Contents
Page No. Preface In Summary 1 Chapter I. The Challenges 1.1 The Energy Scene 1.2 The Issues 1.3 The Vision 1.4 Need for an Integrated Energy Policy 1.5 Approach Chapter II. Energy Requirements 2.1 Total Energy Needs 2.2 Required Electricity Generation 2.3 India’s Coal Demand for Non-Power Use 2.4 India’s Oil Demand 2.5 India’s Non-Power Natural Gas Demand 2.6 Total Commercial Primary Energy Requirement 2.7 Non-Commercial Energy Requirement 2.8 Summing Up Chapter III. Supply Options 3.1 India’s Energy Reserves 3.2 Supply Scenarios 3.3 Implications for Supply Options 3.4 Energy Independence in an Oil Scarce World Chapter IV. Energy Security 4.1 What is Energy Security? 4.2 The Nature of the Problem 4.3 Policy Options for Energy Security 4.4 Energy Security for the Poor 4.5 Policies and Initiatives for Energy Security Chapter V. Energy Policy Options/Initiatives 5.1 The Emerging Backdrop 5.2 Policies Covering Energy Markets, Pricing, Regulation, Taxation, Subsidies, Externalities and Institutions Chapter VI. Policy for Energy Efficiency and Demand Side Management 6.1 Large Potential for Saving Energy Chapter VII. Policy for Renewable and Non-Conventional Energy Sources i ii—xiv 1—20
1-15 15-16 16 16-18 19-20

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21—34
21-22 23-25 25-26 26 26-27 27-28 28-30 31-34

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35—55
35-42 42-48 48-52 52-55

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56—71
56-57 57-59 59-69 69 69-71

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72—83
72-76 76-83

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84—91
84-91

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92—98

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Chapter VIII. Household Energy Security: Electricity and Clean Fuels for All 8.1 Electricity 8.2 Cooking Energy 8.3 Subsidy through Debit Cards to BPL Households 8.4 Fuelwood Mission Chapter IX. Energy R&D Chapter X. Power Sector Policy Chapter XI. Coal Sector Policy Chapter XII. Oil and Gas Sector Policy Chapter XIII. Energy-Environment Linkages 13.1 Energy Supply Side: Environment Concerns 13.2 Environmental Dimensions of Demand Side Impacts 13.3 Understanding the Determinants of Air Quality 13.4 Long-term Sustainability of India’s Energy Use Concluding Comment Annexures Annexure-I: Order Constituting the Committee Annexure-II: Gist of Earlier Energy Policy Committees/Groups Annexure-III: Calorific Value of Various Fuels and Conversion Factors

99—102
99-100 100-101 101 101-102

9 10 11 12 13

103—106 107—109 110—113 114—115 116—123
116-118 118 119-121 121-123

124 125-136
125-127 128-135 136

Preface
Efficient and reliable energy supply is critical for economic growth. The availability of conventional energy sources is limited and may not be sufficient in the long run to sustain the process of economic development. Further, the base of the country’s energy supply system has steadily shifted from renewable to non-renewable sources. India meets about 30% of its energy needs through imports. With the increasing share of fossil fuels in the energy supply/use, the share of imported energy may go up further. Development of newer energy sources thus acquires importance. The challenge is to ensure adequate supply of energy at the least possible cost. The energy policies that we have adopted since independence to subserve the socioeconomic priority of development, have encouraged and sustained many inefficiencies in the use and production of energy. We pay one of the highest price for energy in purchasing power parity terms. This has eroded the competitiveness of many sectors of the economy. Another important aspect is to provide clean and convenient “lifeline” energy critical for their well-being to the poor even when they cannot fully pay for it. Therefore, the need for an effective and comprehensive energy policy is an urgent imperative. In view of the above, a decision was taken by the Prime Minister and Deputy Chairman, Planning Commission to set-up an Expert Committee to prepare an integrated energy policy linked with sustainable development that covers all sources of energy and addresses all aspects including energy security, access and availability, affordability and pricing, efficiency and environment. The committee was constituted on 12th August 2004 and was to submit its report within six months i.e., by 11th February 2005. Given the complexity involved and wider consultation needed, the term of the committee was extended upto 11th October 2005. It is my pleasure and also my privilege to thank all the Members of the Committee for their many important suggestions and sparing their valuable time for finalisation of this report. I am also thankful to the officers and staff of the Power & Energy Division for their contributions in the preparation of this report, particularly Shri Surya Sethi, Member-Secretary of the Committee, for his many ideas, contributions and help in drafting the report and ensuring consistency and clarity. Dr. A. Mohan, S/Shri R.C. Mahajan, M. Satyamurty, R.K. Kaul, I.A. Khan, B. Srinivasan, Rajnath Ram and Dr. M. Govinda Raj provided many inputs and support. I also thank Dr. Vivek Karandikar and Dr. Prasanna Dani of the Observer Research Foundations for their help in developing energy supply scenarios. Finally I want to thank Shri Sanjay Vasnik for diligently, carefully and cheerfully typing many drafts of the report. (Dr. Kirit S. Parikh) Member (Energy), Planning Commission & Chairman, Expert Committee on Integrated Energy Policy Dated: 21.12.2005 i

