 "How to secure India's energy")
Take supply growth. The rate of increase of primary energy supply from domestic sources has been distinctly lower in the post-liberalisation era. According to the Central Statistics Office's energy statistics, the decadal growth of domestic primary energy supply fell from 86 per cent in the 1980s to 29 per cent in the 1990s, when growth had not yet accelerated, and stood at 55 per cent in the next decade of high growth. Part of the explanation may lie in the improved efficiency of big manufacturing consumers such as steel and cement plants, and part in the growing share in GDP growth of services, which may be less energy-intensive. But the largest part of the explanation lies in the rapid growth in energy imports, which brings us to the whole question of energy security.
The dependence on imported oil is not going to end; it may well increase, judging by the Integrated Energy Policy, which projects import dependence in excess of 90 per cent for crude oil, up to 50 per cent for natural gas, and up to 45 per cent for coal. These are huge numbers, particularly for crude oil. Subsequently, this has led to a search for secure sources of overseas supply. Many have argued for a strategy of competing with the Chinese, who are on an aggressive buying spree, and securing concessions overseas. But some are sceptical because owning concessions will not help if the local government turns hostile. But those arguing for competing with the Chinese are right - because if the Chinese are tying up supplies, we could face the twin problems of an unreliable local government and uncooperative Chinese concessionaires. Therefore, as a defensive strategy we may have no choice but to play this game.
Incidentally, one way of protecting supplies in a politically fraught situation is to have national ownership of lots of oil tankers, including those involved in third-party trade. The oil in these supertankers on the high seas is as good as a strategic reserve, because contracts can be broken and tankers diverted to supply domestic needs if the political situation demands so.
Tying up overseas supply sources in nationally owned concessions is helpful, but the core challenge of energy security is to build up domestic supply. It is truly absurd for India to leave domestic coal unused in the ground and hunt for secure sources of oil, or even coal, abroad. But using coal, as carbon concerns become paramount, involves a serious effort at developing clean coal technologies and carbon capture and storage. We are doing precious little in this area. The Chinese, while they pursue overseas concessions, are even more vigorous in their pursuit of coal technology research. The lead they will build in this area may be an even bigger threat to energy security than their overseas concessions.
Energy supply security can also be pursued through a much more vigorous effort to deploy renewable energy and nuclear power. A recent study has put the potential of wind energy in India at 2,000 GW, which is 20 times larger than the current official estimate. The nuclear option has more implementation problems, but has more potential for long-term energy security - particularly with fast breeders and thorium reactors. Energy security is also a strong enough reason to make efficiency as important a part of energy policy as supply management.
Energy security is meant to protect energy consumption. This is where the issue of equity becomes central. India needs three energy policies: one for the 10 per cent of the population that has a near-Western lifestyle; another for the 40 per cent who are acquiring the means to aim for this lifestyle; and a third for the 50 per cent who need to consume more commercial energy to raise their productivity and improve their quality of life. The problem is that the commercial energy system is one in terms of pricing and investment. Thus, the price and tax policy required for a rational approach to the 10 per cent high consumers will be quite perverse for the 50 per cent who need to be persuaded to consume more commercial energy. A similar dilemma arises for the policy priorities for renewables. Meeting the energy needs of those who are deprived of adequate energy, many of whom are in remote areas, may need an emphasis on off-grid solutions. But containing carbon emissions may be better served by grid-connected power. Hence we end up with an energy policy that tries to do too many things. But hopefully, with the aspirant 40 per cent group expanding and more and more of the people and regions left out being brought into the mainstream, this will become more manageable.
Finally on sustainability. The big issues here are climate change and containing carbon emissions. We will have to accept that global pressures will impose some carbon limits on our energy policy within the lifetime of the plants being built now, particularly if we continue to make common cause with countries that are already under global pressures to reduce their carbon emissions, such as China. But, for us, the local sustainability challenges of local air pollution and the conflict between coal extraction and forest conservation are even more important.
Our policy czars must understand that energy policy is more than subsidy management. It requires a political commitment to implement a national energy supply strategy built around the goals of energy security, equity and efficiency.
nitin-desai@hotmail.com