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Chapter 6: The Fuel That Fades

Cross-domain lens: Investing — stranded assets, and the portfolio that cannot be rebalanced

In FY 2024-25, Mahanadi Coalfields Limited achieved record production: 225.2 million tonnes, a 9.3 percent growth over the previous year. Coal despatch reached 210.5 million tonnes. The FY 2025-26 target is 239 million tonnes. The FY 2028-29 target is 285 million tonnes. The FY 2034-35 target is 358 million tonnes — a 59 percent increase from current levels, supporting Coal India’s national target of one billion tonnes.

MCL is opening two new mines: Subhadra (25 million tonne reserves, operational by end-FY26) and Balabhadra (10 million tonne reserves, operational by FY30).

In the same period, solar power tariffs in India fell to Rs 2.50-2.87 per kilowatt-hour — among the lowest in the world. Solar-plus-storage bids have come in at Rs 3.1-3.5 per kilowatt-hour for round-the-clock power. The cost of new coal-fired power is Rs 5-7 per kilowatt-hour. Solar is now 50 percent or less the cost of new coal, and 20-30 percent below the cost of existing thermal power.

MCL’s expansion plan and India’s renewable trajectory cannot both be right. One of them is a bet against the other, and the stakes are the livelihoods of a hundred thousand people in Odisha’s coal districts.

The Stranded Asset

In investing, a stranded asset is an investment that has suffered from unanticipated or premature write-downs, devaluations, or conversion to liabilities. The canonical example is a coal-fired power plant built with a 40-year operational life that becomes uneconomic 15 years in because renewable alternatives have undercut it on cost.

The financial exposure is not theoretical. IEEFA estimates 40-60 billion dollars in thermal power investments across India are already at risk or non-performing. Upward of 100 billion dollars in combined non-performing or stranded assets exist between distribution companies and thermal power plants. Solar tariffs are now below even the fuel costs of running most existing coal-fired plants.

For Odisha specifically: NTPC Talcher’s 1,320 megawatt expansion, OPGC’s planned 1,320 megawatt Units 5 and 6, and NLC’s 2,400 megawatt Talabira project together represent roughly 5,040 megawatts of new coal capacity either under construction or planned. If coal demand peaks by 2035, some of these assets may never earn full returns.

The question is not whether coal declines. Three forces make its relative decline in India inevitable.

Cost trajectory. Solar-plus-storage is already cheaper than new coal, and the cost gap widens every year. As battery costs continue declining — from approximately 1,200 dollars per kilowatt-hour in 2010 to under 140 dollars in 2024 — round-the-clock renewable power becomes competitive with even existing coal plants. The moment it is cheaper to build new solar-plus-storage than to run an already-built coal plant — the “coal crossover point” — existing plants begin retiring not by policy mandate but by market force.

Capital flight. International investors and development finance institutions are increasingly restricting coal finance. The Asian Development Bank has launched an Energy Transition Mechanism to buy out coal plants for early retirement. Domestic banks, having already absorbed decades of thermal power NPAs, are reluctant to finance new coal. The cost of capital for coal is rising while it falls for renewables — a financial feedback loop that accelerates transition independently of policy.

Trade pressure. The EU’s Carbon Border Adjustment Mechanism went into effect on January 1, 2026. Every shipment of Indian steel and aluminium entering the EU now attracts a carbon cost. The UK has announced a similar mechanism. Canada, Australia, Japan, and South Korea are evaluating carbon border measures. If Odisha’s industrial exports face carbon costs in every major market, the economic case for coal-based production collapses regardless of domestic policy.

MCL’s target of 358 million tonnes by FY35 is a bet that none of these forces will move fast enough to strand the investment. It is, in investing terms, a conviction position on a thesis that the market is increasingly pricing against.

The Coal-Power-Aluminium Nexus

Odisha’s coal economy is not a simple extraction story. It is a vertically integrated chain — coal to power to aluminium — where each link depends on the others and disrupting any one link destabilises the whole system.

Vedanta Aluminium, Jharsuguda: The world’s largest aluminium plant. 1.85 million tonnes per annum smelting capacity. 3,615 megawatts of captive thermal power — coal sourced from the Ib Valley Coalfield. The smelter cannot operate without captive power. The power plant cannot operate without captive coal.

