By Gyan Prakash
Oil imports account for roughly more than half of the total exports of India and have been instrumental in fueling the weakening of rupee over the years. No doubt, our Finance Minister has sleepless nights while trying to contain CAD within the self-imposed $70 bn target. Irrespective of the fact, whether this target is achieved or not, GoI would still need approximately INR 70000 crore in order to compensate the oil companies for the losses incurred by them during the fiscal year. In this play between pricing mechanisms & energy crisis, inflation cannot be cornered either. It stands tall as of now!
But the bigger question that needs an answer is this: Is this panic going to get over in near future? ?The primary energy consumption of the world is expected to grow 1.6% annually from 2008 to 2035, whereas India’s primary energy consumption is expected to increase at 3.2% over this period,? according to a PwC knowledge paper. So a pessimistic view would be considered a thoughtful response to the above question though our politicians might beg to differ.
The next one: What factors have contributed to this plight? Well, the mathematics is not quite simple here and its gargantuan complexity can be estimated by the fact that M G Mehetre had to write a book, ?Energy Crisis in India? to elaborate on it.
?Our fiscal deficit is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy.? PM Manmohan Singh?s concern at a recent Planning Commission meeting was not unjustified. The Black Gold (as crude oil is popularly known as) is indeed making our economy bleed.
The total proven reserves of India as of April 1, 2010 include 1201 MMT of crude oil and 437 BCM of natural gas. It was in the same fiscal year 2010-11 that India imported 163.59 MMT of crude oil, which deprived us of $84.87 bn of our foreign reserves. Why is it that we have to import such large quantities of crude oil even though we seem to possess enough of it? This is the question our government has difficult time finding an answer to.
Let?s get some more facts on the table. At the end of FY 2010-11, only 22% of the total sedimentary basins in India varied from moderately to well explored. It takes an average of 60 approvals across 7 different ministries for any energy project in India since each of them is working independently. Mining for more statistics reveals that since the introduction of the New Exploration Licensing Policy (NELP) in 1998, 60 discoveries have been made out of which 51 have been gas discoveries. However, only 2 out these discoveries are under production. It clearly gives an essence of the eternal crisis that we are incubating under our arms. Our trees have borne the fruits but we cannot reap them unless we cut the red tape that it comes along with!
Our quandary lies in the fact that we cannot even rely on our vast coal reserves which constitute 53% of our energy security mix because of the poor quality of Indian coal (mostly lignite reserves). So, a rise in coal dependence is only going to make the sector more inefficient. And after seeing the energy requirement projections over the next two decades, it?s safe to assume that our economy will follow a downward spiral by the end of this decade (the signs of which have started showing up) lest we do something about this astronomical crisis.
Our ex-President APJ Abdul Kalam did suggest the formation of a National Energy Commission which would help in coordinating efforts to meet the rising energy needs of the country’s growing population but no progress has been made in this direction yet. Effective land acquisition reforms are also key to the success of oil marketing companies since pipelines are more economical compared to rail transport. The latter is 3-4 times more expensive than the former. More steps could include higher dependence on renewable sources, increased domestic exploration by bringing new technology via increased FDI, privatization of distribution network as opposed to that of production and so on.
In the absence of concrete actions, the only analogy that can be drawn involving energy crisis would be that with a time bomb. Therefore, for the time being, the energy crisis of India is a ticking bomb, which we can do nothing about but wait for it to explode!
An entrepreneur at heart, a visionary of an ideal society and passionate about his ideas, Gyan Prakash believes that a radical transformation in the society can be brought about by only those who have the courage to come out of their comfort zone and voice the concern of the indigent, i.e., today?s youth. He ascertains that education, as a tool will play a pivotal role in such a paradigm shift. He has special interest in marketing and has been actively involved in such stints ever since he joined IIT Kharagpur as a student in 2010. Apart from mainstream activities, he is a social activist & loves reading. You can contact him at [email protected].
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