Key Findings
As India transitions to a low-carbon economy, coal-producing states like Odisha, Jharkhand and Chhattisgarh will need to navigate the challenge of declining fossil fuel revenues while increasing expenditure on economic diversification and social protection programs to ensure a just transition for coal workers and communities.
These states lag on infrastructure and human capital development compared to other states, highlighting the need for increased public expenditure in these areas and building resilience to the impacts of climate change.
Early action on three fronts can help create fiscal space for the critical public expenditure needed to support a just transition. These are: mobilisation of new sources of public revenue; building state capacity in leveraging green financing instruments; and developing a just transition expenditure framework to prioritise spending.
Executive Summary
As India’s clean energy transition gathers pace, declining revenue from fossil fuels could disproportionately affect its coal-producing states. At the same time, state governments that depend on fossil fuel revenue will face increased budgetary pressures to ensure an equitable and just transition. This briefing note assesses the potential fiscal implications of the transition in India’s top three coal producing states – Odisha, Jharkhand and Chattisgarh – and suggests approaches for economic diversification away from coal, identifying a need for early action on three fronts to help prioritise and create fiscal space for critical public expenditure needed to support a just transition. These include stepping up efforts to mobilise additional public revenue, building state capacity in leveraging new financing instruments, and developing a just transition expenditure framework to help prioritise public investment into emerging sectors where it creates maximum impact.
