As India’s economy grows at a breathtaking 9.1% its hunger for energy to sustain this growth is higher and though per capita energy consumption is relatively low, its energy use is expected to surpass Russia and Japan to be the third largest consumer of energy by 2030. To meet the nation’s poverty alleviation goals, the nation has to maintain at least a 8% economic growth which will require three times the quantum of primary energy supply and four times electrical capacity.
In search for energy, India is looking to diversify its portfolio of sources, regions, suppliers, and technologies to ensure that it is not reliant on any one nation, technology, or region. However, with this strategy comes higher cost of maintaining multiple technologies, dealing with multiple regions, and negotiating multiple contracts. These expose the nation to having to compete with different peers, understand the vagaries of different suppliers, and also develop expertise in different technologies. Because of the shortage of oil, natural gas, and uranium, India has to look to countries around the world to supply these resources. Further, because it refused to sign the Nuclear Non-Proliferation Treaty (NPT), it has been isolated globally and unable to access nuclear fuel—this has in part been addressed by the Indo-US civilian nuclear agreement.
Given the constraints and the stiff competition faced by an economically stronger, cash rich, and politically better equipped China and the strategy it has chosen to bridge the growing gap of demand and supply, its policy formulation and implementation has been anemic at best:
Firstly, the government has four departments that deal with energy and often work at cross-purposes with each other. Hence, the ministries of coal, petroleum and natural gas, non-conventional energy, power and the department of atomic energy need to be made sub-ministries under one senior minister who is capable of creating a vision and architecture that would meet the energy needs.
Secondly, if India is to grow it needs large investments in the energy sector and this cannot happen with only government funds. While the policy makers invite other nations and companies to invest, they have done little to restructure the internal structure of agencies working on energy. States control electricity boards that are largely bankrupt and propped up only because of continued financing. The reasons why these boards are financial failures is because they continue to sell electricity at prices that are lower than the price of generation while the policy makers keep giving away power free to farmers. Study after study has shown that Indians, especially farmers, are willing to pay for power as long as it is reliable and affordable and yet by giving away free or ridiculously cheap power to farmers, the government has encouraged a culture of wastage. Because of low power input, farmers routinely plant the wrong type of crop for quick profit by sucking out ground water. When water tables go below a sustainable level, the go deeper and use more energy. Hence, there must be a national policy that rationalizes power pricing that encourages responsible behavior and usage.
Thirdly, policy makers also need to embark on serious reform of electricity generation, distribution, and usage. While 80% of India has access to energy more than 30% is lost in distribution and a large amount is also stolen or unaccounted for. Through a strong system of legislation that criminalizes power theft or facilitation of power theft, incentives for optimal usage, and a good process of monitoring power distribution, the nation can ensure that it gets optimal usage of high energy costs.
Fourthly, the country should gradually work its way away from the use of low-quality coal to protect its environment and agriculture. The high emission of greenhouse gases from its low-tech coal-fired plants burning low-quality coal is greatly altering weather patterns, rainfall levels, and quality of air. As a largely agrarian nation, India will be greatly affected if this trend continues and brings in long-term drought and famine.
Fifthly, India imports 65% of its oil which contributes nearly 1/3rd of its energy needs which has increased six-fold in the past 25 years and some estimates suggest that the nation will import up to 90% of oil by 2025. Given the inadequate investment in oil and natural gas exploration and even if it were to find new oil fields, the gestation time required to exploit new finds being too long, the nation is increasingly trying to grab oil from any source—even if it is politically inconvenient Sudan, Syria, or Iran. Given the unreliability of Iran as an energy supplier and the political uncertainty in West Asia and Sudan, the supply of energy from these sources cannot be guaranteed. Given the geography of the nation, India has not created many alternative sources.
Sixthly, Natural Gas consumption has grown faster than other types of energy source and the nation has been desperately trying to create reliable sources from Iran, Turkmenistan, Myanmar, and Bangladesh. The geography and topography of the land makes it impossible to port gas without active, sincere, and guaranteed support from Pakistan and Bangladesh. The political insecurity in these nations, the terrorism in provinces through which the pipes should pass, and the recalcitrance of Bangladesh make is impossible for any of these projects taking off. Besides, the unreliability of Iran to honor its international contracts, despite historic ties with India, makes it an unreliable supplier of natural gas.
Seventhly, even as the US signed into law the historic nuclear deal, the implementation is bound to take several years to complete. Besides, even though it is cheaper, the upfront capital expenses to set nuclear plants are bound to be high and the government will be unable to fund the whole plan itself. If the nuclear power is to become a reality and make a significant impact in meeting India’s energy needs and more than the present 3% private investment in this sector is imperative. To attract private investment, the government must have mechanisms in place where private players can supply energy to those who are willing to pay at prices that are sustainable.
Eighthly, the competition from China in bidding for oil contracts is driving the price of oil high. Since India does not have comparable cash or politically gumption, it needs to evolve strategies where it does not have to rely so much on conventional sources of energy. Already, India is one of the largest producers of power from non-conventional sources such as wind power. This is an area that needs serious attention where subsidized wind, solar, and bio-fuel is encouraged to reduce the dependence on oil imports. Instead of looking at these subsidies as expenses, the government needs to look at them as import substitution costs that will pay off major time in the future, Not only will it insulate the nation from oil prices, it will also reduce pollution and greenhouses gases and help it claim credits under Kyoto Protocol. Most importantly, it will do wonders for the air quality and reduce climatic impact.
Without concerted and focused attention to the looming energy crisis, India’s well laid plans for growth and global expansion will crash and remain pipe-dreams.