Energy Policy in India

A team of high-ranking Indian experts, responding to the invitation of the European Energy Foundation, made a detour via Strasbourg on 13 January before participating in a seminar organised by the “Centre de Géopolitique de l’Energie et des Matières Premières” in Paris.

The mission was led by Dr M.R. Srinivasan, former chairman of the Indian Department of Atomic Energy and Member of the Indian Planning Commission to the Government of India.
He was accompanied by Dr R.K. Sachdev, former Adviser to the Minister of Coal, and
Mr R.C. Khurana, Chief engineer at the Directorate General of Hydrocarbons.

The dinner-debate gave them the opportunity to present the energy situation and prospective of their country to Members of the European Parliament and European industrialists.

Today India, with almost 1 billion inhabitants and a population growth rate oscillating between 5% and 7%, is the second most populated country in the world.

The potential for development are high: manpower is large and inexpensive and there is a great body of well-educated and scientific citizens.
Until recently however, excessive bureaucratisation of the public sector, notably in the field of energy, has hampered the country’s development. But since 1991, efforts to change are starting to bear fruit.

Overview of the Total Energy Supply

Total energy supply in India is composed of 40% non-commercial energy sources (such as wood, biogas,…mainly used for cooking and lighting) and 60% primary commercial energy.

Primary commercial energy relies for about 57 % on coal, 30 % on oil, 9 % on gas (growing share), and 4% on hydro, nuclear and renewables. Except for coal and thorium reserves, the other known natural resources are quite small in comparison with the growing demand. So far, energy imports represent 16 % of total energy supply.

Coal: India is the third coal producer in the world. However, coal, containing 30 to 50 % ashes, is of a relatively poor quality. Coal washing to decrease ashes, fluidized bed generation together with combined cycle gas plants and cogeneration represent solutions to improve energy efficiency.

Coal is cheap at the open-pit coal mines (4-10 dollars a ton), enabling power plants near the coal mines to produce cheap electricity. Becoming expensive though once it has to be carried across the country, it is sometimes more profitable import it. To this end, port facilities are to be built to meet the growing power demand.

After 2010, quantities to be imported would be almost equivalent to Australia’s production and are bound to represent a drain of hard currency.

Oil: Until recently, state-owned companies had the monopoly on importing, selling and distributing petroleum products. A few months ago, the Indian government approved a plan to dismantle the controls throttling the oil sector’s growth. The plan calls for price controls on petroleum products to be phased out and for rationalisation of import duties. Oil industry sources and analysts have responded very favourably to this measure, calling it a major steps towards upgrading the market to global standards and attracting significant investments notably in the downstream refining sector – the Indian ministry estimates that at least 110 m tons of additional refining capacity will be required to meet domestic needs by 2010.

Gas is the growing source of energy but overseas pipelines projects are stalled by the difficult political climate with Pakistan. Large gas reserves could be tapped on the continental shelf around India, and joint ventures with foreign oil companies are underway for prospection at sea, harbour facilities and inland pipelines. In the medium-term, LNG could become the cheapest energy source.

Renewables: hydro-power in the North can be increased to a certain extent, but requires large investments and encounters acceptance problems from the local populations. Wind energy is being tapped in windfarms in South India for local consumption.
Nuclear: At present, there are 2 small BWRs and 8 Indian heavy water PWRs, with 4 under construction and 10 units planned. 2 Russian VVER-1000 (equivalent to the PWR) are to be bought in the near future. India’s uranium reserves (60 000 t) are not sufficient for the long run with traditional reactors. However India, which holds vast thorium reserves, operates a small fast breeder reactor at Kalpakkam near Madras and studies the opportunity to build larger ones. Around 2050, India plans to rely more heavily on nuclear energy with thorium. A nuclear share of 10 % of electric generating capacity by 2010 and 20 %, i.e. 20 000 MWe, by 2025, can be part of a power mix.

Electricity Supply

Electric generating capacity is of 85 000 MW (at a rate of 7-8%/a) and represents a mere 20% of the commercial energy supply (12 % of the total energy supply).

Electricity consumption per head in India is currently at around 450 kWh/year, (Western Europe 6000 kWh/year) with frequent brownouts in many areas.

A government’s report recently estimated that the country needed an extra 115 500 MW in the next decade to meet the likely demand, requiring an investment of around $160bn.
In order to at least keep the current power deficits from worsening, the power ministry planning is in the meantime to add a further 40 000 MW by 2002, of which 40 % is expected to come from foreign investors.

To implement such a policy, the government depends on the State Electricity Boards (SEBs) which purchase power and distribute it to the customers. However, decades of mismanagement and populist moves to give free or subsidised power to farmers have put SEBs in a difficult position to pay for the power that could be generated (SEBs combined losses for 1997 amount to $2.5bn).

But reforms encouraging SEBs to be managed like profit-minded companies and a number of incentives for foreign or Indian/foreign joint ventures and ownership are slowly changing the attitudes. Currently, the SEB in the State of Orissa is leading the way as the most advanced in the privatisation scheme guidelines of the Central Government.

Upon questions put to Dr. Srinivasan, in Strasbourg (as well as in Paris) concerning nuclear energy and the Non Proliferation Treaty, the answer was that India’s policy not to sign the NPT can be expected to be maintained, but that India has nevertheless maintained a strict policy of de facto non proliferation with third countries. Moreover, Dr. Srinivasan pointed out that the PWRs that India wishes to acquire are the least proliferating plants on earth. He suggested co-operation with countries as France, Belgium, Germany to be revived, and that nuclear power plants could be run in so-called “NPT islands” with India in co-operation with these NPT countries, with bilateral safeguards set up.

Our speakers were keen to show the interest for European partners to join in India’s infrastructures and further development: India stands at a turning point and is no more the inaccessible bureaucratic fortress it used to be. Privatisation and deregulation have to follow a growth pattern in harmony with the general development of this vast country which, according to the World Bank, may become the fourth world power within 20 years.