NALCO, Angul: 460,000 tonnes per year aluminium smelter. 1,200 megawatts of captive thermal power — coal from captive mines and MCL supply. The captive power plant provides the smelter’s entire power requirement.

Aluminium smelting requires approximately 14,000-15,000 kilowatt-hours of electricity per tonne. At Indian coal-power costs, captive coal power is the cheapest feedstock. The coal-power-aluminium chain in Odisha is not three separate industries — it is a single integrated extraction system.

This vertical integration creates both vulnerability and opportunity.

The vulnerability: if any node fails — coal becomes uneconomic, power becomes too expensive, aluminium demand shifts — the entire chain collapses. This is concentrated counterparty risk. An investor who held coal mining stock, thermal power stock, and aluminium smelting stock would have an undiversified portfolio — three nominally separate assets that are, in fact, a single bet on the same underlying thesis: that coal-powered aluminium remains competitive.

The opportunity: if the transition is planned — replacing captive coal power with renewable energy while maintaining smelting capacity — the aluminium industry could survive the energy transition. Vedanta has moved toward 1,500 megawatts of renewable power purchase agreements and launched a low-carbon aluminium brand — “Restora” at below 4 tonnes CO2 per tonne, and “Restora Ultra” at below 2 tonnes. JSPL at Angul is building a green hydrogen facility targeting 50 percent reduction in coal use for direct reduced iron within 18-24 months.

These are real signals. But the pace of corporate transition is far behind the pace of the threat. Vedanta’s 1,500 megawatts of renewable plans are against 3,615 megawatts of captive coal power. JSPL’s green hydrogen facility is a pilot, not a replacement. The bulk of production remains coal-powered.

The geography of the nexus adds another dimension. Bauxite is mined in southern Odisha — Koraput, Kalahandi — predominantly tribal districts with significant displacement histories documented in Tribal Odisha. It is transported to Angul or Jharsuguda for smelting, using coal mined locally. The finished aluminium is exported nationally and internationally. The value capture is concentrated at the smelting node. The environmental costs — displacement, deforestation, water pollution, air pollution — are distributed across multiple districts and communities. The Value Chain documented this as the 90/10 split: 90 percent of value captured outside Odisha, 10 percent or less retained. The coal-power-aluminium nexus reproduces this pattern within the state itself.

What the Districts Look Like

The four coal-dependent districts — Angul, Jharsuguda, Sambalpur, and Sundargarh — account for approximately 94 percent of Odisha’s thermal power output.

Angul has maximum installed thermal capacity of approximately 6.7 gigawatts across four thermal power plants, an integrated steel plant (JSPL), NALCO’s smelter, a fertiliser plant, and numerous coal-dependent industries. It is India’s third-largest coal-producing district. Coal mining employs 53,802 people — 38 percent formally, 62 percent informally. Approximately 168,000 people — 29 percent of the district’s entire workforce — are directly employed in coal mining, coal-based industries, and coal transport.

Jharsuguda has approximately 5.7 gigawatts of installed thermal capacity across 11 plants — eight captive and three utility-scale. The Vedanta complex alone employs thousands directly and thousands more indirectly.

For these districts, coal is not merely an industry. It is the organising principle of the local economy. The coal town pattern is familiar from resource-dependent regions worldwide: the mine or power plant is the anchor employer. Contractors, mechanics, truck operators, and canteens serve the mine. Local government revenue derives from mining activities and DMF allocations. Real estate values track mine employment. The aspiration of the educated young is a job “at MCL” or “at the plant.”

When coal declines, it is not just about employment. It is about the entire ecosystem of services, commerce, and municipal revenue that exists because coal exists. The dhabas on the mine road. The equipment rental yards. The bus services ferrying workers. The tutoring centres preparing students for mining entrance exams. All of it unravels.

In investing, this is concentration risk — the danger of an undiversified portfolio. A district that depends on a single industry is like a portfolio invested entirely in one stock. The returns may be excellent while the stock performs, but a single adverse event can destroy all value simultaneously. Angul’s portfolio is 100 percent coal. Jharsuguda’s portfolio is 100 percent coal-and-aluminium — which, given the vertical integration, is essentially the same position.

The DMF Paradox

Odisha has the highest District Mineral Foundation collection in India: Rs 23,120 crore cumulative through June 2023, of which Rs 5,237 crore came specifically from coal and lignite. This is conceptually a transition fund — revenue from extraction set aside for the communities affected by extraction.

