PRE-ORDER: COMING SOON

First published 2020 by Notion Press and Brookings India, ISBN: 978-1-64828-845-6, © 2020

Learn more about our upcoming book launch & panel discussion, on Monday, September 7 at 5:30PM IST » 

No discussion of global climate change can ignore India, and no discussion of India’s energy future can ignore coal, which provides about half of India’s energy. Coal dominates because it is available domestically and cheap (especially without a carbon tax). If the global focus is on the energy transition, how does India ensure a just transition? Managing winners and losers will be the single largest challenge for India’s energy policy.

Across 18 chapters, drawing from leading experts in the field, we examine all aspects of coal’s future in India. We find no easy answers, but attempt to combine the big picture with details, bringing them together to offer a range of policy options. The Table of Contents shows the breadth of topics covered.

Coal is entrenched in a complex ecosystem. In some states, it’s amongst the largest contributors to state budgets. The Indian Railways, India’s largest civilian employer, is afloat because it overcharges coal to offset under-recovery from passengers. Coal India Limited, the public sector miner that produces 85% of domestic coal, is the world’s largest coal miner. But despite enormous reserves, India imports about a quarter of consumption.

On the flip side, coal faces inevitable pressure from renewable energy, which is the cheapest option for new builds. Local air pollution is a national crisis, with 7 of the world’s top 10 polluted cities in India. This places further pressure on coal-based power generation. However, there is significant coal-based power capacity already in place, some of which is underutilized, or even stranded.

Low per-capita energy consumption means India must still grow its energy supply. Before India can phase out coal, it must first achieve a plateau of coal. How this happens cost-effectively and with least resistance isn’t just a technical or economic question, it depends on the political economy of coal and its alternatives. Some stakeholders want to kill coal. A wiser option may be to first clean it up, instead of wishing it away. India has unprecedently ambitious renewable energy targets for 2030, calling for about a four times growth of today’s installed wind, solar, and hydro total electricity capacity. Even assuming India doesn’t start building any more coal power plants going forward, it still means that in 2030 about half of India’s electricity will come from coal.

Selected findings include:

1. India actually uses a relatively modest amount of coal on a global scale, if we normalize per capita. Tons of coal is a slightly misleading metric since Indian coal is high-ash, which hurts local air pollution but also means a ton of US coal emits a third more CO2 than Indian coal.
2. The present regulation of coal creates winners and losers by not just location but also by ownership (private versus public sector) and type of user (power plants versus other users). The locational aspect of coal is a key part of the puzzle. Coal is very cheap per ton at the mine, but has concentrated deposits in east/central India, which means increased environmental burden in those areas. In contrast, renewable energy is concentrated in South and West India, increasing the spread between states using clean energy and coal. This is also one reason the impact of the transition will hit the Indian Railways much sooner than Coal India Limited.
3. While there are enormous negative externalities of coal, there are also substantial societal payouts from coal across the chain. At the mining level, the government enjoys dividend payments from Coal India Limited, and the railways, which dominates transportation of coal, receives an existential level of cross-subsidy from coal. We also cannot ignore the large revenues from taxes, royalties, and mining fees, which are amongst the highest in the world.
4. While India imposes a Rs. 400/tonne (metric ton) cess upon coal, which even applies to imports, this is only about $5.5 per short ton of coal. If one were to convert this to an implicit carbon tax, it is only a little over $3/ton CO2. Imposing a high carbon tax will be difficult, especially given the implications on the price of electricity (the dominant use of coal).
5. Going forward, India’s focus will be on the combination of a controlled transition, increasing domestic supply, growing renewable energy, and cleaning up coal emissions. These are each trillion rupee questions – how to achieve these in coordination instead of conflict remains the task at hand for policy-makers.
6. If there were challenges before COVID-19, fiscal space and political will for systemic change become even more constrained in a post-COVID-19 world. While there is a clamour for a leapfrog or positive disruption towards sustainability in the “new normal,” there are also greater concerns over resiliency, local supply, and simply seeking cost-effective solutions. Either way, coal will remain part of the mix. How much is a question no one can accurately predict even ten years out, forget 20-30 years hence.

“Coal has historically fuelled India’s rise, bringing energy to millions of households and generating useful economic activity. It continues to be the mainstay of India’s energy mix, even as concerns over climate change and air pollution have highlighted the need to pursue a more sustainable path forward. In this context, this book impressively flags the opportunities and challenges that the coal sector will face in the coming years. The breadth of issues is comprehensive and relevant to all those wishing to understand India’s mainstay source of energy.”

-Fatih Birol, Executive Director, International Energy Agency (IEA)

“Coal’s decades-long primacy is ending, because of declining costs of renewables, its own environmental impacts, and logistics constraints. This book brings out the systemic risks that the coal sector faces, as well as the restructuring opportunities over the next quarter of a century. You may or may not agree with all it says, but you will agree that all of it needs to be discussed today; this book is required reading for anyone who follows the Indian energy sector.”

