A giant Indian company that has bought up famous British firms such as Jaguar, Land Rover and Tetley Tea is to get hundreds of millions of pounds in “green” subsidies to build one of the world’s biggest coal-fired power stations.

Tata will receive huge sums from the West for building the power station in India, thanks to the carbon trading system established by the Kyoto treaty. Critics say the system makes a mockery of attempts to combat climate change.

When the plant near the port of Mundra, in Gujarat, becomes operational in 2011 it will emit 25.7m tonnes of carbon dioxide a year – more CO2 than any power station in Britain.

Yet it will be classed by the United Nations as a source of “clean power”. That means Tata will be able to sell surplus “carbon credits”, established under the Kyoto treaty, to firms in the West. Energy groups will be able to buy the credits as an alternative to reducing CO2 emissions.

It is estimated Tata could earn £30m a year from such sales. It has already received more than £230m in soft loans from the World Bank to build the plant.

Tom Picken, head of international climate at Friends of the Earth, said: “This plant exposes how the World Bank’s attempt to get involved in combating climate change is nothing but a farce.

“The World Bank is there to promote development. As we see clearly in this case, that aim conflicts utterly with their other aim of trying to protect the environment.”

The International Finance Corporation (IFC), the World Bank unit that lends money for private sector projects in the developing world, has classified the Tata plant as clean energy because it will use “supercritical” technology that produces up to 20% less CO2 than conventional coal-fired power stations.

However, critics say it will still produce more CO2 than some other energy sources such as a cleaner type of coal power technology known as “ultra supercritical”.

David Wheeler, a senior fellow at the Center for Global Development, a US-based think tank, said the IFC’s funding of the plant “did not make any sense” and that Gujarat is an ideal place for solar power.

This is the first time the IFC has part-financed a coal-fired power station. The funding consists of a £230m loan to be repaid over 20 years. The cost of building the plant is said to be around £2.1 billion, but is expected to rise.

In the UK, Tata recently bought Jaguar and Land Rover from Ford in a deal worth £1.15 billion. Last year the conglomerate paid £6.2 billion for steelmaker Corus and eight years ago bought Tetley Tea for £271m. Three-quarters of Tata’s operations are now based outside India.

Tata Power, the subsidiary building the Mundra plant, said India is suffering a “chronic” energy shortage, with up to 450m people living in places without access to electricity.

“Coal-powered energy is vital to address India’s energy scarcity,” said Prasad Menon, managing director of Tata Power. “India and Tata are looking at renewable energy also, but solar is too expensive.”

Although Tata is a successful business it said help from the IFC loan was essential because Indian banks would not be willing to lend it the sums necessary for the new plant.

Rashad Kaldany, the head of infrastructure at the IFC, said: “This is a power station that will produce significantly less CO2 than other power stations of its size.”

Source: Times Online.co.uk
By: Robert Watts