Energy Security: The most indispensable shield of a nation

The last three decades the nation has been striving for excellence in all spheres. To substantiate its development India needs a holistic approach in every walk of life. However, there are a few sectors that need to be paid attention with utmost sincerity and sufficiently to shine with the fullest potential. One of them is the energy sector and time has now come for it to be secured to shield and support 2.8 trillion economy and 1370 million over crowded population.

The ability of a nation to secure sufficient, affordable and consistent energy supplies for its domestic, industrial, transport and military requirements is termed as Energy Security. It means that the current and future energy needs have a high probability of being met, irrespective of the economic or political instability. But India’s fragile energy security is under severe pressure from its rising dependence on imported oil, regulatory uncertainty, international monopolies and opaque natural gas pricing policies. India seeks to achieve its energy security through multiple international partners e.g. Indo-USA nuclear deal, Oil import from Middle East, etc.

Current India’s energy security scenario needs to be pondered a lot by the nation think tanks. India imports 80 percent of its oil needs and is the third largest oil consumer in the entire world. India’s energy consumption is expected to grow 4.5 percent every year for the next 25 years. Recently due to high International Crude Oil Prices, Current Account Deficit (CAD) inflated because of higher cost of oil imports, raising concerns about long term economic stability in India and highlighting the importance of energy security.

Looking at India’s ambition to be a super power by 2030 which will fuel energy needs for providing infrastructure, provisioning of basic necessities, developing human skills, employment generation and manufacturing abilities.

India is currently facing an energy crisis due to its major dependency on coal and crude oil imports to meet sharply growing energy needs of the country. More than 40% of households lack access to electricity. Even though domestic production of energy resources is projected to increase, import dependence will continue. By the end of the 12th plan, import dependence on crude oil and coal is estimated to be at 78% and 22% of the demand respectively. It is estimated that up to a third of India’s power generation capacity, both thermal and gas generators, are lying idle due to fuel scarcity. While the state-owned coal mining monopoly, CIL should shoulder its share of the blame for the current crisis, the major problems lie beyond mining per se. Land acquisition and environmental clearances are essential for both new mining projects and capacity-expansion in old mines, as well as for laying rail transport lines. We therefore have a situation where even the mined coal is stuck at the pithead for lack of adequate transportation facilities and capacity-addition projects are delayed inordinately. It is no wonder that the coal blocks allocated for captive power generation remained mostly unexploited.

Another important aspect of securing energy is pricing of energy transmission which though is economically important nevertheless also a politically sensitive issue. It was precisely to depoliticize the tariff increase that regulatory authorities were established. Unfortunately, they have become handmaidens of governments.  Misalignment of energy prices pose micro-economic challenges like that of the under pricing of energy to consumers that reduces the incentive to be energy efficient though negates leakage of subsidized products for sale in the open market and macroeconomic challenges that hits either the producers or leads to an excessive import dependence with implications for Balance of Payment.

Similarly transmission and distribution losses  account for 27% of electricity generated. At least two-thirds of the national  average distribution losses (which is 23 %) are commercial losses, mostly in the form of billing deficiencies or pilferage.

It is not that the Government has not taken the immense measures to live up to the potential. India has already committed to bring electricity to every household by 2022. An even more ambitious goal would be to provide electricity to all households on 24×7 basis. To bring clean fuel in rural areas the Pradhan Mantri Ujjawala Yojana, should be complemented by setting up of biomass palletizing units and distribution of ‘efficient biomass chullahs’. On the agricultural front, solar irrigation pump distribution target must be stepped up and financed through the credit support from NABARD and through government subsidy. The potential non-conventional energy sources must be explored and researched to make them technologically advanced and viable, economical and accessible, like geothermal energy, tidal energy etc. The National Mission for Enhanced Energy Efficiency (NMEEE) should conduct a thorough cost-benefit analysis of the available energy-efficient technologies and products across all sectors, especially agriculture, housing and transportation. At the institutional level, the national and the state designated agencies working in the area of energy efficiency should be strengthened. To enhance vehicle fuel efficiency gains, the auto fuel quality should be upgraded to BS VI norms for nation-wide launch in 2020.

Similarly the Government has invested quite a sum and effort in infrastructure to surpass the energy crisis, augment refining and distribution of oil and gas to sustain its export capacity of refined products by setting up new refineries. At present, 31 companies are developing City Gas Distribution (CGD) networks  in 21 states for transportation or distribution of natural gas to consumers in domestic, commercial or industrial and transport sectors through a network of pipelines. For the hydro projects, the government will need to make efforts to expedite progress on capacity under construction through satisfactory Rehabilitation & Resettlement implementation. India has also built its strategic petroleum reserves in order to meet any supply shocks due to any external exigencies like wars, natural disasters etc. Indian Strategic Petroleum Reserves Ltd, a special purpose vehicle under the Oil and Gas Ministry, has constructed three strategic petroleum reserves in huge underground rock caverns at Visakhapatnam on the East Coast, and at Mangaluru and Padur on the West Coast. These facilities, with a total capacity of 5.33 million tonnes, can meet about 10 days of India’s crude oil requirements. India now plans to build another 6.5 million tonnes of storage at Padur and Chandikhol in Odisha which will augment its supply to 22 days.

At the same time India is focusing on its energy diplomacy with international partners for sustainable energy development. India is setting up a web of energy relationships in the extended neighborhood covering Myanmar, Vietnam in the east, with Central Asian countries like Kazakhstan and Gulf countries in the west. Indo-US Nuclear deal opened new vistas for India in field of Nuclear energy facilitating cutting edge technology and nuclear fuel. India has started to engage with China, Kazakhstan and Australia for nuclear fuel. India’s SCO membership could now play a bigger role in ensuring greater energy cooperation between energy producers and consumers by linking Central Asia and South Asia.

Finally the promotion of renewable energy looking at environment issues can be the safest measure in the current context. A renewable energy capacity of 100 GW should be achieved by 2019-20 so as to contribute to an achievement of 175 GW target by 2022. Solar Energy Corporation of India Limited (SECI) should develop storage solutions within next three years to help bring down prices through demand aggregation of both household and grid scale batteries. A large program should be launched to tap at least 50% of the bio-gas potential in the country by supporting technology and credit support through NABARD by 2020.

To summarize, the Indian power sector has made considerable progress in the last decade and has evolved from a nascent market to a developing market led by policy reforms and increased private sector participation. Challenges do exist in the sector, which India has to overcome to evolve from a developing market to a matured market. Meanwhile, the gap between what can be achieved and what is currently present, uncovers a number of possibilities and opportunities for growth.