-Ajay Mathur, Director-General, TERI, & Co-Chair, Energy Transitions Commission

Section I: Summary and Key Insights

1. ‘King Coal’ Isn’t Dead, but Future Indian Coal Won’t (And shouldn’t) Look like It Did in the Past
-Rahul Tongia

Section II: Coal Supply in India: From History to Future

2. India’s Coal Industry and CIL in Historical Perspective
-Rohit Chandra

S1. Global Coal: Production, Consumption, and Trade in the Era of Climate Change
-Peter Nicholls and Tarunika Vyas

3. Issues with Existing Coal Market in India: Monopolistic Structure and Implications of the Current Regime
-Partha S. Bhattacharyya

4. Existing and Emerging Challenges of Coal Production: Digging Deep into CIL and SCCL Operations
-Anurag Sehgal

5. Coal Pricing and Allocations in India
-Anurag Sehgal and Rahul Tongia

6. Policy Challenges for India’s Fledgling Coking Coal Sector
-Harsh Sachdev and Anurag Sehgal

7. Coal Mining Technology and Practices in India: Challenges and Prospects
-Raman Srikanth

8. Ease of Doing Business in Indian Coal Mining
-Dipesh Dipu

9. Future of Coal Supply in India: It’s not just about Coal India
-Rahul Tongia

Section III: Ecosystem of Coal: Supply Chain, Use and Demand

10. Bottom-up Scenarios of Coal Requirement by 2030
-Mohd. Sahil Ali

11. RE “versus” Coal: A False Framing when both will be Required
-Rahul Tongia

12. Power and Coal Sectors: A Dysfunctional Intertwining
-Daljit Singh

13. Coal Logistics and Supply Chain in India: The Premier Status of Railways and Coal
-Vivek Sahai and Puneet Kamboj

Section IV: Regulation and Societal links of Coal

14. The Social Contract from Coal to Renewables: Can the Win-Win also have Losers?
-Pallavi Roy

15. Environmental Impact of Coal
-Priyavrat Bhati

16. Pricing Carbon Externality: Context, Theory, Evidence and Lessons for India
-Mohd. Sahil Ali and Rahul Tongia

S2. Managing Corporate Climate Risk in a Fluctuating Policy Scenario
-Damandeep Singh, Gargi Sharma, and Divya Varma

17. Technology Solutions to Cleaner Coal and Power
-Anand B. Rao

Section V: Conclusion

18. Putting it all Together – The Path towards Cleaner and Viable Coal
-Rahul Tongia

Addendum

Coal after COVID-19

       

Across 18 chapters, drawing from leading experts in the field, we examine all aspects of coal’s future in India. We find no easy answers, but attempt to combine the big picture with details, bringing them together to offer a range of policy options. 

The agenda for the launch (online) includes: 

1.      Welcome 

2.      Introduction to the book, by Rahul Tongia, Fellow, Brookings India 

3.      Keynote Address by Anil Jain, Secretary, Ministry of Coal, Govt. of India

4.      Panel discussion and Q&A featuring:   

Anil Jain, Secretary, Ministry of Coal, Govt. of India 

Ajay Mathur – DG, TERI and Co-Chair, Energy Transitions Commission 

Partha Bhattacharyya, former Chairman, Coal India Limited 

Rahul Tongia, Fellow, Brookings India (moderator) 

Please register in advance using this link:

https://us02web.zoom.us/webinar/register/7715989528361/WN_r8JszchzRyqLO8RfmRVglA

After registering, you will receive a confirmation email with details about joining the webinar.  

During the discussion, you will be able to submit questions via the Q&A chatbox on Zoom. Alternatively, you can also share your questions with us in advance by emailing Rishabh Trivedi, at rtrivedi@brookings.edu, who will also be able to provide any registration or logistical assistance.  

       

The 2015 Nepal earthquake, one of the deadliest in its history, evoked an outpouring of support from the international community in the form of cash contributions, in-kind relief, and search and rescue operations. Among the quickest to respond was India, who launched Operation Maitri by deploying the Indian Army, the Air Force, and other specialised teams.[2] Claiming it to be its largest-ever disaster relief operation, India’s response garnered praise from many quarters with a top UN official acknowledging the country’s role as a “first responder”.[3] The relief operation also coincided with the Modi government’s focus on regional cooperation, including assertive claims to take on the role of a “first responder” to regional crises.[4]

Nepal’s then Ambassador to India recognised India’s timely efforts and called the response “unique” in its scale.[5] However, as the relief measures went on, there were also accusations of the Indian contingent hindering other international aid efforts, lack of coordination between Indian and Nepali agencies, and insensitive reporting by Indian media.[6] As a result, India’s largely successful operation raised some questions on its organisational and technical preparedness towards disaster relief and management in the region. Moreover, the massive international response to the crisis featured bilateral assistance from six different South Asian countries but with no coordinated relief effort, including from the South Asian Association for Regional Cooperation (SAARC). India’s leading role thus paradoxically also exposed the absence of effective regional mechanisms for disaster relief in South Asia.[7]

The case of Nepal reflects four trends in India’s approach to Humanitarian Assistance and Disaster Relief (HADR). First, the centrality of its immediate neighbourhood. Geographically, India’s HADR historical footprint can be largely traced to its subcontinent and, in a more limited way, to the Indian Ocean region. According to one estimate, more than two-thirds of India’s humanitarian assistance has been directed to South Asia.[8] India has carried out similar relief operations to assist its neighbours in the recent past, including after the 2004 tsunami, the 2005 India-Pakistan earthquake, cyclones Nargis and Mora in 2008 and 2017 respectively, the 2014 water crisis in the Maldives, and the Rohingya refugee crisis in 2018.

