Resource security matters for India. It has to simultaneously secure energy, water and other minerals to support economic growth; meet basic needs for food, fuel and water for a growing population; and manage the environmental constraints and consequences of increased resource use. It has to compete in international resource markets even as global energy and food prices have become more volatile in recent years.
Energy, food, water and climate form a resource nexus, affecting each other. Consider energy’s impact on food, water and climate. In agriculture, oil accounts for 42% of energy use, so high or volatile crude oil prices drive food inflation and impact the fiscal balance if subsidies cushion some of the shock. With subsidized but poor quality electricity, farmers over-extract groundwater for irrigation from more than 16 million electrified pumpsets, leading to both water and energy shortages, and land degradation. The climate is affected by fossil fuel demand in India and elsewhere. Natural gas could partially mitigate the impact but its use would depend on pricing decisions, infrastructure, and bilateral agreements to import gas.
Food markets, in turn, are affected if crops are diverted to produce biofuels. Inefficient subsidies elsewhere, such as for corn-based ethanol in the US, impact global prices for major crops. Cropping patterns also affect water use efficiency. If food security is largely measured by rising stocks of foodgrains, then continued production of water-intensive crops, such as rice, in our northern states will further deplete water tables.
Water is central to food production (more than 80% is used in agriculture with groundwater taking a majority share). As groundwater levels fall rapidly, food output will be adversely affected unless demand-side efficiency measures are adopted. This will, in turn, raise food prices, undermine food security and threaten farmers’ incomes over the long term.
Water is also critical for energy. Thermal power plants use nearly 88% of water used in industry. More than 70% of existing and planned thermal and hydropower capacity is located or expected in water-scarce or water-stressed areas. Some types of renewable energy, such as concentrated solar power, also need water for cooling.
Trade in agricultural commodities embeds water which has been used in their production. If water stress increases, virtual water could be imported. But it would also involve risks associated with commodity price fluctuations, foreign exchange pressures, vulnerability to extreme weather events in food exporting countries and threats to farmers’ livelihoods in India.
In response to this resource nexus, India has to act at home and on reforming global governance of resources. Five priority actions are paramount, three against supply constraints and two regarding demand pressures.
First, develop infrastructure for importing and transporting resources. India will be reliant on energy imports, so it should build infrastructure commensurate with long-term resource needs. This means greater capacity for coal imports on the western coast, more oil and natural gas terminals in the east, larger strategic reserves of oil, and greater inland freight and pipeline capacity.
Second, promote distributed energy infrastructure. A blend of different renewable energy sources via smart microgrids could reduce the grid load, offer energy access solutions, and allow for productive uses of renewable energy. Distributed energy could also lower the risks for energy infrastructure should the grid collapse or come under any attack.
Global energy markets are constantly changing. For the first time since 1995, US domestic crude oil production will exceed its imports by end-2013. China has already become the world’s largest oil importer. This has profound implications for global security, protection of sea-lanes, interventions in oil rich but politically fragile states, and the role of markets versus resource nationalism.
Therefore, third, India should actively work with other second-tier energy demanders to develop regional and multilateral energy regimes. Such a forum could emphasize the importance of markets, reduce threats of sudden disruptions of supply, protect overseas investments, increase transparency, and arbitrate on energy-related disputes.
Fourth, on the demand side, promote water use efficiency in agriculture. This is a complex task, involving energy policy reform, use of latest technologies, improved cropping practices, and participatory irrigation management along with farmers. But the National Water Mission could catalyse action (just as the solar mission has done for solar energy) with targets; timelines, transparently selected project interventions, and associated incentives to change behaviour. Water use efficiency in agriculture will have positive spillover effects on energy demand and food security.
Finally, from a global resource demand perspective, India must emphasize basic needs against mercantilist negotiating positions. For other major economies, mercantilist interests predominate. India, too, needs technologies and markets. But its primary aim should be to reform global governance to align with its development needs. For instance, it has more in common with smaller developing countries than China in climate negotiations. A global atmospheric space carved up by the US, China and Europe will leave little for India and others. India needs to find new allies in climate negotiations.
Arunabha Ghosh is CEO, Council on Energy, Environment and Water, an independent policy research institution.