Breaking the oil habit

In the past, several committees have carried out the exercise of assessing and defining an energy policy for the country, but their recommendations received temporary attention only to be quietly forgotten, a sad reality that I have seen as a member of several of these committees including the advisory board on energy established by Indira Gandhi. Unfortunately, the fragmentation of decision-making on energy in the government and the demarcation of responsibility between Centre and state renders integration of decision-making in the energy sector extremely complex and difficult. Another shortcoming has been the fact that energy policy unfortunately has been seen only as a supply side exercise without concern for restructuring the major energy consuming sectors and activities and ensuring proper management of demand both in the short as well as the long run.

Even more inadequate and isolated from mainstream decision-making has been the area of technology development, which is critical in addressing India’s long-term energy challenge. The Indian economy and the expectations of the public are now at a crucial stage, which require some major departures from past practice. India’s future energy challenge would significantly dwarf the difficulties and problems we have faced in this sector in the past. There is the looming danger of serious imbalances in energy supply with the prospect of oil demand in the country increasing from over 2.7 million barrels per day currently to around 5.2 million barrel per day in 2030. Consequently, our vulnerability to sudden and sharp prices in the global oil market would grow substantially. There is, therefore, an urgent need for diversification of sources of supply of oil and towards greater use of other forms of energy.

One major strategy for diversification of supply is to import natural gas from neighbouring countries. It was with this in view that in 1989 Ali Shams Ardekani, a former deputy foreign minister of Iran, and I proposed the import of natural gas from Iran to India through Pakistan. Quite expectedly this project faced and continues to face several political hurdles, but the initial resistance in India also came from mindsets that dismissed natural gas as a source of energy, with emphasis on “high value” applications such as production of petrochemicals and fertilisers. Happily this view has changed, particularly with other countries using large quantities of natural gas as fuel. The basic reality is that if adequate changes are not made both within the sectors that consume energy as well as in energy supply, India would become not only a major importer of oil reaching around 300 million tonnes per annum in 25 years but also of coal.

While we have an abundance of coal reserves in the country, limitations in mining capacity and the transport infrastructure would constrain the extent to which we can use indigenous coal. Over the past few months several power stations have in fact had to impose power cuts because coal supplies did not keep up with demand, leading hurriedly to imports. Imports of coal could reach up to 400 million tonnes in 25 years.

The delay in securing large quantities of natural gas imports only adds to the inevitability of larger oil and coal imports. The Iran-Pakistan-India pipeline seems stalled for the present, and could remain so almost indefinitely.

Against this background, the appeal of nuclear energy as an important element of future energy security becomes increasingly relevant. However, the country needs international acceptance of our status as a nuclear weapons state for opening up import of nuclear fuel and rapid and significant increase in nuclear power generating capacity. The July 18 agreement between President George W. Bush and Prime Minister Manmohan Singh must, therefore, reach early culmination. The agreement however can only go through if our politicians and the US Congress see the merit in breaking from the past and charting out a new path in Indo-US relations and opening up prospects for large scale increase in nuclear energy production in India.

The formalisation of the agreement between the two countries is of course as complex as commensurate actions that would need to be taken to give it full substance. For example, France took a conscious decision to increase nuclear power supply while simultaneously modernising its rail system and shifting to electricity for rail traction. Integrating energy policy in this country would also require a similar long-term perspective involving both supply and demand side options. This includes the need for moving the Indian economy towards higher efficiency of energy use. Even more important would be the creation of a technology vision and a programme of research and development that would move us to greater use of renewable sources of energy, such as solar, wind and biomass, which exist in abundance in this country. Also necessary is the need for developing and commercialising coal gasification technology in which India’s efforts in the past have been dismal.

The Indian economy could falter and certainly not maintain the rates of economic growth which we aspire to, unless the US-India nuclear agreement takes effect and the government pushes forward with urgent reforms in the energy sector.

R.K. Pachauri is director-general, TERI