Second, South Asia is particularly vulnerable to natural calamities.[9] Since 1970, the number of disasters in the region has increased five-fold with estimated direct losses amounting to US$80 billion.[10] The region is also the most exposed in the world to flooding, the second most exposed to cyclones, and it experiences most of its disaster fatalities due to earthquakes.[11]

Third, under the label of “first responder,” India has been signalling its intent to be a leading actor during emergencies in its neighbourhood. Commenting rather positively on the experience so far, in 2019, the Minister for Home Affairs Amit Shah emphasised that, “in the Indian sub-continent, we have been playing the role of the first responder in the case of disaster… India is leading the initiatives in disaster management and disaster resistance.”[12] Such ambitious assessments and declarations, along with India’s improved economic and military capabilities have led to greater expectations from neighbours in times of crises.

Finally, beyond the case of Nepal’s earthquake, a range of new types of emergencies is also plaguing the region. Such non-traditional crises include pandemics, chemical and biological accidents, industrial failures, and terrorist attacks. Together, they have pushed the boundaries – both geographically and technically – of the traditional conception of humanitarian crises. The COVID-19 pandemic has emphasised the changing nature and growing complexity of such emergencies. In an era of increased uncertainty, India will have to adapt its approach to traditional disaster response.

To realise its leadership ambition, respond to new expectations, and address an increasingly complex and frequent range of emergencies in the neighbourhood, India will have to adapt on two fronts. Internally, India needs to focus on better coordination between the multiple government agencies handling overseas relief operations, state governments providing cross-border assistance, the media, and civil society. Externally, India must improve bilateral and multilateral collaborations with its neighbours and leverage regional institutions for disaster management.

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Around half of the Indian government’s economic assistance to neighbouring countries in South Asia goes to the infrastructure sector, including roads, railways, ports, and other projects. Between 2014-18, this total investment in cross-border connectivity amounted to around Rs10,000 crores (approximately US$ 1,461 million). [1] These development cooperation projects are a critical component for India to achieve one of its most important foreign policy objectives: to tie its domestic economy closer to neighbouring countries and accelerate regional integration.

Funded by the Ministry of External Affairs (MEA) and executed by Public Sector Enterprises (PSEs) or private contractors, most of the Indian infrastructure projects are situated in the neighbouring countries of Nepal, Bangladesh, Bhutan, and Myanmar. However, a vast majority of these investments have faced chronic delays, or even halted, due to a myriad of challenges. Access to unimpeded land in these neighbouring countries is among the most significant reasons why India’s infrastructure projects get bogged down. This is due to both the Indian and host governments’ lack of expert and technical capacity on land issues – including on managing records, property right frameworks, litigation and lack of enforcement, or deficiencies in surveying.

This paper examines these issues in the case of Nepal. Focused on in-depth case studies of two Indian-funded projects in Nepal – 1) The East-West Postal road (or Hulaki Rajmarg) project, and 2) The Jogbani-Biratnagar cross-border railway line – it surveys the institutional impediments and expertise deficiencies that led to years of delays in the process of land acquisition. Such issues led to protracted problems, on the ground between central, local, public, and private Nepali stakeholders, to occasional tensions in bilateral government relations, and most importantly, to significant escalation in costs to India’s public exchequer.

Additionally, the paper also contributes to the evolving policy and institutional debates on how the Indian government, and the MEA in particular, can enhance its expert and technical capacity to engage in future land acquisition processes abroad, especially in the case of Nepal and other neighbouring countries. It makes the case for the Indian government, via MEA, to:

1. Encourage interactions between diplomatic generalists and various domestic Indian expert stakeholders involved in land governance and property rights at the central and state levels. This should help in the development of clear benchmarks for all land and property-rights related issues involving Indian infrastructure projects abroad.
2. Deepen bilateral engagements between Indian officials and their counterparts in Nepal to exchange best practices on property rights and land acquisition governance, including, for example, digitisation of land records.
3. Coordinate with other national and multilateral development cooperation agencies to exchange best practices and develop Indian guidelines and standards for land acquisition, resettlement, and rehabilitation processes abroad. This could, for example, include the Asian Development Bank and Asian Infrastructure Investment Bank or the Japan International Cooperation Agency (JICA), and the United States Agency for International Development (USAID).

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In this edition, Saheb Singh Chadha interviews Dr. Mirza Sadaqat Huda on his book “Energy Cooperation in South Asia: Utilising Natural Resources for Peace and Sustainable Development”, published in April 2020 by Routledge.

Recent developments in South Asian energy security such as the India-Nepal petroleum products pipeline and the India-Bhutan joint venture hydroelectric project have revived conversations on energy cooperation in the region. While these projects are a welcome development, like many others before, they have experienced logistical, bureaucratic, or political delays.

In this context, Mirza Sadaqat Huda’s book offers unique insights into addressing the underlying problems in regional energy cooperation. Based on his Ph.D. thesis at the University of Queensland, the book uses four case studies (the Tipaimukh Dam, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, the Myanmar-Bangladesh-India (MBI) Pipeline, and the Bhutan-Bangladesh-India-Nepal (BBIN) sub-regional grouping) to layout four distinct frameworks for energy cooperation, offering learnings on how challenges of a similar nature can be overcome in future projects.

Saheb Chadha: Your book describes India as a “hydro-hegemon” in the chapter on BBIN cooperation. Could you elaborate on the term and how it has contributed to distrust among India’s neighbours?

Mirza Huda: The term hydro-hegemony is used to describe a situation where power disparities between members of a shared river basin results in the maintenance of the status quo on water allocation. More powerful members of shared river basins, such as Egypt in the Nile and Turkey in the Euphrates-Tigris Basins use a range of strategies, such as coercion, resource capture, and inequitable treaties to control water resources.