But only 50 percent of DMF funds have been spent. And documented cases of diversion exist — Sundargarh DMF funds were used to purchase 25 police patrol cars for Rourkela city, a non-mining-affected area.

In investing terms, DMF is Odisha’s sovereign wealth fund — the Norway model applied at the district level. Norway’s Government Pension Fund Global, worth approximately 1.8 trillion dollars, was built by saving oil revenue during the extraction phase to provide a cushion for the post-extraction economy. The discipline was strict: no more than 3 percent of fund value could be spent annually.

Odisha’s DMF operates at a fraction of Norway’s scale and with a fraction of its discipline. If Odisha had captured even 10 percent of total coal value in a sovereign-wealth-style fund over the past two decades, the transition cushion would be materially different. Instead, DMF funds are partially unspent, partially diverted, and not structured as a transition mechanism. They are treated as supplementary development spending rather than insurance against the day when coal revenues cease.

The political economy of DMF adds the complication. Mining revenue is a significant source of political patronage, contracting opportunities, and local power. Any transition plan that threatens this political economy faces resistance not just from workers but from the entire political-commercial class that benefits from coal’s continuation. This is why transition planning cannot be purely technocratic — it must engage with the incentive structures that sustain coal dependency beyond the point of economic rationality.

CBAM: When Climate Becomes a Trade Issue

The EU’s Carbon Border Adjustment Mechanism makes climate change economically real for Odisha’s industrial model. Before CBAM, carbon intensity was an environmental concern. After CBAM, it is a market access issue.

Indian steel averages 2.55 tonnes of CO2 per tonne of crude steel — 38 percent higher than the global average of 1.85, and nearly 50 percent greater than the EU benchmark of 1.8 tonnes. The root cause is dominance of coal-based direct reduced iron, which emits 3.0-3.1 tonnes CO2 per tonne. Iron and steel constitute 90 percent of India’s CBAM-exposed exports to the EU.

For Odisha’s steel producers — JSPL at Angul, Tata Steel at Kalinganagar — the maths is direct. The Global Trade Research Initiative estimates exporters may need to cut prices by 15-22 percent to absorb the CBAM cost. On margins of 21-24 percent, this would eliminate profitability entirely on EU-bound exports.

Aluminium is also covered. Global aluminium production averages 12-16 tonnes CO2 per tonne. Vedanta’s Restora brand at below 4 tonnes offers competitive advantage, but the majority of production remains coal-powered.

Finance Minister Sitharaman has called CBAM “unilateral, arbitrary, and a trade barrier.” The diplomatic framing does not change the competitive reality. Indian steel that cannot compete on carbon intensity will be priced out of the EU market — and eventually other markets as the UK, Canada, and others adopt similar mechanisms.

CBAM is not the only trade pressure. India’s own evolving emissions framework, bilateral climate agreements, and customer ESG requirements are all tightening. The question for Odisha’s steel and aluminium producers is not whether decarbonisation is necessary but how fast it must happen to preserve market access.

In investing, this is regulatory risk — the risk that changes in law or regulation will adversely affect an investment’s returns. The distinctive feature of CBAM is that it converts what was previously a diffuse environmental externality into a precise, per-tonne financial charge at the border. Carbon emissions were always a cost — to the atmosphere, to vulnerable communities, to future generations. CBAM makes them a cost to the producer.

The Renewable Gap

Despite significant potential, Odisha has moved slowly compared to renewable energy leaders.

Odisha’s installed solar capacity: 706 megawatts. Rajasthan: approximately 24 gigawatts. Gujarat: approximately 18 gigawatts. Karnataka: approximately 10 gigawatts. Tamil Nadu: approximately 8 gigawatts. Odisha’s solar is roughly 3 percent of Rajasthan’s.

The official MNRE estimated solar potential for Odisha is approximately 27 gigawatts. But a revised estimate by iFOREST suggests up to 170 gigawatts using only wasteland and reservoir areas — six to seven times the official figure. Districts like Koraput, Malkangiri, Keonjhar, and Angul have solar potential comparable to Karnataka and Gujarat.

