The International Energy Association?s (IEA?s) meetings last week underlined how critical China and India?s energy needs are to any sensible energy forecast. We have known this from the time we modelled India?s future for the United Nations? preparations for the Rio plus 10 meeting at Johannesburg. That?s when the UN released its sustainable development framework for large developing countries. The India study was put together by Kirit Parikh and me, and the China study was by the Chinese Academy of Sciences.
It?s an even bigger issue today. The Prime Minister?s new council on this subject has also underlined the need to do something, and now that our own RK Pachauri has got the Nobel prize for the council he heads, global attention is on us. It is good to take energy seriously now that India is growing as fast as China?with an economy potentially as large and energy resources as thin. But here, the similarity ends, and it would be wise to be conscious of this. The differences in China and India?s energy consumption patterns are tremendous, and it would be na?ve to ignore this as the noose tightens. For its projections, the IEA clubbed the two countries together for the media buzz that ?quantum breaks? generate (an expression I coined). But this is not a page 3 issue. According to the IEA?s own statistics, which are missing in its recent media releases, India is one of the world?s leanest users of energy and China is one of the fattest.
IEA estimates show that in terms of kgoe/$2,000 of GDP in purchasing power parity terms, China had an energy consumption of 0.23 in 2003 and is in the league of energy-guzzlers like the US at 0.22 and Canada at 0.27. The global average is 0.21, and India at 0.16 compares well with the UK?s 0.14 and Japan?s 0.15. Since the mid-1980s, Indian industry?s energy efficiency has risen dramatically. Industrial reforms, with the easing of controls on output, import, prices, investment, tariffs and taxes, resulted in technological change, better scale economies and more efficient use of capacity. The changes were noticeable in energy guzzling sectors like cement, paper, steel, aluminium, petrochemicals and fertilisers. This was in line with the strategy of the Eighth Plan paper presented to Rajiv Gandhi in 1989, which said that reforms would mean higher factor productivity and lower capital cost for every rupee of output. Energy use for cement, on the basis of private sector investments underway, was expected to go down from 1.3 giga-cal per tonne to 1.0, for aluminium from 19,000 kwh/tonne to 17,000, steel from 700 kwh/tonne to 415, and so on. This actually happened, as reported by the Bureau of Energy Efficiency, and Pradipta Ghosh has recently argued that this has continued. For the 1995-2005 period, his calculations show that specific energy consumption has gone down by 3.5% annually in steel, 7.5% in cement and 1.8% in aluminium.
Thus was adversity turned into an advantage, with demand adjustments making up for the energy sector?s inability to keep pace with development. Of course, the power capacity of non-utilities also grew fast, up from 3,500 mw in 1980-81 to 19,500 mw in 2005-06, resulting in an incredible 15.69% of India?s power capacity in the so-called captive sector. This was costly and inefficient, but in a recent CIGI meeting in Canada, I was tickled at the suggestion of a Canadian energy efficiency expert that decentralised power generation sources can be more easily retooled to renewable sources. He was suggesting that if captive power was as large as my working paper on India?s energy showed, furnace oil or naptha could be substituted by vegetable waste, solar power or wind.
India has also coped with its energy requirements of fast growth by raising the plant load factor (PLF) of existing power capacity. Capacity growth, which was at around 120% in the 1980s, went down to around 60% in the 1990s, and was only around 20% in the 2000-2006 period. The reforms period has seen very little progress on capacity augmentation. Generation growth was also around 120% in the 1980s, and so capacity use was roughly constant. But in the 1990s, at around 90%, this figure far outpaced capacity expansion, showing a substantial increase in PLF. However, in the current decade, the slack seems to have been used up and both capacity and generation growth are running neck-and-neck at around 20%. The average PLF is around 75% for the typical hydel year, and planned shutdowns for repairs will lower the figure. Generation growth, therefore, is now low?at less than 5% annually, as compared to around 9% in the last decade. Clearly, there is a crisis looming on the horizon, and recent reform measures must succeed for it to be averted.
Again, China has followed a different path towards energy sufficiency. Its capacity growth is tremendous. While the pursuit of efficiency in energy use will continue in India, since capacity growth is taking so long, its leaner energy economy has little scope for improvement, and the PM?s council would be well advised not to suggest otherwise.
?The author is a former Union minister for power, planning and science, and was vice-chancellor of JNU. Email: alagh@icenet.net