In Summary

India faces formidable challenges in meeting its energy needs and providing adequate energy of desired quality in various forms to users in a sustainable manner and at reasonable costs. India needs to sustain a 8% to 10% economic growth to eradicate poverty and meet its economic & human development goals. Such economic growth would call for increased demand for energy and ensuring access to clean, convenient and reliable energy for all to address human development. To deliver a sustained growth of 8% through 2031, India would, in the very least, need to grow its primary energy supply by 3 to 4 times and electricity supply by 5 to 7 times of today’s consumption. By 2031-32 power generation capacity would have to increase to 778095 MW and annual coal requirement would be 2040 mt, if we don’t take any measures to reduce requirement. Along with quantity the quality of energy supply has to also improve. The energy challenge is of fundamental importance to India’s economic growth imperatives. The broad vision behind the energy policy is to reliably meet the demand for energy services of all sectors including the lifeline energy needs of vulnerable households, in all parts of the country, with safe and convenient energy at the least cost in a technically efficient, economically viable and environmentally sustainable manner. Assured supply of such energy and technologies at all times considering the shocks and disruption that can be reasonably expected is essential to providing energy security to all. Meeting this vision would require that India pursues all available fuel options and forms of energy, both conventional and non-conventional, as well as new and emerging technologies and energy sources. Coal shall remain India’s most important energy source till 2031-32 and possibly beyond. India will need to take a lead in seeking clean coal technologies and, given its growing demand, new coal extraction technologies such as in-situ gasification to tap its vast coal reserves that are difficult to extract economically using conventional technologies. The approach of the Committee is directed to realise cost-effective energy system. For this the following are needed: (i) (ii) Markets that promote competition. Pricing and resource allocation to take place under market forces under an effective and credible regulatory oversight, as far as possible. Subsidies to be transparent and targeted. Improved efficiencies across the energy chain. Policies that reflect externalities of energy consumption. Policies that rely on incentives and which are implementable.

(iii) (iv) (v) (vi)

A competitive market without any entry barriers is theoretically the most efficient way to realise optimal fuel and technology choices for extraction, conversion, transportation, distribution and end use of energy. The tax structure and regulation across energy sub-sectors should be consistent and institutional arrangements should provide a level playing field to all players. Social objectives

