Indira and the First Energy Crisis

As India remembered Indira Gandhi,an astute commentator pointed out that half of India's current population was not there in her time.

As India remembered Indira Gandhi,an astute commentator pointed out that half of India’s current population was not there in her time. That may well be the reason for her handling of India’s first major global economic crisis,the impact of the First Energy Crisis,being ignored. Since I joined the Planning Commission as the adviser head of its powerful Perspective Planning Division in my first stint with the government then,one was in the ringside. The OPEC raised oil prices and from 1972 onwards the global economy went into a tailspin. Prices rose – by double digits in 1972 and 1973 – and output and employment fell. India was no exception. But as a wag put it,in the energy crisis England discovered North Sea gas and India had an energy policy report.

Indira Gandhi took the energy policy needs head on. India’s oil imports were rising rapidly on account of low prices and stagnation for over a decade in coal production Petroleum prices were raised savagely.

India had the highest price of petrol in the world then. Diesel and kerosene were spared. Indira Gandhi did not believe in half measures. I have always believed that if it is needed to raise prices it should be done in one stroke rather than bleeding in small doses,and did so when I was Minister. Car pools shifted to contract buses.

In Gujarat,scooters had side cars attached to them. Demand growth for petroleum went down from 7 per cent to zero and imports actually fell. The younger generation simply has no idea of what frugality meant in those days.

For younger people like us who joined the government at high levels,as Nitin Desai put it,people thought we wore Coptex bush shirts and Kolhapuris for fashion,not knowing we couldn’t afford shoes.

India’s coal production had stagnated at around 60 million tonnes for over a decade. The sheer audacity of the inefficiency of the foreign and Indian coal mine owners was mind boggling. With no investment in the mines or conservation,as an official history of an MNC,showed the managers slept in gold-plated beds. Coal Mines were nationalised. Production started rising by 10 million tonnes every year and Indian coal was produced and sold at the cheapest rates in the world,while the mining companies were also making money.

In electricity India started with the novel idea then,of putting up super thermal power plants at pit heads of the coal mines and shipping very cheaply produced power to the consumption centres. V Krishnamurthy rejigged the BHEL from a sick company to one of the most powerful of its type anywhere. Some of the top managers we have known in the public or private sectors got their badges building up super thermal power plants on time.

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The second half of the ’70s and the ’80s was the golden age – high growth,STPs,large transmission networks,transmission losses at 17 per cent considered high and only a few SEBs suffering losses. All to be rudely shaken up since 1991.

In 1976,the then finance minister was to declare with some pride that we were one of the first ones to emerge successfully from the energy crisis. With an Indian philosophical mindset he declared that we had a negative rate of inflation. He could have said prices were falling but the double negative of inflation falling,while grammatically incompatible with the Queens English,sounds more impressive.