In South Asia, India has used its relative advantage in military and economic power to dominate regional interactions on water sharing. Historically, India has only agreed to cooperate on a bilateral level on water issues, despite Nepal and Bangladesh’s preference for multilateral, basin-wide cooperation on the Ganges-Brahmaputra-Meghna Basin (GBM). Some analysts have argued that India has preferred to engage bilaterally in order to maximise on disparities in size and power.

Due to the politicised nature of interactions on water sharing, the focus of existing bilateral agreements is on establishing sovereign rights over water, rather than the collective development of shared resources. This reductionist approach cannot address climate change and extreme weather events, which is set to drastically change the ecology of the GBM Basin. During my fieldwork in Nepal I spoke to several policymakers who argued that the political and ecological repercussions of India’s hydro-hegemonic policies can undermine the development of BBIN hydroelectric projects.

In my book, I have proposed an Environmental Peacebuilding framework for informing the planning processes of BBIN hydroelectric projects. I argue that policies conceptualised from an environmental peacebuilding framework can resolve some of the environmental challenges to BBIN hydroelectric projects and have a transformative impact on regional politics by incentivising integration and reducing conflicts.

I suggest a policy mechanism by which the ‘high politics’ of energy security can be linked to the ‘low politics’ environmental cooperation, thereby facilitating energy security, multilateral river basin management, and peacebuilding. Since the 2018 guidelines of the Indian power ministry have formalised multilateral cooperation on electricity trade, hydroelectric cooperation can be an important entry point towards integrated river basin management of the GBM.

SC: You suggest a ‘peace-building approach’ to energy diplomacy that engages both energy security and conflict resolution imperatives. How do you think this differs from the current practice of diplomacy in the region?

MH: South Asia’s regional geopolitics is determined by the conflation of identity, politics, and international borders. Almost every conflict in South Asia – be it the Kashmir issue, the Kalapani dispute, or deadly confrontations between Bangladeshi citizens and the Border Security Force (BSF) of India are rooted in the region’s messy borders. Due to the history of the partition, borders are both a physical and social construct, looming large in domestic-level ethnic and religious conflicts. Transnational energy projects would thus engage with multiple social and ideational issues rooted in South Asia’s borders.

Before implementing cross border infrastructure projects, policymakers should identify the direct and indirect objectives of these initiatives. In my opinion, the goal of cross-border infrastructure in a conflictual region like South Asia should not be confined to the enhancement of energy security. We must also perceive energy projects as mechanisms of conflict resolution. In other words, energy projects should be deliberately designed to facilitate integration and peacebuilding. In my book, I argue that currently, cross-border energy projects are perceived only as conduits of resources that are vital to national security. I call this the ‘national security approach to energy diplomacy’.

In the last seven years, India’s renewed enthusiasm for regional energy cooperation in South Asia has led to concrete progress on multiple cross-border energy projects. However, New Delhi’s enthusiasm for South Asian integration after years of neglect has been marked by a paradoxical assertion of hard borders and ethno-nationalism, which creates significant concerns for the sustainability of cross-border energy projects. The regional repercussions of India’s Citizenship Amendment Act (CAA), and the continuation of insurgencies in Pakistan and Afghanistan have contributed to the entrenchment of ultra-nationalism and ethnic and religious cleavages.

SC: Your book highlights the potential of extending the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, such as TAPI-B to Bangladesh, as well as keeping the interests of local communities and other external powers in mind. Do you feel this might complicate negotiations and perhaps stall progress?

MH: An increased number of stakeholders can indeed create complexity in an energy project. However, in security-obsessed South Asia where elite actors dictate discourses on development, it is fundamental that a broader group of stakeholders are involved in the cross-border energy projects. In my book, I have argued that one of the fundamental challenges to the realisation of the TAPI pipeline is that existing policy discourse has focused almost exclusively on the national security interests of the four countries involved in the project. This limited perspective has perpetuated the orthodox, defence-centric perception of energy and undermined the realisation of pipeline projects.

In security-obsessed South Asia where elite actors dictate discourses on development, it is fundamental that a broader group of stakeholders are involved in the cross-border energy projects.

Interview respondents from India and Pakistan told me that the ‘securitisation’ of pipelines is one of the fundamental challenges to their implementation. In my book, I suggest a framework for de-securitising the TAPI pipeline, which takes into account the interests of regional countries, extra-regional powers, international organisations and most importantly, that of local community members. Firstly, I argue that the TAPI can be deliberately designed to converge the interests of regional countries and external powers. I suggest a number of policy interventions that can be undertaken to encourage inclusive cooperation between state-level actors, energy companies, and institutions. Secondly, I undertake a comparative analysis of the Baku-Tbilisi-Ceyhan Pipeline (BTC) to identify ways by which the interests of local communities that live along the route of the TAPI can be addressed via socio- economic programmes and effective social and environmental governance. This can reduce the explicit emphasis on the physical security of the pipeline by including human security concerns within the project’s blueprint. My conclusion is that taking into account a broader group of stakeholders can create a shift in the perception of the TAPI from a defence and security realm to that of inclusive cooperation.

SC: The construction of a Chinese pipeline in the same region as the Myanmar-Bangladesh-India (MBI) pipeline raises questions about resource constraints for a second pipeline. Does this also impose any political constraints, due to the Sino-Indian competition in South Asia?