Floating solar offers a solution to Odisha’s key constraint — limited available land that is not agriculturally productive or forest-protected. GRIDCO has tendered a 225 megawatt floating solar project at Upper Indravati Reservoir, with plans for 1.5 gigawatts at Hirakud Reservoir and 1 gigawatt at Rengali Reservoir.

The green hydrogen opportunity is equally real. Paradip has been identified as one of three coastal Green Hydrogen Hubs. ReNew Power has agreed to a 500 megawatt green ammonia project there. Sembcorp has signed an MoU for an integrated green hydrogen hub. JSPL plans a green hydrogen facility at Angul.

The gap is not about potential. It is about pace, and the reasons for the pace are structural.

When you are a coal state, the political and bureaucratic incentive to promote renewables is weak. Coal generates revenue, employment, and political patronage. Renewables threaten all three in the short term. The state government’s incentive structure favours coal expansion.

Odisha’s grid was built to transmit power from thermal plants in western districts to demand centres in the east. Integrating distributed renewable generation requires grid upgrades — smart grids, battery storage, bidirectional flow — that the existing infrastructure lacks.

The institutional learning curve is real. GRIDCO, OHPC, and the energy bureaucracy have deep expertise in thermal and hydro. Renewables require different skills: land aggregation, PPA structuring, storage optimisation, variable generation forecasting.

One underexplored opportunity: repurposing degraded mining land for solar. Exhausted opencast coal mines in Angul and Jharsuguda represent thousands of hectares already environmentally degraded, already connected to grid infrastructure, not suitable for agriculture, and available for alternative use. Germany pioneered this in Lusatia, where former lignite mines have become solar parks. Mining land to solar would address land constraints while creating a symbolic and practical bridge between economies.

What Appalachia Teaches

West Virginia provides the cautionary tale.

Coal production in Appalachia fell 45 percent between 2005 and 2015 — more than double the national decline rate. In Boone County, West Virginia, half of all residents worked in coal in 2008. By 2016, total employment dropped by 80 percent. West Virginia now has one of the lowest labour force participation rates in the country, a poverty rate of 16.8 percent (higher in coal counties), and the highest population out-migration rate of any American state. Coal counties suffer high rates of heart disease, obesity, and opioid abuse, with some of the lowest life expectancies in the country.

No sovereign wealth fund. No transition plan. No early diversification. No proactive reskilling. The political economy of coal as identity delayed every necessary adaptation. By the time the decline arrived, the capacity to respond had atrophied with the communities.

Germany offers the alternative model. The Coal Commission — established 2018, bringing together unions, industry, environmentalists, and regional representatives — recommended phase-out by 2035-2038. Forty billion euros were committed for coal region investments. The core principle: no mining worker became unemployed throughout the entire phase-out. Early retirement, retraining, guaranteed redeployment.

Jharkhand, India’s largest coal producer, established a Just Transition Task Force in November 2022 — India’s first state to formally plan for coal transition. The estimated cost: 256 billion dollars between 2026 and 2070.

Odisha has no equivalent task force. No transition plan. No formal acknowledgment that coal production will eventually peak and decline. MCL’s expansion targets project growth through 2035 and beyond.

In investing, the difference between Norway and Appalachia is the difference between a diversified portfolio and a concentrated one. Norway saved during boom years, invested in alternatives, and built institutions to manage the transition. Appalachia spent during boom years, invested in coal, and had no institutions when the decline arrived. Odisha’s coal districts are currently on the Appalachian trajectory.

The Environmental Kuznets Curve Question

The Environmental Kuznets Curve posits an inverted U-shaped relationship: pollution rises with income, then falls after a threshold as societies become wealthy enough to demand and afford environmental protection.

Odisha’s GDP per capita — approximately Rs 1.34 lakh, or 1,600 dollars — places it firmly on the upward slope. Under the conventional path, Odisha would industrialise with carbon-intensive processes, grow wealthier, and eventually clean up.

The leapfrog thesis argues differently. Declining renewable costs, CBAM pressure, green hydrogen economics, and critical minerals demand create a window for Odisha to industrialise green from the start — bypassing the pollution peak entirely.

The honest assessment: a partial leapfrog is possible. Green steel pilots at Angul, floating solar on reservoirs, green hydrogen at Paradip — these represent the beginning of a green industrial path. But the bulk of Odisha’s industrial expansion in the near term will still be carbon-intensive. The question is whether the green trajectory gains enough momentum before the carbon trajectory locks in.

