Much concern will be expended on the impact of the Supreme Court judgment cancelling coal-block allocations on industry. This is as it should be, but I believe that greater availability of electricity (and energy in a broader sense) brings about revolutionary changes in rural India.
I first saw India from the sky at night on an airmail flight between Delhi and Nagpur in 1969, and was stunned by the ocean of darkness in the "Bimaru" territory below. I was amazed to find villages along the Mumbai-Ahmedabad railway line boasting of at least a few tubelights on another night journey a couple of years later. This highlighted even then the difference in development between central India and coastal Gujarat.
Instances of other aspects of rural change also come to mind. A dirt poor marginal farmer in Ratlam fortunately discovered that his well had a copious aquifer. He struck it rich beyond imagination by selling water after getting a power connection. A thriving sugar co-operative in coastal Gujarat provided generous loans for tractors. Everyone wanted one, and over-exploited groundwater to irrigate greater areas to pay for them. That caused irreversible ingress of salinity into the otherwise abundant aquifer. The prosperity tapered off, providing me a modern morality fable to narrate.
Hari Pargal, an energy expert at Engineers India, told me in 1985 that making electricity abundantly available everywhere would ensure all other infrastructure followed on its own. Flood the countryside with electricity - but not cheap, because what is cheap is not valued was his blunt advice. Two decades later, a certain Narendra Modi unknowingly followed it with considerable success.
The two-fold concerns these generation-old instances highlighted then have not faded.
First, increased production and income due to power availability are easy to understand and quantify, but not so the even more significant impact on decision-making and risk-taking. With water, even the most marginal farmer becomes entrepreneurial, seeking chancy cash crops and an entry into monetised economy, using all available resources to produce marketable surplus. Actions otherwise frowned upon, such as borrowing and culling useless livestock, no longer remain taboo.
Second, production factors must be reasonably priced to inculcate an appreciation of their worth and ensure their optimal use. Cheap loans lead to profligate investments, which in turn cause over-exploitation and lasting damage to scarce resources. The irreversible depletion of primordial water in the Deccan basalt trap by excessive sugarcane cultivation in western Maharashtra is a striking case.
Arbitrary and often long power cuts have been the order of the day nationwide, especially so in rural areas. The better-off farmers make protective but unproductive investments in diesel pump sets, leading to an inefficient use of hydrocarbons. Poorer farmers silently suffer loss of income. As entire feeders are switched off for hours on end, the quality of village life deteriorates.
Mr Modi understood this early on in his tenure as chief minister of Gujarat. He grasped the logic of separate feeders for rural domestic lighting and irrigation. Its pursuit cost money, but allowed household supply in the evenings and energy to pumps late at night when the lighting load was low. Farmers waited patiently for the appointed hour to irrigate farms. Not needing to leave the pumpsets on at all times any longer, they saved power and water. They saved more by eliminating diesel use. They paid reasonable tariffs (which nevertheless have an element of subsidy).
Gujarat utilities stemmed the flow of red ink and invested in distribution to reduce losses and enhance the reliability of supply. Private players entered generation. Power cuts became fading memories in Gujarat, and it emerged as a preferred destination for new investment. That is the core of the Modi development model. The rest is our current history.
Can this be replicated nationwide? Mr Modi seems to think so, but some major hurdles remain.
The balance between energy availability and requirements is precarious. Managing it will remain a tightrope walk for some time. Much of our famously large coal reserves is of "D" and "E" grades, containing more than 40 per cent ash. Burning it is expensive. It also causes pollution. Imported coal now costs a lot more. Regulators are reluctant to award higher prices to power suppliers, who would rather shut down the plants than incur losses.
Except for the Himalayan region, the hydroelectric potential of the country is now nearly exhausted. Setting up power plants there is sensitive to ecological and geopolitical considerations. Nuclear energy is neither cheap nor quick to come on tap, as we have been discovering. There is also the environmental dimension to be considered. Non-conventional sources still remain in the realm of non-scalable experiments.
This does not quite mean that there will be no change in the present state of affairs with regard to power. Many actions could work in the short and medium term, while we wait for long-term structural changes.
First, the Gujarat initiative of separating rural domestic and irrigation feeders must become the norm. Second, with improved and reliable power supply, charging reasonable tariffs agricultural connection would be possible. These could in all probability set off the same virtuous cycle of effects as they did in Gujarat. Third, off-grid use of alternative energy sources must be encouraged wherever technically and economically feasible. Incentives must be provided for using such sources. Fractional horse power pumps energised by photo-voltaic solar panels would work well where water is available at depths of under five metres. Where wind patterns are predictable with adequate velocity, small turbines backed by storage batteries could similarly energise pumpsets. Areas with large crop residues could use agricultural waste as fuel. These provide added, locally generated power and eliminate investment in transmission infrastructure.
Each of these projects would have to be tailor-made for a well-defined geography. The subsidy would be a one-time, not a recurring, expense, such as for solar panels. But they would provide breathing space as we wait for systematic removal of the overwhelming constraints that now choke coal supply and hamper power generation.
The writer taught at IIM-Ahmedabad and helped set up the Institute of Rural Management, Anand
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
