PM calls for relook at taxes, subsidies in energy sector

Calling for an examination of the "entire gamut of taxes and subsidies on energy forms and devices", Prime Minister Manmohan Singh today said domestic energy prices should take into account the economic and environmental cost of alternate sources of energy.

"The extreme volatility we have seen in international oil markets, coupled with a similar trend of price increases in natural gas and imported coal, has put enormous pressure on domestic prices," Singh said while addressing the energy conclave on implementing the integrated energy policy organised by IRADe.

The PM also made a case for providing subsidy on fuels targeted at poor households under the Rajiv Gandhi Vidutikaran Yojana, which seeks to provide electricity to all households by 2009.

"While all villages will be connected to the grid, 25,000 remote villages will be provided electricity based on their local generators. They would use locally available renewable resources. Clean cooking fuel in the form of kerosene, LPG or biogas will reduce indoor air pollution. A subsidy for such fuel targeted at poor households can, therefore, be justified," he said.

He expressed concern over the mounting losses in the power sector and called for a new management strategy to deal with the situation in the energy sector.

"Transmission and distribution losses are as high as 40-50 per cent in several parts of the country. The new management system will have to deal with this reality," Singh said.

Looking at India's energy requirement in the next 25 years, Singh said the power sector alone would need Rs 60 lakh crore. Such large investment would need participation by both the public and private sectors as well as the government.

Singh said the potential of hydrogen as a fuel of the future should be examined and hydroelectric resources should be optimally utilised to reduce dependence on fossil fuels.

Referring to biofuels, Singh said measures were needed to ensure availability of planting material and enabling policy framework.

"We can also use the resources available from the employment guarantee scheme for developing these plantations," he said.

The Integrated Energy Policy has estimated energy requirements in 2030 will be higher than existing levels by a factor of anywhere between 4 and 5, if the Indian economy grows at around 8 per cent annually, he said.

"The figures for future requirements are gigantic. Electricity generation capacity would need to go up from our current installed capacity of 131,000 Mw to 800-950,000 Mw. This would imply huge annual imports of oil "" anywhere between 300 and 400 million tonne and coal imports that could touch 800 million tonne annually," Singh said.

India is short of modern energy resources such as oil, gas and uranium and even coal is not as abundant as is generally believed. "Thus we must use our energy resources optimally and efficiently," Singh added.