Odisha holds significant resources of 30 critical minerals as identified by India’s national list — nickel in Sukinda, graphite in Angul, platinum group elements, chromite. These are the minerals the energy transition requires: for batteries, fuel cells, and renewable infrastructure. The irony: the same mining infrastructure and geological knowledge that extracts coal could position the state for the clean energy supply chain. Sukinda, one of the world’s most chromite-polluted places, could become a source of nickel for batteries.

But — and The Value Chain documented this pattern — will Odisha capture the value? Indonesia’s nickel export ban offers the lesson. Banning raw ore exports and mandating domestic processing sent nickel export value from 3 billion to 30 billion dollars in two years. But the gains were unevenly distributed, processing depended on foreign investment, and local employment gains were modest relative to environmental cost. If Odisha exports nickel ore to Gujarat for processing into battery materials, the permanent colony dynamic simply shifts from coal to critical minerals.

The Transition No One Is Planning

India currently lacks statutory safeguards for workers displaced by the energy transition. The Ministry of Coal’s 2025 Mine Closure Guidelines recognise “just transformation” for the first time, but no binding legislation exists. NITI Aayog has established a reskilling committee, but as of early 2026, no framework has been enacted. Union concerns include abrupt redeployments to distant mines, lack of consultation, and failure to retrain workers for green jobs.

MCL’s workforce — 17,000 to 22,000 direct employees — represents a significant portion of Odisha’s formal industrial workforce. But the informal workers — 62 percent of coal’s employment in Angul — have no safety net at all. These are the truck drivers, equipment operators, canteen workers, and maintenance contractors who exist because the mine exists. They have no union membership, no pension, no retraining entitlement.

Green energy projects are expected to generate more than 66,000 employment opportunities in Odisha. But the employment profile is different. Renewable energy jobs tend to be in manufacturing, installation, and maintenance — skills that do not overlap with coal mining. Workers with lower educational levels, uncertified skills, and decades of mining experience cannot simply be “reskilled” through a training programme and deployed to solar panel installation. The transition is not just economic. It is social, psychological, and generational.

Coal-based thermal power units will start closing after 2025 due to age and inability to meet environmental norms. This is not a distant scenario. It is beginning now. The iFOREST study found that coal production at Angul is likely to peak within 10 years and decline after 2040. The question is not whether the decline happens but whether Odisha will be Appalachia or Norway when it does.

Odisha was among the first Indian states to implement Climate Budget Tagging — integrating climate-related expenditures into the government’s budgeting process. This is genuine institutional innovation: it makes climate spending visible and trackable. The state has an 11-mission State Action Plan on Climate Change covering agriculture, water, forestry, health, and industry. These are not nothing.

But they are not a transition plan. A transition plan would identify which coal assets will strand first, model the employment cascades, build alternative economic infrastructure in coal districts before closure, create retraining pathways matched to emerging industries, and structure DMF and mineral revenue as a genuine transition fund rather than supplementary development spending.

None of this exists in Odisha as of early 2026.

In investing, the worst position is to own a depreciating asset in a declining market with no exit strategy. The asset loses value. The market moves against you. And you have no plan for what comes next. Odisha’s coal portfolio — the mines, the power plants, the smelters, the entire economic ecosystem of the coal districts — is this position. The asset is physically depreciating (environmental degradation, water stress, health costs). The market is turning (renewable costs, CBAM, capital flight from fossil fuels). And the exit strategy does not exist.

The fuel that built modern Odisha — that powered NALCO, that energised Vedanta, that generated the revenue that built roads and schools and hospitals — is fading. Not today, and not next year. But within the working lifetime of a person entering the coal workforce today. The institutional capacity to manage that transition — the same kind of institutional capacity that OSDMA demonstrated for cyclones — has not been built, has not been funded, and has not been politically acknowledged.

The coal will be mined until it is not economic to mine. Then the miners will need something else. The question — the urgent, practical, unavoidable question — is whether that something else will exist when they need it.

