The rapid rate of economic growth registered by the Indian economy so early in the new millennium raises aspirations that the 21st century would possibly be India’s century. Sustaining a healthy rate of economic growth, however, would require substantial improvements in several sectors, one of the most important of which is energy. Over the past two decades, much of the ills that afflict India’s energy supply and distribution industry have largely been submerged under the growing consumption of hydrocarbons—in a period when oil prices remained at historical lows after crashing in 1985.
That phase is unmistakably over. There is a serious concern that higher demand, particularly in the US, China and India, could exert so much upward pressure on known sources of supply that prices could rise significantly in the future. There’s also the concern on security of supply related to the geopolitical conditions likely to prevail in major exporting countries of West Asia. India needs to build these factors into its energy strategy.
In 1991, some efforts were made to reform the country’s power sector, which had become financially bankrupt. The management of this sector was continuously subjected to political interference resulting in high levels of inefficiency, manifested in high transmission and distribution (T&D) losses, frequent breakdowns resulting in major losses to the economy and hardships to consumers across the country. The initial wave of reforms, which targeted private capital inflows for power generation, proved to be largely misplaced, because there were no matching reforms at the downstream end of the electricity supply industry. Legislation was brought in later to correct this situation and incentivize the unbundling of specific segments of state electricity boards with a move towards a commercial culture of management. The progress of reforms in this regard also has been slow, largely because of political resistance, and less-than-satisfactory capacity and capabilities exhibited by the regulatory commissions that have come into existence as part of the reforms package. In essence, the electricity-supply industry still remains dominated by inefficiencies that could become a major constraint to economic growth in India.
Another aspect that has a direct impact on the country’s energy choices is the growth of major energy-consuming sectors such as transport and housing. The proliferation and extended use of private motor vehicles not only increases our dependence on oil imports, but also, and even more significantly, creates a culture in Indian society which is based on a reverence for the private automobile, so prevalent in the countries of North America.
The expansion of this love affair between Indian society and motor cars can prove fatal in respect of energy-import dependence. Substantial strengthening of the public-transport infrastructure and services is, therefore, important for creating energy security. Equally important is the need for buildings and homes under construction to incorporate the best knowledge available for efficient use of energy, and to minimize impacts on the environment.
Teri has taken the lead in creating advanced knowledge on sustainable use of energy in buildings and structures and has constructed in India several buildings that create a benchmark in energy efficiency not even seen in other societies.
Another important aspect is the lack of options for supply of modern forms of energy in rural areas. The result is that several hundred million people in rural India have to cook meals using inferior fuels, primitive cooking technologies, and a lack of ventilation exposes women and children in particular to heavy doses of harmful emissions. Viable options for supply of clean and modern fuels have not yet been established in this country, nor have we been able to harness renewable sources of energy on a decentralized basis to ensure that energy can be made available for local enterprises, refrigeration for storing medicines and vaccine, and cold chains for storage of fresh produce. India’s economic growth in the future would depend critically on a new model of rural development that creates employment and ensures a large increase in the use of renewable sources of energy, which are available on a decentralized basis in rural India. An approach that would make this possible would also help address the growing problem of disparities in income and wealth.
The 21st century can’t provide India pre-eminence in the world, if we have teeming millions continuing to live in abject poverty. An enlightened energy policy has to be devised and implemented to suit local resource endowments, low income and wealth conditions and lack of finance in rural areas. The gap can be closed only through a multi-pronged approach that ensures an inflow of inputs into rural areas to create conditions for the generation of income, wealth and employment on a sustainable basis.
Overall, therefore, while we have seen major technological changes in several segments of the Indian economy such as information technology and telecommunications, the situation in the energy sector continues to cause concern. Economic growth and equitable development in the country could fall under siege by a stagnant energy sector, and an unresponsive system that does not spread sustainable solutions for the benefit of the rural population. At the same time, major reforms of the power-supply industry are long overdue because in the absence of rapid change in this sector, neither would adequate private capital flow in nor would technological changes come about to create higher levels of efficiency.
With the prospects of fuel supplies constrained or accompanied by high prices, the Indian energy sector would remain inefficient, imposing high costs on industry and commerce. India’s competitive position in the global economy could, therefore, be threatened. The one factor that provides hope against this scenario of inadequacies is that realization of current problems is seeping into the political system as well. Hence, there is reason to hope that sooner rather than later reforms will be implemented.
If this were to happen in the next five years or so, the Indian economy could get energized to make this the Indian century.
R.K. Pachauri is director general, The Energy and Resources Institute (Teri), and chairman, Intergovernmental Panel on Climate Change (IPCC)