India’s energy conundrum

Following the usual pattern of the past several decades, half way into a Plan period the estimates for electricity capacity expansion have been severely downsized from the original level to roughly half of it. The electricity capacity expansion estimates for the Eleventh Plan seem to be suffering the same fate — Kirit Parikh, member (energy), Planning Commission, has recently indicated that against an ambitious target of nearly 80,000 mw, the likely capacity addition in the Eleventh Plan will be about 40,000 mw. This pattern has become so predictable that associated players can almost sit back and relax under the assumption that they would be under no pressure to deliver — a good case in point being the coal industry. Further, shortages in generation are attributed to shortages of coal supplies due to various factors. How can we go so wrong, and consistently so, in our projections? Ever so frequently, the alarm bells ring on the extremely low levels of coal stocks that our power plants are left with. In December, nearly 50 per cent of India’s power generating capacity was extremely vulnerable to disruptions on account of coal shortage. At the same time, the coal industry appears to be comfortably on track to meet its production target of 520 million tonnes by the terminal year of the current plan, that is, 2012. So, what’s going wrong? Considering the fact that our projected demand for coal by 2012 was to be in the range of 680 mt, implying a private sector/import role of 160 mt — is the private sector to blame for the coal shortages? Or, is the process of coal block allocations to the private sector still to be streamlined? After long deliberations, the coal ministry recently ruled out the competitive bidding route for coal blocks to the power, steel and cement companies — implying that the less-than-transparent route of allotments would continue. And the blame game continues with the coal ministry pointing fingers at the mines ministry for delaying the presentation of the requisite bill in Parliament. The power crisis in the country was also exacerbated by the non-availability of gas from the KG basin (of Reliance Industries Ltd) and the protracted wrangling between the various ministries of the government on the issue of its pricing. The gas-based power plants in the country with a capacity of 14,700 mw are receiving merely half of their requisite gas supply, and approximately half of this shortage would be alleviated by gas flows from the KG basin. With the RIL gas pricing issue being clarified, over 3,500 mw of generating capacity would become available in the next few weeks. On a yearly basis, the incremental opportunity cost to the country due to a delay of this nature is Rs 30,000 crore or higher. Somebody needs to be accountable for such delays. The integrated energy policy was approved by Parliament toward the fag end of 2008 after a delay of nearly three years. It focused attention, and rightly so, on the principles and mechanisms by which the energy economy should be run. However, it stopped short of discussing or recommending the institutional structure that would be needed to support the implementation of this integrated approach for energy development. The energy coordination committee constituted in 2005, under the chairmanship of the prime minister, to enable a systematic approach to policy formulation and promote coordination in inter department action, probably needs to have an executive arm that would ensure implementation of coordinated action. The above discussion shows the scale of the energy challenge that India faces. In the next couple of decades, India needs to quadruple its electricity generation capacity. Doing so blindly, on the assumption that the fuel required for running these plants would be available, could lead us into great trouble. Even the establishment of incremental capacity for manufacturing power equipment must be undertaken with a long-term perspective, allowing substantial flexibility in design to move to renewable energy equipment if feasible. The minister of state for coal has already emphasised the need for taking a harder look at nuclear and hydro energy generation options — the writing on the wall with regard to renewable energy is also becoming sharper with each passing day.