MH: Finite resources are not only an impediment to the revitalisation of the MBI but can also impede the TAPI. China has been very successful in constructing pipelines in Myanmar and Central Asia. Technological developments and the discovery of new reserves can increase the supply of available resources in these regions. However, geopolitical conflicts between India and China, as exemplified by the tragic incident in Ladakh, can complicate transnational energy projects. Some South Asian policymakers I spoke to suggested that cooperation between India and China on securing international energy resources can result in economic benefits for both countries. Unfortunately, the political repercussions of the COVID 19 pandemic and territorial conflicts between India and China will prevent any substantial cooperation between the two countries on energy in the near future.

SC: In your chapter about the Tipaimukh dam, you outlined the feasibility of the ‘Cooperative Security Approach’ and ‘Share the resources’ model. Postcolonial states, including South Asian countries, tend to prize the resources in their territory and their ownership over them. How much of a challenge is this mindset in reducing the ‘Sovereignty Based Approach’ and ‘Divide the resources’ model?

MH: South Asia as a region must collectively address climate change and energy insecurity. Yet, a regional approach to these critical challenges is undermined by resource nationalism. For decades, bilateral agreements on water in the region have only focused on dividing resources. Collective action on resource development has been mentioned almost as afterthoughts in these agreements and has never seen concrete implementation. In my book, I argue that for South Asia to transition from dividing to sharing resources, there needs to be a change in the way resources are conceptualised and how costs and benefits are shared.

One of the persistent issues that I encountered in my research is that people in a particular region or country are unhappy if local resources are used to generate energy in another area. To address this issue, politicians must change the way they communicate key messages to their citizenry regarding natural resources. In my book, I argue that politicians often talk about the total cost of resources, but not the total benefits that can be derived from exploiting these resources. For example, in the early 2000s, political discourse on energy security in Bangladesh focused almost exclusively on the total amount of gas reserves in the country. This led to resource nationalism, resulting in the shelving of a gas trade deal between India and Bangladesh. However, instead of discussing the total cost of gas reserves, if politicians and wider intelligentsia in Bangladesh discussed the potential benefits from the exploitation of these reserves towards poverty alleviation and socio-economic development, it could have led to broader consensus on the need for regional cooperation on energy.

People in a particular region or country are unhappy if local resources are used to generate energy in another area.

Of course, such messages need to be followed up by the development of benefit-sharing mechanisms as well as resettlement and rehabilitation plans for those who stand to be adversely affected by energy projects. While I use the example of gas trade, similar communication strategies and benefit and compensation policies can create broader consensus on the need to collectively harness the hydroelectric potential of South Asia’s rivers. Overall, astute political leadership is fundamental to creating broad consensus on ecological interdependence in South Asia.

About the expert

Dr. Mirza Sadaqat Huda is a Postdoctoral Research Fellow at the OSCE Academy in Bishkek. Currently, his research focuses on the Belt and Road Initiative, the politics of renewable energy in Asia and global climate governance. Dr. Huda’s analysis has been published in Energy Policy, Geoforum, Water International and Energy Research and Social Science. He is an Australian citizen and has previously worked as a Postdoctoral Fellow at the Nanyang Technological University and has held research appointments at the University of Queensland and Griffith University.

Email: mirzasadaqathuda@gmail

       

Introduction

Tourism is an important metric of a country’s soft power potential, marked by an increase in movement of people and enabling people-to-people connectivity. Over the last two decades, South Asia has emerged as an attractive tourist destination due to its natural and cultural diversity, and price competitiveness.[2] The region is home to tourism-based economies such as Bhutan, Maldives, Nepal, and Sri Lanka that attract high spending per traveller.[3] In 2019, the World Economic Forum’s Travel and Tourism Competitiveness Index (TTCI) ranked South Asia as “the most improved region since 2017.”[4] Within this, India has shown the greatest improvement in rank among the top 25% countries, from 40th in 2017 to 34th in 2019.

India accounts for a majority of South Asia’s travel and tourism gross domestic product (GDP) and has also been the preferred destination for tourists from within the region. In the last decade, India has witnessed an increase in the share of South Asian tourist arrivals. While geographic proximity and cultural affiliations are the underlying factors for high cross-border mobility, the market size and the tourists’ spending capacity have also played an important role. Additionally, tourist spill-overs from India to the rest of the region contribute significantly to the regional tourism economy.

This policy brief highlights tourism connectivity between India and its neighbours, capturing the tourism trends within South Asia. Given China’s increasing tourism imports and a growing presence in the region, the brief also offers a comparative analysis of reciprocal tourism trends between South Asia and China.

Methodology

The United Nations World Tourism Organization (UNWTO) defines tourism as “the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes.”[5] Along similar lines, the Ministry of Tourism (MoT), Government of India, defines a foreign tourist as “a person visiting India on a foreign passport, staying at least twenty-four hours in the country, the purpose of whose journey can be classified under one of the following headings: (a) leisure (recreation, holiday, health, study, religion, and support), and; (b) business, family mission, meeting.”[6] The definition extends to transit passengers who stay overnight in India and are counted as tourists.

The data on inbound and outbound flows is from the Ministry of Tourism’s India Tourism Statistics Reports and the United Nations World Tourism Organization’s (UNWTO) e-library. The inbound statistics used in Figures 1 and 2 are equivalent to outbound tourism data from each neighbouring country to India. Qualitative inputs were collected through informal interviews with officials from the Ministry of Tourism and the Bureau of Immigration in India to understand the data collection methodology and various steps taken to promote tourism.