ii

should be ideally met through direct transfers. Environmental externalities should be treated uniformly and internalised, as far as possible, under the polluter pays principle. An energy market with the foregoing features would minimise market distortions and maximise efficiency gains. An integrated energy policy is needed to ensure that energy availability does not become a constraint on India’s economic growth and competitiveness. While the medium to long-term challenges of ensuring competitive energy supplies are formidable, the immediate problem of power and coal shortages also require policy actions. The policy recommendations have addressed the immediate as well as the medium to long-term issues. Some key recommendations are summarised below: (i) Coal Shall Remain India’s Primary Energy Source till 2031-32, Current shortages are a concern: (a) Coal accounts for over 50% of India’s commercial energy consumption and some 78% of domestic coal production is dedicated to power generation. Since prices were de-controlled, the sector has become profitable primarily as a result of price increases and the rising share of open cast production. The present shortage can be addressed by encouraging imports which are also needed from a longer-term perspective. Thus we need to facilitate coal imports and create the needed infrastructure. Imports also put a competitive pressure on domestic coal industry to be efficient. The Committee has concluded that imported coal is far more cost competitive to imported gas for power generation especially along the western & southern coasts of India. Such a cost advantage is likely to continue. At the same time domestic coal production should be stepped up by allotting coal blocks to central and state public sector units and for captive mines to notified end users. Coal blocks held by Coal India Limited (CIL) which CIL cannot bring into production by 2016-17, either directly or through joint ventures, should be made available to other eligible candidates for development and bringing into production by 2011-12. Ideally, the Coal Mines (Nationalisation) Act, 1973 should be amended to facilitate (a) private participation in coal mining for purposes other than those specified and (b) offering of future coal blocks to potential entrepreneurs.

(b)

(c)

(d)

(ii)

Power Sector Reforms must focus on control over aggregate technical and commercial losses of state power utilities. Only financially healthy state power utilities can sustain the growing Central and State Public Sector Units (PSUs) and provide the needed comfort on payment security to attract private investment in the power sector at internationally competitive

iii

is foreseen only through the provision of open access. The revised APDRP would provide incentives to SEBs linked to performance outcomes and would also include incentives to staff for reduction in AT&C losses. This will facilitate private generation that limits its interface with the host utility to merely use of the distribution network for a fee and thus can be realised even before AT&C losses are reduced. commerce & large households are among the highest in the world. India’s liberal captive regime would not only derive economic benefits from availability of distributed generation but also set competitive wheeling charges to supply power to group captive consumers. A number of measures are suggested to reduce cost of power. (a) The Government Policy should seek to ensure that all generation & transmission projects started in the 11th Plan & beyond should be competitively built on the basis of tariff based bidding under a prescribed price cap. Where a cost plus regime cannot be avoided and the payments are guaranteed by the Government of India (GOI) the internal rate of return on total capital employed should bear a reasonable relationship to the long-term government bond coupon at the time of the approval.tariffs. Further. This will fix accountability and provide a baseline which is an essential prerequisite to privatisation. to achieve these objectives. The Committee also recommends that a liberal captive and group captive regime foreseen under the Electricity Act 2003 be realised on the ground. (iii) Reduce Cost of Power: In terms of purchasing power parity. To control AT&C losses the Committee recommends that the existing Accelerated Power Development and Reform Programme (APDRP) be restructured to ensure energy flow auditing at the distribution transformer level through automated meter reading. however. Separation of content from carriage in the distribution sub-segment. However. The wires business within the distribution sub-segment is also a natural monopoly and must be regulated as proposed under (iii) (e) below. geographical information system (GIS) mapping of the network and consumers and separation of feeders for agricultural pumps. This will pave the way for open access to distribution networks. Electricity Act 2003 recognises such separation for the transmission sub-segment. power tariffs in India for industry. (b) iv . the Committee feels that it is essential to separate the cost of the pure wires business (carriage) from the energy business (content) in both transmission & distribution. Investment in developing the MIS that can support full energy audit for each distribution transformer is essential to reform and reduction in AT&C losses. introduction of ABT and the upgrading of State Load Despatch Centres to the technological level of Regional Load Despatch Centres will have to be realised.

