The greatest deficiency in India’s energy sector lies in the area of natural gas. Though it is touted as the greenest fossil fuel, natural gas contributes two-thirds less to India’s energy profile than the global average. This is why the announcement that gas discovered off the Krishna-Godavari river basin has begun to course through the country’s pipeline system is more than just a matter of commercial interest. Such indigenous finds, in combination with investment in the infrastructure for imported gas, hold out the promise of transforming what has been the most stunted energy sector.
The change is not just about the impressive amount of gas coming on stream. If the Krishna-Godavari D6 field produces to expectations, it will provide an opportunity to end what has been a destructive industrial environment borne of an acute gas scarcity. This scarcity generated a vicious economic cycle.
As gas is crucial to fertiliser and power production, it became a target of price controls. The price controls scared away investment in gas prospecting or production. This, in turn, ensured gas remained scarce and further fed popular demands for price controls. The present calculation seems to be that if enough gas enters the system not only will the demands for fertiliser and power be met, but there will be enough to nurture nascent, market-friendly consumers like piped cooking gas and manufacturing.
Ensuring natural gas escapes the clutches of populism will not be easy. Farmer demand for cheaper fertiliser and free power could, in theory, convert any surplus into deficit. The present gas allocation policy attempts to firewall the sector from this possibility, but only a small political push would be needed to break down that barrier. Such a development would be unfortunate. A vibrant, indigenous gas sector is crucial to India’s future.
The coal industry has become so inefficient with nationalisation that it is now cheaper to import coal from the other end of the world. The nuclear sector is free of foreign shackles but still in the clutches of a domestic bureaucracy. Oil has not been found in the subcontinent in any sizeable quantity. Power is the most tangible barrier to India’s economic rise. And the energy drama cannot end happily if gas does not have a heroic role in the script.