Every now and then when oil prices are high, we wake up to emphasise on non-conventional energy. We also begin to realise the need for an integrated energy policy. Delineating a policy that deals with long-term demand and supply of energy, that considers different energy modes, examines the economics of alternative fuels, and promotes energy efficiency as well as R&D has been a long-felt need. In short, the imperatives for an integrated policy. It is to the Prime Minister?s credit that he commissioned a group of experts. The Kirit Parikh report on Integrated Energy Policy contains credible recommendations covering the broad contours of these intricate issues. Given their complexity, there are neither perfect nor permanent answers. Assumptions can go wrong and changing technology paradigms can alter the prognosis significantly. What does the report say?
Our per capita energy consumption is one of the lowest in the world; a 520 kg of oil equivalent (kgoe) person compared to 1,090 kgoe in China and a global average of 1,688 kgoe. In terms of efficiency, we are better than the global average, but far worse than Brazil, Japan or the UK. Proje-cted rates of 8-10% growth would dramatically raise energy demand; assured availability, as well as affordability, will greatly determine growth outcomes.
Since coal remains the dominant energy input, enhancing sector efficiency is critical. While price decontrol has improved productivity, policy remains cluttered with restrictions. Blocks held by Coal India which can?t be brought into near-term production, should be made available to joint ventures or the private sector. Even if consensus eludes the long-pending amendment of the Coal Nationalisation Act, greater private participation must be encouraged. Innovative approaches on prospecting will enhance proven reserves.
The coal ministry is driven by a populist mentality; more than a fair share of ministers have concentrated on petty rent-seeking than addressing long-term needs.
Power sector reforms got a big push with the enactment of the Electricity Act, 2003. Nonetheless, the Accelerated Power Develop-ment Reform Programme (APDRP) for upgrading the distribution system, minimising transmission and distribution losses, improved metering, assigning responsibility for realisation of user charges needs sustained action. Phasing-in of open access to enlarge consumer options by separating the wire business (carriage) from the energy business (content) would certainly help. Our cost of power is said to be highest in the world; this calls for productivity improvement, rationalised internal rates of return and long-term debt at competitive prices.
Rationalising inter se fuel pricing is not easy. While increasing application of market driven principles is the obvious direction, the absence of a well-developed market and its serious imperfections needs an orderly transition path. Fostering energy efficiency through fiscal, regulatory, and other instruments based on the principle that a megawatt produced by reducing energy needs saves more than a megawatt generated must be a priority concern.
• The main issue is of fragmented responsibility; we need a ministry of energy • Besides, regulatory issues and their harmonisation remain serious concerns • Subsidy for the vulnerable, and appropriate economic costing are crucial, too |
Pursuing hydel options to realise the 150,000 mw potential will improve the balance between peak and base load. Nuclear energy holds great potential; the breakthrough with the US and its beneficial consequences on the Nuclear Suppliers Group would help improve our civil nuclear energy programme. We can increase nuclear energy by, say, a 20-fold increase by 2032 to meet 5-6% of our energy needs.
Renewable energy needs a push. Fiscal measures, concerted R&D policy and the suggestion of converting the Indian Renewable Energy Development Agency into a national refinancing institution are worthwhile.
The socio-economic needs of the poor to mitigate the drudgery of gathering fuel wood, agricultural waste and animal dung can be ameliorated through better techniques, including their easier availability through village co-operatives. The costs, coupled with a Rs 9,800 crore programme for free electricity and a Rs 34,000 crore annual subsidy for cylinders, would need credible funding.
Finally, the report suggests a National Energy Fund, by levying a cess of 0.1% on companies over Rs 100 crore of annual turnover in the field of primary and secondary energy, which will yield Rs 500-600 crore a year. It also suggests starting several Technology Missions on coal, in situ gassification and carbon sequestration; solar technologies for thermal and photovoltaic, bio-fuel, as well as biogas and wind gasification. These have merit.
There are four unresolved issues. First and foremost, fragmentation of responsibility. We need a ministry of energy which can oversee power, coal, gas and non-conventional energy. This should be under the charge of a senior minister with ministers of state for four departments. A co-ordinative body under the PM is helpful, but no substitute for an energy ministry.
Second, regulatory issues and their harmonisation remain serious concerns. Commonality of approach to determine optimal fuel pricing needs symmetry even while we have independent regulators for power, hydrocarbons and hopefully, coal.
Third, the socially vulnerable need subsidy. Any mechanism for cross-subsidy in a country where power is already expensive would be counter-productive. So also the imposition of a cess to fund R&D. The practice of proliferating sector-specific cesses mitigates against canons of financial propriety. Both these should be funded directly from the Budget.
Finally, the issue of appropriate economic costing remains an overarching challenge. Till conventional energy is charged at economic cost, market incentives for alternative energy sources will remain weak. So would the urge to economise on wasteful use of energy. Energy pricing is a global concern. The political economy of implementing an integrated energy policy needs to address the centrality of this challenge.
