E-Paper
Why industry and city no longer need to live apart
This article is authored by Aishwarya M, associate, research (urban), Centre for Public Policy Research (CPPR), Kochi.
History bears testament to company towns that have failed to catch up with changing economic winds. In Bihar’s Saran District, the quiet chimneys of C&E Morton India Limited confectionery factories and sugar and distillery mills at Marhowra paint a grim picture. Karnataka’s now exhausted Kolar Gold Fields (KGF), the first Indian city to be electrified in 1902 and once called mini-England, is now home to mounds of toxic residue locally termed as cyanide hills.
While the causes of their obsolescence vary, the impact of industrial decay on both these company towns is rather similar. Industries become stranded assets when their licence to operate is revoked and their business formally terminated, either due to market forces in the case of Marhowra, by law due to violation of mineral rights in the case of KGF, or due to regulatory non-compliance. However, when an industry shuts down in a town that relies solely on its operations for its livelihood, its residents suffer. Marhowra and Kolar both send thousands of residents to their neighbouring cities of Patna and Bangalore, respectively, for jobs. Today, the modern equivalents of these cities operating as mono-industrial cities or belts face a new threat apart from land, labour, and capital constraints: that of an invisible Carbon Wall. High-carbon industries and cities built around them, without a pivot in tandem with global trade shifts desiring cleaner products, face the same stranded asset fate and a danger of obsolescence.
With global trade barriers like the European Union’s Carbon Border Adjustment Mechanism (CBAM) now live and the January 27 FTA between India and the EU providing no exception to the mechanism, “dirty” production is now a double-edged sword; it is both an environmental and an economic concern. CBAM is the EU’s climate policy tool imposing a carbon charge on embedded emissions in imported goods. India is the EU’s largest steel importer and also a major source for cement and aluminium. With the CBAM’s definitive phase now live, the export of these materials could face carbon costs ranging from 3-8% of their value. In order to remain competitive in the EU, importers may even have to cut their ex-factory prices by 15-22% beyond the carbon tax, reported GTRI. Union Budget 2026-2027’s ₹20,000 Crore outlay for Carbon Capture, Utilisation, and Storage (CCUS) over the next five years offers a way to decarbonise these industries to ensure they stay afloat, without de-industrialising the cities they inhabit.
By scrubbing emissions at source, CCUS technology outlay facilitates CO2 emission reduction of legacy industries and CO2-intensive sectors such as steel, cement, oil & gas, petrochemicals and chemicals, fertilisers. These sectors are critical to the growth of the Indian economy, and CCUS is currently the only known technology to decarbonise them. If implemented well, this technology not only has the potential to significantly decarbonise the country’s production output, but to also realign its urban landscape. With emissions being captured at source, industrial belts and cities would no longer have to be housed in isolation. CCUS technology allows high-emitting industries to continue operating near urban centres without the traditional levels of air pollution and carbon emissions. It thus has the potential to act as a shield of livability for the new City Economic Regions (CER) (with ₹5,000 crore backing per allocated region) outlined in the Union Budget’s strategy for urban revival through its increased focus on Tier-2 and Tier-3 cities, and the simultaneous decongestion of the country’s Tier-1 cities. With adequate implementation, CCUS could scrub mono-industrial belts while turning them into high-tech, liveable urban landscapes. Industrial belts could decarbonise and survive, while cleaner and greener cities could thrive around them. The technology could also simultaneously create a carbon management economy and generate
However, like most of India’s legacy industries, CCUS technology too comes with an energy penalty. The parasitic loop goes as such--for a typical coal-fired power plant, the CCUS system consumes about 20-30% of the plant’s power output. In the Indian context, where most legacy industries are heavily coal reliant, the reality is that using a coal plant to power a carbon capture unit results in burning more coal to obtain the same amount of clean energy, thus causing what is termed as a “fossil lock-in”. Pilots such as the NTPC’s Vindhyachal plant have demonstrated that the energy for CCUS is almost always parasitic in its early stages; i.e., that it is powered by coal. Critics have thus argued that CCUS might be yet another alternative to just keep India’s coal-heavy industries running as they are, without a much-needed push to switch to renewables. Other concerns reported by Down to Earth magazine include the costs associated with the carbon capture and transport itself, as well as the slow deployment of the technology.
To avoid this thermodynamic trap, the policy must incentivise a shift to external, non-fossil power sources. The success of the ₹20,000 crore CCUS crore outlay outlined in this year’s budget depends on breaking the "fossil lock-in." If the CCUS units are powered by the existing coal-heavy grids instead of renewable alternatives, the process would ultimately create a circular trap where crores of rupees are spent to maintain a carbon-neutral status and remain competitive in global trade markets, without actually reducing the carbon footprint itself. By switching to renewable energy sources for the same and adopting mechanisms such as waste heat capture, India could also aim to achieve its 500GW renewable targets while moving closer to achieving net zero in the process of decoupling industrial cleanup from the coal grid.
By providing legacy industries with the technology to thrive in a green global economy, the budget does aim for an industrial reset that does not de-industrialise. While historically, city, industry, and livability have been treated as a “zero-sum game”, the City Economic Region (CER) framework, supported by CCUS technology, offers a blueprint for a more holistic urban landscape. If executed well, this allows industrial hubs to be integrated into the heart of Tier 2 and 3 cities, instead of being relegated to their peripheries. By integrating decarbonisation technology with holistic urban planning, India’s industrial heartlands can avoid the "stranded asset" fate of the past and also become crucial nodes in the city’s metabolism.
This article is authored by Aishwarya M, associate, research (urban), Centre for Public Policy Research (CPPR), Kochi.