It should be noted that the Ministry of Tourism changed its methodology in 2014, standardising it with the UNWTO methodology, and added Non-Resident Indians (NRIs) to the Foreign Tourist Arrivals (FTA) category, which together formed the “International Tourist Arrivals” (ITA).[7] For the purpose of analysis and standardisation of data with the preceding years, Figures 1, 2 and 5 only focus on the FTAs.  The mode of arrival data in Figure 4 is from the India Tourism Statistics reports, published annually between 2010 and 2019 by the Ministry of Tourism.

This policy brief covers tourism data between India and seven of its neighbouring countries: Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka, which are collectively referred to as ‘South Asia’ or N7.

Growing share of tourist arrivals from South Asia to India

Figure 1

While India declared tourism as an industry in 1982, it adopted the National Tourism Policy two decades later in 2002.[8] Supporting this, the Ministry of Tourism launched the “Incredible India” campaign in 2002 targeting increased tourist inflows. The impact of these developments is seen since 2003, when India started witnessing a linear growth in the total number of foreign tourist arrivals (FTAs) (Figure 1). Despite this, India’s share of global tourist arrivals remains abysmally low at 1.2% (2018).[9]

However, India is growing as an attractive tourist destination for travellers from the South Asian region. Tourists from the neighbourhood account for roughly a third of the total FTAs (Figure 1) in India. In 2018, South Asia accounted for the highest percentage share of tourist arrivals (29%) among all the regions, followed by Western Europe (21%).[10]

From 2003 to 2013, the share of South Asian tourist arrivals dipped from 23.8% to 16.9%. This declining trend registered a shift in 2014, when the share increased for the first time in more than ten years, to 21.6%. Between 2003-2013, the cumulative annual growth rate (CAGR) of total FTAs was 10%, which increased to 22% between 2013-17. Much of this shift is attributed to the rise in the number of Bangladeshi tourists.

How tweaking rules can have a big impact: The case of Bangladesh

Figure 2

A country-wise breakdown of FTAs in India (Figure 2) reveals that the top four South Asian countries for inbound foreign tourists are Bangladesh, Sri Lanka, Nepal, and Afghanistan.

For years, Bangladesh has featured in India’s list of top ten tourist source countries due to its proximity and cultural linkages. However, figure 2 shows that there has been a sudden surge in the number of Bangladeshi tourist arrivals from 2014. Between 2003-2014, the growth of Bangladeshi tourist arrivals was 1%, whereas, in 2014, the arrival of Bangladeshi tourists to India increased by 80%. Since then, the number been growing at an average annual rate of 40%. In 2018, one in every four tourists from South Asia arriving in India was from Bangladesh.

A possible explanation for this upward trend could be the liberalisation of Revised Travel Arrangement (RTA) between India and Bangladesh in 2013 and 2018. The 2013 revision brought certain changes to the provisions of the 1972 Agreement on Passport and Visa System, to remove difficulties faced by the nationals of either country in obtaining a visa.[11] Some key revisions include extending the short-term visa on medical grounds for a year, allowing up to three accompanying attendants and similar extension facility, and relaxation in the issuance of multiple-entry permits. India and Bangladesh further liberalised the RTA in 2018, to include longer employment time, student visas and five-year multiple-entry permit for the elderly and freedom fighters. [12]

In 2013 and 2018, India liberalised the Revised Travel Arrangement with Bangladesh, resulting in an average 40% year-on-year growth of tourist arrivals.

Interviews with stakeholders revealed that as a result of ease of obtaining a visa, several informal cross-border movements have been converted to formal movements. This can be exemplified by tracking movement through the formal border-crossings such as the Integrated Check Posts (ICPs) or Land Customs Stations (LCS). For example, the total incoming and outgoing passenger movement from ICP Agartala increased by 51% in 2014-15 over the previous year, and movement through Petrapole has doubled in the last five years (2014-2019).[13] The increase in registered movements also reflects the efficiency of border infrastructure, including digitisation of immigration processes.

A detailed 2018 survey on ‘Study on Visits of Nationals of Bangladesh in India’ by the Indian Institute of Tourism & Travel Management (IITTM), reveals the profile, purpose and expenditure pattern of tourists and visitors from Bangladesh.[14] It found that while a majority of the tourists visited India for religious and leisure purpose – 37% and 26% respectively – about 14% of Bangladeshi nationals visited India for medical treatment.

Owing to the cumbersome procedure or inability to obtain a medical visa, some of them were found to have entered India through regular tourist visas. Some Bangladeshi tourists were also repeat visitors to India, with about 24% visiting India six times or more for different purposes. Furthermore, the affordability of India is an important factor for Bangladeshi tourists. The survey shows that the majority of Bangladeshi tourists spend approximately INR 8,000 (approx. USD 115) on a 5-9 day visit to India, with many dependent on public buses for transportation within India.

In the last two years, India also focused on improving visa application processes, which could further explain the rise in Bangladeshi tourist arrivals. In 2018, India inaugurated a new integrated state-of-the-art Indian Visa Application Centre (IVAC) in Dhaka – its largest visa centre in the world. Additionally, the Indian High Commissioner to Bangladesh also announced the withdrawal of the appointment system for submission of visa applications.[15]

Visa barriers to regional tourism

India’s bilateral visa policies and the resultant degree of ease of access for tourists have an instrumental bearing on the number of FTAs. Within South Asia, agreements with Nepal and Bhutan exempt all nationals of these countries from requiring a visa to travel to India and vice-versa, with only minimal exceptions. Similarly, Maldivian nationals travelling to India for tourism do not need a prior visa if their period of stay in India is less than 90 days in the preceding six months.

