Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

Book Review | The Political Economy of Energy and Growth

A volume of essays in honour of Vijay Kelkara man who has been at the vanguard of reforms in the energy sector

Observers of the energy policy landscape were shocked to find that one fine day in July 2012, half of India plunged into total darkness after the most of the electrical grids collapsed. It was something unheard of in the past. That it happened in India, one of the fastest growing emerging economies, pointed to a deeper malaise than just bureaucratic mismanagement. The really odd bit though, was that India suffered such a breakdown even when roughly half of Indians have absolutely no access to electricity. Overall, India’s per capita energy consumption is just 30% of the world’s average and Planning Commission estimates suggest that if India has to sustainably grow at 8% for the next 25 years, it would need five-six times the electrical supply.

But the problem is not just about electricity supply. India faces a grave energy crisis if the business as usual approach continues and it needs to urgently start work at shoring up its energy security if it has any real ambitions to grow into an economic superpower. The search for resources will not be easy or without competition. Global energy demands are expected to increase by about 40% in the coming decades and the biggest chunk would come from developing countries like India.

The problem before India is twofold. India is not the best endowed country in terms oil and gas resources and is hugely dependent on imports. Currently it imports roughly 70% of its crude oil demand, 17% of its natural gas and 12% of its coal. All these percentages are expected to go up substantially over the course of the next two decades. The other, and perhaps bigger, hurdle are the domestic policies especially those related to pricing energy. India has been loath to give up on “administered prices" of oil and gas. Over time, price distortions have adversely affected consumption on the one hand and ruined government’s balance sheets on the other.

It seems timely then for Oxford University Press to come out with an edited volume of essays, The Political Economy of Energy and Growth, in honour of Vijay Kelkar—a man who has been at the vanguard of reforms in the energy sector for the last three decades. The book contains 14 essays by national and international energy experts making sense of what ails India’s energy landscape and how it can be set right.

There are two salient themes that emerge from the different essays. One, the need for India to seriously pursue natural gas as the fuel of the 21st century. A strong case has been made by several authors, always acknowledging Kelkar’s foresight in this regard, for investments in long-term supply contracts in LNG (liquefied natural gas). Writers argue for the government to lay down clear and consistent ground rules to explore and develop the domestic natural gas market. A liberalized regime—where prices are market determined—supported by improved regulatory backup could unleash the natural gas potential that exists within Indian shores. In the past, the New Exploration and Licensing Policy (Nelp), aimed at developing domestic oil and gas sources, has met with little success. In the nine rounds of Nelp since 1999, 257 blocks were auctioned but till date only one block, the KG-D6, is actually a producing asset. Any new regime which hopes to redo the process would also need to involve the private sector in bringing up the gas infrastructure in the country such as the pipelines, LNG terminals and city gas distribution networks. Focus on natural gas, which has many benefits over oil as an energy source, is an obvious choice but the governments have been too slow to react.

The second theme though is far less obvious. Energy security has for long been viewed as a zero sum game. However, it is argued that individual national responses are costly and inefficient and fail to address the uncertainty involved in the demand and supply of energy across the globe. The call thus is for increased cooperation with other nations. Such cooperation would allow countries securing sea lanes and pipelines. But such a change in approach requires visionary leadership, which can walk around long-standing conflicts and focus on what really matters. Do we have such leadership? We will know soon if the lights are still on.

Udit Misra is Assistant Editor(Views) at Mint.

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