Sources

Coal Production and MCL:

MCL Official Website: 225.2 MT production FY25, expansion targets
Odisha Bytes (2025): “After Record Production, MCL Prepares Ground for More Output”
Indian Masterminds (2025): MCL FY35 target 358 MT
Ministry of Coal Annual Report 2024: Odisha holds 24-25% of India’s coal reserves
Geological Survey of India: Talcher Coalfield 38.65 billion tonne reserves
The Machine Maker (2025): Subhadra and Balabhadra new mine plans

Renewable Energy Costs:

CEEW: Solar tariffs Rs 2.50-2.87/kWh, lowest LCOE globally
India Energy & Climate Center (Berkeley, 2025): Solar-plus-storage Rs 3.1-3.5/kWh
IEEFA: New coal power Rs 5-7/kWh, stranded asset risk $40-60 billion
Ember: Coal’s diminishing role in India’s electricity transition

Odisha Thermal Power:

Global Energy Monitor (2025): 18,744.5 MW total coal capacity including captive
GRIDCO/SLDC: 8,998 MW utility allocation
NTPC: Talcher Super Thermal 3,000 MW + 1,320 MW expansion
Vedanta Aluminium: 3,615 MW captive, 1.85 MTPA smelter, Restora brand
NALCO: 1,200 MW captive, 460,000 TPA smelter

CBAM and Steel:

Euronews (2026): EU CBAM compliance phase effective January 1, 2026
Global Efficiency Intelligence: Indian steel 2.55 tCO2/t vs EU benchmark 1.8 tCO2/t
CSEP: Iron and steel 90% of India’s CBAM-exposed exports
GTRI: Exporters may need to cut prices 15-22%
JMK Research (2023): Coal-based DRI emissions 3.0-3.1 tCO2/t

District-Level Data:

iFOREST (2025): Angul 6.7 GW thermal, 53,802 coal workers, 29% of district workforce
iFOREST (2025): Jharsuguda 5.7 GW thermal, 11 plants
iFOREST: Coal production at Angul likely to peak within 10 years, decline after 2040
Mongabay India (2022): “Decarbonising Odisha’s Largest Coalfield”

DMF:

PIB (2023): Odisha DMF Rs 23,120 crore, Rs 5,237 crore from coal
Mongabay India (2021): DMF funds diverted — Sundargarh police patrol cars
CSE India: DMF utilisation analysis

Renewable Potential:

MNRE: 27 GW official solar potential
iFOREST (2025): Revised 170 GW using wasteland and reservoir areas
Down to Earth (2025): Odisha installed solar 706 MW
Mercom India (2025): 225 MW floating solar tender, Upper Indravati
ANI (2025): Hirakud 1.5 GW and Rengali 1 GW floating solar plans
Green Hydrogen Mission: Paradip hub designation

Comparative Transitions:

Brookings: West Virginia coal decline — 80% employment drop in Boone County
ARC (2020): Appalachian coal production fell 45% (2005-2015)
Belfer Center (Harvard): Health, poverty, and brain drain in coal Appalachia
WRI/E3G: Germany Coal Commission — EUR 40 billion, no worker unemployed
Jharkhand Inc (2025): $256 billion transition roadmap (2026-2070)
Norway NBIM: Government Pension Fund Global ~$1.8 trillion

Energy Transition Labour:

TERI (2024): Just Transition Framework for coal mining regions
OutlookBusiness (2025): India’s 2+ million coal workers, no statutory safeguards
IndustriALL (2024): Union concerns on redeployment and retraining
Mongabay India (2024): India’s Mine Closure Guidelines — “just transformation” first mention

Climate Budget and State Plans:

Odisha Finance Department: Climate Budget 2024-25 and 2025-26
Climate Change Cell, Odisha: SAPCC 2021-2030
The Climate Group: Odisha — first state with Climate Budget Tagging

Cross-references within SeeUtkal:

The Long Arc Chapter 5: The extraction equilibrium — coal revenue as component
Value Chain series: 90/10 value split, per-tonne economics
Tribal Odisha Chapter 5: Mining displacement, Niyamgiri — bauxite source for aluminium chain
The Leaving Chapter 6: Western Odisha migration — coal districts as destination for some migrants
Political Landscape Chapter 6: Welfare-extraction balance — DMF as case study
Environmental Odisha Chapter 2: Mining ecology costs — the environmental balance sheet coal ignores
Environmental Odisha Chapter 4: Industrial heat islands in Angul-Talcher-Jharsuguda

Source Research

The raw research that informs this series.