We developed an openness index, tracking the ease of access to visas for nationals from South Asian countries seeking to travel to other countries in the region (Figure 3). The index shows that Bhutan, Maldives, and Sri Lanka have the most open tourist visa policies towards citizens of the other South Asian countries. India ranks fifth in travel openness towards South Asia, with only three countries (Nepal, Bhutan and Maldives), eligible for visa-free travel to India. By contrast, Sri Lanka offers visa-on-arrival or e-Travel Authorisation to all South Asian countries and maintains an open border with the Maldives.

Figure 3

Transportation matters: Mode of arrival

Figure 4

The mode of arrival data in figure 4 is derived from the record of all passports stamped by the Bureau of Immigration at recognised ports of entry. Qualitative inputs reveal that not all land border arrivals from Nepal are stamped, as seen in figure 3, where the majority of the reported arrivals from countries sharing a land border with India, such as Nepal and Bhutan, are via air. Informal crossings are also frequent, especially on the India-Nepal border. Furthermore, it is interesting to note that the number of road arrivals from Sri Lanka to India has been increasing. This is possibly due to religious tourism along the Buddhist circuit, with Sri Lankan citizens crossing overland into India after visiting Nepal.

Apart from serving as an indicator of the possible rise in the income profile of India’s inbound tourists from South Asia – with more tourists opting for air travel – the data may also reflect improvement of India’s infrastructural connectivity with its South Asian neighbours. In the last few years, there has been an increase in investments on cross-border connectivity infrastructure such as Integrated Check Posts (ICPs), airports and sea connectivity. In January 2020, for example, India and Nepal inaugurated the ICP at Jogbani-Biratnagar to facilitate trade and people’s movement. This is the second ICP on the India-Nepal border – the first one was built at Raxaul-Birgunj in 2018.[16]

Additionally, in 2018 India and Nepal agreed to open four new cross-border air routes connecting the provinces of Nepal directly to India and Bangladesh.[17] India and Sri Lanka also expanded flight connectivity with the resumption of flights to Jaffna from Chennai after more than four decades. Interestingly, to support such air connectivity, the Ministry of Civil Aviation, India, waived the “5/20” rule, requiring five years of experience and a minimum of 20 flights for an airline to operate international flights.[18] In March 2019, India and Bangladesh commenced a passenger cruise linking Kolkata and Dhaka as part of the Agreements for Enhancing Inland and Coastal Waterways Connectivity. [19]

Ni Hao! South Asia welcomes Chinese tourists

Figure 5:

Tourism is a lucrative source of foreign exchange earnings. As per the World Travel and Tourism Council’s (WTTC), the sector contributed US$ 234 Billion or 6.6% to South Asia’s total GDP in 2019.[20] There was a 4.5% travel and tourism GDP growth vis-a-vis the 5% real GDP growth in the region. While foreign tourist arrivals to the region have increased over the years, there has also been a significant increase in the contribution of tourists from the two largest economies: India and China.

A comparison of Indian and Chinese tourist arrivals in four South Asian countries – Bangladesh, Maldives, Nepal and Sri Lanka – reveals that while more Indian tourists visit South Asia, the last decade has witnessed an unprecedented rise in the number of Chinese tourists, approximately by 753% (Figure 5). In 2007, few Chinese tourists were visiting South Asia, concentrated mainly in the Maldives and Nepal (42% and 32%, respectively). In the same year, the number of Indian tourists was significantly more in Bangladesh, Nepal, and Sri Lanka (Figure 5).

A decade later, the 2018 figures reflect a rather different reality, with a phenomenal rise in the number of Chinese tourists to the Maldives, Sri Lanka, and Nepal.  Between 2007 and 2018, Chinese tourist arrivals rose by 687% in the Maldives, and 462% in Nepal. Sri Lanka registered the highest growth in tourist arrivals from China, from just about ten thousand in 2007 to almost two hundred and sixty thousand in 2018 (a rise of 2486%).

According to the UNWTO and the Chinese Tourism Academy, China has been the world’s largest tourism source market since 2012. The number of outbound travel departures increased from 4.5 million in 2000 to 150 million in 2018, with an average annual double-digit growth of 16%.[21] However, it is reported that the market is still in its infancy. Since only 7% of Chinese citizens currently own a passport, the number of trips could surge to over 400 million by 2030.[22]

This enormous expansion of the Chinese outbound tourism market can be attributed to reasons such as increased air connectivity and a rising middle-class with growing disposable income. Between 1990 and 2016, the number of international air travellers has increased from just one to 52 million.[23] Furthermore, a profile segmentation of Chinese outbound tourists shows that women and millennials (aged between 15-34 years) dominate the market with respectively 53% and 55% of the total outbound tourist share. [24]

Between 2007 and 2018, the number of Chinese tourist arrivals has increased five-fold in Nepal, seven-fold in the Maldives, and twenty-five-fold in Sri Lanka.

