The socio-economic development of a country depends considerably on an adequate energy policy. Successive five-year plans in India have set aside sizeable funds for the development of the energy sector. However, supply of energy from different sources has invariably fallen short of actual demand despite significant growth in this sector. Energy used to be the monopoly of the public sector till the ninth plan, characterized by supply regulations and administered price. These were meant to enhance commercial energy supply and also to ensure that the economy remained insulated from volatility in the overseas energy markets. But excessive price control, subsidies and tariffs ultimately led to the creation of a distorted and inefficient energy sector.
A different approach and strategy to planning became necessary for the tenth plan. The ninth plan had focussed on reforms in this sector to ensure its development in a deregulated market. The reforms aimed at increasing domestic production by enhancing private sector participation, increasing efficiency and restructuring performing public sector units.
Beyond the public
The energy sector is highly capital intensive and technology driven besides having high risk factors. It requires private, domestic as well as foreign agency participation to supplement the efforts of PSUs. There needs to be a dismantling of prevailing price and distribution controls, rationalization of the energy market as well as import tariffs, better transport networking and an independent, transparent and effective regulatory regime. Increasing awareness of and concern for the environment means a complete restructuring of the energy PSUs.
The presence of the influential World Trade Organization in the current race towards globalization poses several challenges to the energy sector. Developed nations have taken proper initiatives to ensure the minimization or elimination of energy deficits. This is an important lesson for India because of the multiplier effect the energy sector is capable of generating.
Regular supply of energy has long been recognized as a necessity for achieving aggressive growth targets as well as to strengthen India’s position in global trade. Interestingly, besides the obvious benefits, there is evidence to suggest that environmental conditions improve significantly with higher energy consumption. Adequate access to energy can raise standards of living which ultimately benefits the immediate environment. This follows from access to alternative sources of energy which are slightly expensive but environment friendly.
The right mix
A fine balance is therefore required between growth imperatives and environmental concerns. India is in a fairly safe position as overall emissions per capita are quite low here. However, meeting the demands of the majority of the people poses a problem as indigenous energy resources are not fully competent even if improved efficiency of their use is accounted for. A “right energy mix” of indigenous and imported energy will play an important role in national development. India has to import a considerable amount to meet its primary energy consumption which includes coal, lignite and oil.
In the coming years, this share of imported primary energy is likely to increase due to an expected increase in the import of crude oil, natural gas and coal. It is theoretically accepted that the fuel mix would be determined by the interplay of competitive market forces. This can happen only in a totally deregulated market. However, strategic choices and interventions also impact the choice.
Taking into consideration growth targets and global environment requirements would also work to India’s benefit in the use of local energy. This can be developed with an aim to improving the standard of living of the masses. Only then will our energy policies be considered effective and beneficial.