Want to Fuel GDP Growth? First Fix the Energy Policy
By Shankkar Aiyar | Published: 01st June 2014 06:00 AM |
On Friday, the Government of India informed Indians that India’s GDP sputtered at around 4.7 per cent in 2013-14. For the second consecutive year, India grew at sub-5 per cent.
The Modi Sarkar has listed reviving growth as one of its priorities. But can growth be fuelled with a poorly crafted energy policy?
Uttar Pradesh, in the news for the blackouts, is a classic illustration. It has a population of 200 million—more than Brazil. Its per capita electricity consumption though is one-eighth of Brazil, half of India’s national average, one third of smaller states like Uttarakhand, and a fourth of Gujarat.
Does Uttar Pradesh require and consume less power because it is less developed or is it less developed because it consumes less power?
Energy security demands the crafting of a 360-degree strategy that balances availability and affordability to deliver efficiency. The policy must also promote diversity of produce and use, so that no one user group or producer dictates terms. The ideal strategy would be to deploy the best mix of gas, coal, crude oil and renewables across user categories to fire growth.
India is on the cusp of mammoth energy crisis. Ideally all energy ministries should have been combined as it is in China—for synergy of decision and implementation. Still, the young Turks of the BJP—Piyush Goyal and Dharmendra Pradhan—could combine forces to liberate the sector. Here are nine mantras.
Price the Costs: There are no free lunches. The best approach is to price the costs uniformly across categories of consumers. If and when government wants or desires to intervene in favour of one sector, say farmers, it must do so by paying through the budget, transparently and directly to the beneficiary through direct cash transfers or a voucher-based recharge system as with mobiles.
Auction ready-to-dig sites: India imports nearly 80 per cent of its petroleum needs and nearly 125 million tonnes of coal (as also uranium). This aggravates deficits and makes India geopolitically vulnerable. India must promote domestic exploration. It must invite investors to bid for ready-to-dig sites with all clearances (even NELP investors waste months on permissions) to accelerate exploration for coal and for oil and gas.
Stop Tailoring the Market: The government must unsubscribe from the licence raj practice of telling coal/oil/gas producers—who can sell what to whom at what price. Investors have to wade through a web of guidelines and gangways to recover costs. This effort of the government to design price has only ramped up import dependency. It should focus on availability and affordability through better supplies.
Free the PSUs: Cohabitation of government ownership and poor regulation has resulted in inefficiency, losses, corruption and benefits to the private sector. Government must disinvest in favour of Indian public, create a national shareholding trust that hosts all PSUs and is answerable to Parliament. Strategic holdings could be sold to investors to induct technology and professionals.
A National Discom Grid: India needs to add over 800 GW. This cannot be achieved if SEBs—milked by state governments—go bankrupt every fourth year. India should merge state distribution companies to create a national grid; it could be a subsidiary of the power grid corporation. It will be big—imagine supplying to six lakh villages and towns—but size will also deliver economies of scale.
Restructure Agri Demand: Induction of new ideas—drip, sprinkler—will curb depletion of water and waste of power. India must shift from subsidies to incentives—for induction of drip and sprinkler systems as also solar pack pumps. India must redraw its crop pattern. Sugarcane or paddy cannot be the chosen crop for water-scarce regions. Investment in soil-water-crop alignment will end the politically dyslexic economics of prices and subsidies.
Go Green: India is fortunate; its per capita energy consumption is yet low. It has 300 days of sunshine, wind and hydro potential besides the possibility of tidal power. It must aggressively promote renewables —set up a sovereign fund for innovation, invest in a smart grid, and redesign the grid to facilitate flexibility.
Mass Transport: The next set of highways must combine road and rail tracks. The Mumbai Trans Harbour must be both a rail and road link. India must prioritise investment in mass transport systems—in cities and intra-cities. Transport yet accounts for only 40 per cent of fuel consumption (vs 80 per cent in the US). India must seize the opportunity. Mass transport will drive efficiency in energy management, create jobs and investment led growth.
Offshore Carbon Footprint: India is often, across sectors, an importer of fuels and final produce—fertilisers/steels. It is an inefficient model. Why not invest in fields abroad or collaborate with gas surplus sovereigns, use the energy locally to produce fertilisers or steel, and facilitate tariff-free imports? India could gain geopolitical points, create emigrant jobs and offshore its carbon footprint.
India cannot grow on the back of a poorly crafted and badly implemented energy policy that is trapped in a contest of cause and consequence. If growth is a real objective, then India’s energy policy must be liberated.
Shankkar Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change