While India’s economy has been growing at around 9% a year, energy production has managed only 5% annual growth, said Pramit Pal Chaudhuri, the Washington correspondent for The Hindustan Times, at the Carnegie Endowment for International Peace on December 5, 2007. Such a discrepancy represents a serious policy challenge; India’s Integrated Energy Committee Report estimates that the nation needs to produce five to seven times more energy than present levels to satisfy future demand.
While much attention has been drawn to India’s external energy policy, particularly the US-India nuclear deal, Chaudhuri said that domestic reforms where real progress is needed in order to fulfill India’s energy needs.
The most important sector in Indian energy is the coal industry, said Chaudhuri. Coal currently makes up over 50% of India’s energy production, and will likely continue to do so for the next 25 years. Unfortunately, the coal industry is also one of India’s most corrupt and inefficient. Chaudhuri said that India has conducted essentially no new exploration since it was a British company. An extraordinary amount of coal is simply stolen. Furthermore, coal mines in India only extend downwards 150 meters because they lack the technology and willingness to dig for deeper reserves.
As a result of these factors, despite having the world’s fourth largest coal reserves, India is a net coal importer, and will continue to be without significant reforms.
Chaudhuri then turned to oil. India imports most of its oil, and will import an even larger share over the next 20 years. Oil in India is subjected to a bewildering set of government interventions—it is taxed along every step of production, and petroleum for cars is taxed as a luxury good, but cooking oil, such as kerosene, is subsidized to support the poor. These subsidies cost the government a tremendous amount of money, and a pittance of the amount spent ends up helping poor Indians—much of the subsidized cooking oils wanders across the border into Bangladesh and Nepal.
Chaudhuri was optimistic, however, about gas’ role in the Indian economy. There have begun to be some genuine reforms in the gas industry, and the Reliance corporation has signaled its interest in investing in gas. Despite the noise made about various pipeline projects, Chaudhuri said, 96% of all gas imported into India comes by ship from Qatar. The Iran-Pakistan-India pipeline, which recently gained support in India as a symbol of Indian independence, is a political nightmare for Indian politicians, who would have to pay the Pakistani army to provide security to the gas as it flows through Baluchistan.
Nuclear energy is a small player at the moment, as India’s nuclear program was primarily concerned with making weapons. And India has few sources of radioactive fuel, and can’t import fuel since it is not a signatory of the non-proliferation treaty.
However, two developments could dramatically increase India’s use of nuclear power. One is the US-India civilian nuclear deal. If it goes through, the deal would life restrictions on the import of nuclear fuel. Another important component in the area of nuclear power is a bill currently being considered by the parliament that would privatize nuclear power in India. Companies like Tata and Reliance are likely to enter the market if the legislation passes.
Chaudhuri said that Indian politicians are at the moment not willing to compromise India’s economic growth for the sake of cutting carbon emissions and fighting global warming. However, India could reduce its footprint simply by switching from fuels like dung and wood to gas and kerosene, which will occur as poverty levels drop.
Chaudhuri finished his prepared remarks by noting that the estimates of India’s future energy needs are probably low; as industries like cement and glass grow, energy consumption will explode. There are clean technologies which India could adapt, he said, but noted that technology transfer is being impeded at the moment by intellectual property questions. In the short term, Chaudhuri predicted India would build more coal plants, but that new technologies may be adopted in the long run.
During the Q&A session, Chaudhuri answered questions about the use of hydroelectric power and other renewable energy sources. He said that while massive hydroelectric plants are now politically unfavorable due to the massive displacement they cause, mini hydro projects are being pursued. Wind and solar are currently unfeasible without government subsidies, he said, and currently make up a miniscule proportion of India’s energy.
Chaudhuri also talked about India’s external energy strategy. “What we’re seeing on the foreign external side is a market approach,” he said, adding that the Indian Prime Minister has said he sees no strategic basis for buying oil equity overseas.
Despite overtures by central Asian nations, the Gulf and Nigeria remain the main foci of India’s energy strategy, with all the Gulf players interested in developing a relationship with India.