Not running on plenty now
India must have a finger in every energy pie since the future is uncertain.india Updated: Nov 07, 2011 23:56 IST
India's energy sector is in parlous shape - and the present acrimony over the decision to raise petroleum prices by Rs1.80 a litre is a symptom of this larger malaise. It is unfortunate that this relatively innocuous decision by the oil companies, one that doesn't even affect supposedly socially sensitive petroleum products like cooking gas and diesel, should cause so much political discord. Unfortunately, pricing and regulatory problems bedevil almost every energy sector in India. Natural gas investment and supply are down because there is no clarity on allocation and price. Coal supplies to power plants have become a daily gamble. Nuclear power is under so much flak that its future existence is in question. Solar and wind power continue to be little more than niche sources of electricity.
But nothing is as politically sensitive and administratively complicated as the sale of petroleum in India. The Kirit Parikh Committee on energy security admitted that the number of taxes, duties and so on that were affixed to a barrel of crude made it almost impossible to work out who were the ultimate financial beneficiaries. The result is that India's petrol consumption is the worst possible mix of incentives and short-term measures that any nation can conceive. The State-owned oil companies are among the least efficient, hampered as they are by huge subsidy bills and constant political interference. Their cash reserves are minuscule by industry standards. They have little money for exploration, none for technological development and, unsurprisingly, are regularly outbid for overseas energy assets by Chinese rivals. Politics has skewed prices so that the entire country is, in effect, becoming 'dieselised'. The argument that diesel subsidies are socially progressive is ludicrous, as benefits overwhelmingly go to trucking firms and individual car-owners. India promotes diesel consumption to such an extent that it actually drives up global prices of diesel, leading to further subsidies and ever higher prices. The subsidies have also spawned a huge nation-wide adulteration mafia that lives off the price differences between petroleum products.
The subsidy issue and its impact on the energy profile of India is another part of the power story. The future of energy worldwide is one of uncertainty. Is petroleum running out? Will shale gas dominate power production? Is nuclear power finished? Will climate change agreements spell the end of coal-fired electricity? And all of this is going hand in hand with a declining ability of the United States to maintain stability in West Asia, still the world's main hydrocarbon source. This is why it is more important than ever that India has a finger in every energy pie. This means as diverse a pool of energy sources as possible and a technological capacity in as many of them as possible. But policy confusion and short-sighted populism have meant an increasing dependency on fossil-fuelled thermal power - about 120,000 of the country's total 182,000 megawatts of installed capacity. There are many sinkholes that could wreck India's economic progress. Energy is one of the largest - and one wholly of the making of Indians themselves.