubble, collecting it, and then transporting it to a place where it can be disposed properly. The collected stubble is tricky to handle because it is high volume but low weight, occupies land to store and requires high transportation cost to move around. In short, we expect the farmer to pay and be a good citizen so that we breathe better. Are we really expecting that the farmer “will do the right thing” when his economics incentivises him to clear his field cost-effectively by simply setting it on fire and fertilising his fields in the process as well?
Policy-makers and residents need to abandon the hope that enforcement of stubble-burning bans is a solution. On a trip to Punjab last week, I understood how disaggregated this problem is when I saw that the fields being burnt were both very small and quite large making enforcement by arresting and fining violators en masse completely out of the question. In general, enforcement of laws is not our strength in India and such enforcement against the powerful farming lobby is simply not going to happen.
The only solution to this annual stubble burning nightmare lies in changing the economics of the farmer by making collection and disposal of stubble more rewarding than burning. The stubble is actually valuable biomass fuel that can generate renewable electricity. The supply of such stubble by farmers to power plants can be a source of additional income instead of becoming a cost. North India can certainly use and pay for more renewable energy to feed its economic growth. The farmer will happily collect the stubble if there was a profit to be had. What would unlock such a win-win solution?
The solution lies in either individual state governments like Delhi or preferably the Central government, through one of their power procurement agencies like Power Trading Corporation or NTPC offering an attractive power price to private power producers for electricity generated from this stubble. The power price offered needs to both justify making an investment in a new power plant and also enabling the power producer to pay a price to the farmer for the stubble that justifies its collection and transportation. Since speed is of the essence, the government should offer an early completion bonus for projects that come online within 36 months with the bonus reducing every year, thereby rewarding companies that deliver a quicker solution to our lungs.
The reason I know this will work is because I have seen it work in Thailand. When I started investing in biomass generation in Thailand in 2004, rice husk (a completely different product than stubble) was viewed as a nuisance product by rice mills and there were limited uses of this husk. The government of Thailand introduced the “Very Small Power Plant” scheme for biomass projects below 10 MW that offered very attractive tariffs. Within the space of five years, this waste rice husk had gone from fetching the rice mills a price that barely recovered transportation cost to becoming a significant source of revenue and an essential source of profits for rice mill operations.
If Prime Minister Narendra Modi is serious about doubling farmer incomes and improving public health, finding a way to turn this agricultural waste into electricity in an environment-friendly manner is surely a starting point.
As an investor in renewable energy and climate finance in India for nearly two decades, I have seen how quickly capital has been mobilised in India and projects implemented when economics justifies the investment. India has seen more than $42 billion invested in renewable energy since 2014, mainly in new solar and wind power plants, simply because the power price was considered sufficiently lucrative to justify the risks. A fraction of this capital can permanently solve the stubble burning crisis and the same players in renewable energy that are now larger and much better financed can be the executors of this strategy.
Like all environmental problems, no one person or state government can solve this problem on their own. The Centre has to take the lead and take along the state governments of not only the states that are the source of stubble burning but the states whose residents are breathing these toxic fumes. We should stop expecting the farmer to single-handedly pay for our clean air and accept that the right economic incentives are the only sustainable solution to this intractable problem. We need to finally put a price on our health and our lungs and open up our wallets to buy our way out of this annual crisis. Perhaps then, like Bill Murray in Groundhog Day, we will unexpectedly wake up one year and find that it really is a new year.
This article first appeared in the print edition on November 5, 2019 under the title ‘Let’s pay the price of clean air’. The writer is a senior private equity leader in renewable energy and climate finance in Asia and India. He is currently a Senior Advisor to Sarona Asset Management, a Canadian private equity fund manager in climate finance
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