Countries in South Asia reportedly gain more from tourism exports to China than India. This is reflected in the average per capita spending capacity of Chinese and Indian tourists in 2018, at approximately US$ 1850 and US$ 960, respectively.[25] In the same year, the total Chinese tourist expenditure amounted to US$ 277 billion, registering a 5% increase from the previous year. By comparison, India’s total international tourist expenditure was US$ 26 billion after a 9% year-on-year increase.[26]

China’s increasing investments in tourism and allied sectors in South Asia could have possibly led to the rise in Chinese tourist arrivals. For instance, in the Maldives, China has invested significantly in infrastructure, housing, hotels and airlines.[27] In 2011, the Sri Lankan government sold a strategically important site, the Colombo beachfront property, to a Hong-Kong based holding company for USD 125 million.[28] Nepal and China have established direct flights from Kathmandu to Beijing through Himalayan Airlines, a Nepal-China joint venture.[29] Furthermore, China’s Northwest Civil Aviation Construction Group, with financial assistance from the Asian Development Bank (ADB), is constructing the new Gautam Buddha International Airport.[30] During his 2019 visit to Nepal, China’s President Xi Jinping noted that “Nepal is the first South Asian country to be designated an approved destination for Chinese tourists” and that there now are about sixty weekly flights connecting both countries.[31]

Conclusion

India has been the preferred short-haul destination for tourists from its neighbourhood. Tourists visit India not only for leisure and medical reasons, but also use the country for transit to other regions. Bilaterally, there have been improvements in visa policies, for example, the relaxation of the India-Bangladesh visa policy in 2013 and with the Maldives in 2019. However, there are still significant challenges towards promoting free and open intra-regional tourism such as visa-openness, gaps in cross-border infrastructure, etc. China, on the other hand, has been increasing its presence in the region, with a growth of 753% in the last decade (2007-2018). It has also made significant investments in South Asia’s tourism and hospitality sectors.

Recently, the COVID-19 pandemic has presented unforeseen challenges to global tourism. With geography gaining significance and the importance of shorter distances becoming more pronounced, regional tourism is likely to grow. Governments must thus pivot to focus considerably more attention on regional tourism through investments in infrastructure and services, particularly digitisation to reduce human transactions. India, in particular, will have to leverage the wide range of cultural similarities with its neighbours such as the regional Buddhist trail and pilgrimage, etc. Such a push would also contribute locally through employment and revenue generation from foreign exchange earnings.

Policy Recommendations

Several steps can be taken to ensure a seamless flow of tourists in India and its neighbourhood:

1. E-visa, with digital application and delivery: Technical modernisation, upgradation and other improvements are needed in the Indian visa application and delivery system for South Asian nationals. Currently, only China and Sri Lanka are eligible for an Indian e-visa. Considering the rising share of tourists from the neighbourhood in India, the e-visa facility should be extended to other countries in the region.
2. Investing in digitisation in the tourism industry: Due to the Covid-19 pandemic, there is an increasing focus on digitisation of various services to revive the tourism sector. Contact-less transfers, hotel check-ins, site-visits etc. will be crucial for revival of the industry. This requires participation from both public and private sector stakeholders and significant investment in digitisation to enhance secure travel and ensure revenue from foreign exchange.
3. Inter-ministerial coordination to enhance infrastructural connectivity: The Ministry of Tourism should actively work with other ministries such as the Ministry of Civil Aviation and Ministry of Home Affairs to undertake infrastructure-related connectivity initiatives, for example by further expanding the UDAN Scheme to neighbouring countries and supporting digital immigration services at the Integrated Check Posts.[32] Apart from this, the government must play a role in facilitating tourism infrastructural development supported by multilaterals such as the Asian Development Bank, World Bank, Japan International Cooperation Agency, etc.
4. Tourism promotion through regional initiatives: India must take the lead in promoting intra-regional tourism through the South Asian Association for Regional Cooperation (SAARC), Bay of Bengal Initiative for Multi-sectoral, Technical and Economic Cooperation (BIMSTEC) or the Bangladesh, Bhutan, India and Nepal initiative (BBIN). Following the example of the Association of Southeast Asian Nations (ASEAN), India could host regional tourism summits and facilitate inter-regional cooperation among tour operators, for example with the Federation of ASEAN Travel Associations (FATA). India should also work and cooperate bilaterally with other South Asian countries on joint tourism promotion and advertising campaigns, towards establishing the tourism industry as a regional value chain.
5. Promoting religious tourism circuits: The historical and cultural linkages between South Asian nations offer the potential to develop tourism circuits within the region. There has been an interest towards developing a Buddhist circuit between India and Nepal, and a Ramayana circuit between India, Nepal and Sri Lanka. India’s regional governments will have to play a vital role in targeted outreach initiatives to promote their religious heritage to specific countries. [33]

Further Readings

Renton de Alwis, “Promoting tourism in South Asia,” in Sadiq Ahmed, Saman Kelegama & Ejaz Ghani (Eds.), Promoting economic cooperation in South Asia: Beyond SAFTA, (Washington, DC: The International Bank for Reconstruction and Development/The World Bank, 2010), P. 259–276.

Annual Report 2017–18, Ministry of Tourism, Government of India, http://tourism.gov.in/sites/default/files/annualreports/Annual%20Report2017-18.pdf

Golam Rasul and Prem Manandhar, “Prospects and Problems in Promoting Tourism in South Asia: A Regional Perspective,” (South Asia Economic Journal, October 1, 2009) Volume: 10 issue: 1, page(s): 187-207, https://journals.sagepub.com/doi/abs/10.1177/139156140901000108?journalCode=saea  

“Guidelines for Success in the Chinese Outbound Tourism Market,” (Spain: UNWTO and China Tourism Academy, 2019), https://www.e-unwto.org/doi/pdf/10.18111/9789284421138