With India consuming high levels of energy, serious efforts need to be taken by the new government to avoid a severe energy supply crunch

India will soon witness a new government in control. Among the multitude of burning issues, the new government will have to face the challenge of a growing energy crisis. It will require extraordinary effort, innovative vision and viable solutions to tackle the increasing demand for energy, while maintaining an eco-friendly approach. Energy commodities comprise gas, oil, coal, renewable energy and electricity.

Currently, high levels of consumption with respect to energy-related commodities are paralysing operations in the country because of non-performing policy initiatives. The demand-supply imbalance is evident across all commodities, requiring serious efforts by the new government to augment energy supplies to avoid a severe energy supply crunch.

The Planning Commission indicates that by 2016-17, the country will manage an approximate 6.7 million tonnes of oil and by 2021-22, this will rise to 850 million tonnes. However, this will meet only 70 per cent of the expected demand; the remaining 30 per cent will have to be sourced through imports.

Even though India possesses a rich heterogeneous mix of energy components, deterring policies have created a difficult environment for potential investors.

Demand for coal

Coal will continue its dominant position in India’s energy mix for many years to come. Today, 54 per cent of the total electricity generation capacity is coal-based, and more than 70 per cent of energy generated is from coal-based power plants. As per the 11th Five Year Plan (2007-12), 67 per cent of the planned capacity added is also coal-based. While domestic production is set to touch 795 MT in 2016-17, the projected demand for coal will be 980 MT during the same period.

Coal reserves in India, presently mined by Coal India Limited and its subsidiaries, are around 293.5 billion tonnes, with a few blocks being given to private parties for production of electricity and captive use. From 2012, the country has seen a paradigm shift in coal policy, with the Comptroller and Auditor General stating that there was a national loss of Rs.1,76,000 crore. This resulted in the Ministry of Coal removing coal blocks, but it is obvious that the new government will have to collate a clean coal policy with respect to exploration, mining and use.

Another important concern is the reduction in dependability on imported coal. Last year for instance, we imported 100 million tonnes from Indonesia.

In addition, the next government must give serious thought to pricing, regulation and resolving disputes for domestic coal, in a manner favourable to both coal blocks and users.

The KG-D6 basin experience has not gone down well with the majority of the people, which is one of the reasons why we need a complete overhaul of the situation. The main issues of tariff are being debated. The country has vast reserves of gas and the new government should now explore attractive opportunities to lure foreign investors for gas exploration. The government can fix contracts based on the O&M or Public-Private Partnership model, which would ensure that operators don’t pocket extra profits or face undue losses. Natural gas resources in India were an estimated 1330.26 billion cubic meters (as of March 31, 2012). There has been a steady increase in the availability of natural gas, mostly due to indigenous discoveries of more reserves. Opportunities regarding exploration of gas must be formulated to maximise foreign investment in a big way.

The New Exploration Licensing Policy requires revision to derive maximum benefits from gas acquisition and create more employment opportunities.

Further export of gas would set off expenses of equivalent imports. We can’t afford mindless imports of coal, oil, gas as we are doing today, while compromising our national energy security.

We could provide a right of first refusal to state-owned companies if they undertook time-bound responsibilities to do the job. We can’t avoid private sector participation given that we could not even explore 40 per cent of our probable gas reserves in last seven decades. Exploration is also capital-intensive and a risk-fraught business, which requires expertise.

With lack of good resources, crude oil has to be imported. However, the government needs to address the issue of pricing of petroleum products drawn from crude oil, which fluctuates every fortnight. Instead of fortnightly revision, we can have annual pricing based on the previous year’s import parity. Current estimates of crude oil reserves in India stood at 759.59 million tonnes, with maximum reserves in the western offshore. In March 2012, the crude oil refining capacity of the country was 198 million tonnes per annum.

Investing in electricity

Electricity has become the lifeline of the country, with per capita consumption touching 1000 KW, but we are still lagging behind China and other developing countries. The total installed capacity for electricity generation was 2,66,387 MW in March 2013, but distributing electricity at the retail level at affordable and reasonable prices is still a nightmare. Secondly, the regulatory framework for the electricity business needs strengthening. Loss in distribution is a worrisome factor and sadly efforts being taken to bring down losses are not encouraging. The new government must invest in this field, which may involve rationalising tariff and incentivising reduction of losses.

Renewable energy generation has a potential of 89,774 MW, with Gujarat having the highest potential. Unfortunately, the country does not have any existing Renewable Energy Law. Renewable energy comprises 60 per cent of electricity and 40 per cent of other sectors. Climate change is a global issue, warranting the new government to implement a Renewable Energy Law, that would make it mandatory for all conventional energy users to use a certain percentage of renewable energy. This process has started in electricity, but needs strict implementation across all segments.

Merely levying a carbon tax on imported coal will not yield sufficient results. Renewable energy comprises solar, wind and biomass. Wind power accounted for the highest capacity of total installed renewable power at 69.65 per cent, with small hydropower coming second at 13.64 per cent and biomass power at 12.58 per cent.

The new government must aggressively work on energy as the main agenda. We should have an energy commission for formulating synchronous policies with other inter and intra ministerial departments. States must also be taken into confidence. Progress of the energy sector will provide mindboggling opportunities for employment and socio-economic growth, besides raising the standard of living in the country.

(Suresh Prabhu is former Union Minister for Power.)

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