India?s energy consumption beats GDP growth due to subsidies

India?s energy consumption has risen at a compounded annual growth rate of 5.96% in the last three decades even while GDP has grown by 5.7%, pointing to need for fuel price reforms and securing more of the hydrocarbon from domestic sources.

According to the Energy Statistics report for 2013 prepared by the ministry of statistics and programme implementation (MoSPI), the per capita energy consumption has grown by five times to 6205.25 kWh at the end of 2011-12 from 1,204.39 kWh in 1970-71, a CAGR growth of 3.98%. The per capita energy consumption was up by 7.2% during 2011-12.

Energy consumption has increased by 10.45% in 2011-12, much faster than the GDP growth of 6.2% as prices of fuels have risen sharply during the year. In fact, the energy consumption has been growing faster than the economy for the last three decades. The CAGR increase in energy consumption was 5.96% since 1970-71 compared to GDP increase of 5.65%.

?Energy has come to be known as a ?strategic commodity? and any uncertainty about its supply can threaten the functioning of the economy, particularly in developing economies. Achieving energy security in this strategic sense is of fundamental importance not only to India?s economic growth but also for the human development objectives that aim at alleviation of poverty, unemployment and meeting the Millennium Development Goals (MDGs),? the report said.

What?s worrying is the growth in consumption of subsidised fuels like LPG and diesel have grown faster than those whose prices are market-linked.

The country?s heavy reliance on crude oil and recently coal imports to meet rising domestic demand have resulted in widened the fiscal and current account deficit in recent years.

The trends in the consumption of petroleum products shows that consumption of subsidised fuels grew fastest LPG grew fastest by 11.23% CAGR since 1970, followed by diesel (6.96%), and petrol (5.71%) and kerosene (2.21%). While the difference in LPG and kerosene sales could be attributed to the increasing shift of household to LPG from kerosene. The consumption of LPG rose 7.17% in 2011-12 whereas it declined by 7.8% for kerosene.