They are thus the most vital aspect of Integrated Energy Policy that promotes efficient fuel choices and facilitates appropriate substitution. the marginal use value of different fuels. Prices of different fuels should not be set independently of each other. Then the resulting inter-fuel choices would be economically efficient. To provide a cushion against the volatility of prices on the international market. Pending the creation of such a competitive market independent regulation of coal prices becomes essential. This principle is extremely relevant for the petroleum sector wherein bulk of the crude is imported and India is fast becoming a net exporter of petroleum products. This will reduce the capacity charge in the earlier years and spread it more evenly over the life of the project. Thus the natural gas price can be determined through competition among different producers (this presumes multiple sources and a competitive supply-demand balance) or independently regulated on a cost plus basis including reasonable returns (where competing supply v . in liquification. This means FOB price for products for which the country is a net exporter and CIF price for which it is a net importer. (d) (e) (iv) Rationalise Fuel Prices: Relative prices play the most important role in choice of fuel and energy form. should be free. which are substitutes. Natural Gas is a non-tradable commodity in the absences of significant investments in pipelines or. is equal at a given place and time and the prices of different fuels at different places do not differ by more than the cost of transporting the fuels. Steps to achieve these objectives for the coal market are summarised in paragraph (i) above. Standardise the unit size and invite global tenders for 20 to 30 units to get substantial bulk discount. FOB or CIF prices. The only legitimate alternative to trade parity prices in the petroleum sector is to permit full price competition at the refinery gate and the retail level. all commercial primary energy sources must be priced at trade parity prices at the point of sale. Only a competitive free market can do an efficient job of price determination.(c) Government should seed the capital markets to develop market based instruments that effectively extend the tenure of debt available to power projects to say 20 years. alternatively. can be set on the basis of median prices over a month or three months. In a competitive set up. cryogenic shipping & regasification. Coal prices should ideally be left to the market and trading of coal. Distribution should be bid out on the basis of a distribution margin or paid for by a regulated distribution charge determined on a cost plus basis including a profit mark up similar to that paid under (b) above. As a general rule. nationally and internationally. A competitive market requires that there are multiple producers and that there are no entry barriers to new producers or to imports.

India’s energy intensity of growth has been falling and is about half what it used to be in the early seventies.14 and Japan at 0.22 kilograms of the US and a World average of 0. Another option could be to price gas on a net-back-basis. Central and State taxes on commercial energy supplies need to be rationalized to yield optimal fuel choices and investment decisions. vi . automotive and domestic sectors gas must compete with coal.21. (v) Energy Efficiency and Demand Side Management: Lowering energy intensity of GDP growth through higher energy efficiency is key to meeting India’s energy challenge & ensuring its energy security. This is equal to the energy intensity of the OECD and better than the 0.21 kilograms of China. India would need to and must succeed in achieving much lower energy intensity compared to its current level. as it saves on production losses. clearly there is room to improve and energy intensity can be brought down significantly in India with current commercially available technologies. produced by reducing energy need saves more than a Megawatt generated. However. Should a scenario wherein gas becomes 15%-20% of India’s energy mix materialise by 203132. This would mean that beyond the level of gas consumption in the fertiliser. In other words they should be such that producer and consumer choices as to which fuel and which technology to use are not affected by the taxes and subsidies. A competitive coal market is thus important for setting a proper price of natural gas on a net-back-basis. Environmental taxes and subsidies. transmission and distribution losses.15. Relative prices of fuels can be distorted if taxes and subsidies are not equivalent across fuels. Lowering energy intensity through higher efficiency is like creating a virtual source of untapped domestic energy. The Committee feels that upto 25 percent reduction in India’s energy intensity is possible over current levels. It may be noted that a unit of energy saved by a user is greater than a unit produced. however. some 60% to 80% of the gas supply would be used for power generation.19 kilogram of oil equivalent per dollar of GDP expressed in purchasing power parity terms.12 with Brazil at 0. Differential taxes can be justified here if they appropriately reflect environmental externalities. petrochemical. 0. Currently India consumes 0. An alternative to pricing domestic gas could be the net realisation of the domestic natural gas producer after investing and getting a return on the infrastructure needed to make the natural gas tradable across borders. Thus a “Negawatt”. as well as transport. are levied to affect choices. there are several countries in Europe at or below 0. Thus. A consistent application of polluter pays principle or consumer pays principle should be made to attain environmental objectives at least cost. the key alternative for power generation.sources are absent and/or demand exceeds available supply). The equivalence should be in term of effective calorie.

and energy efficient vehicles. electricity distribution. (a) The Petroleum Conservation Research Association (PCRA) should be merged with Bureau of Energy Efficiency (BEE) that is seen as an autonomous statutory body under the Energy Conservation Act. However.5 percent to 39 percent for all new plants. standards for all vehicles.Efficiency can be increased in energy extraction. As the Indian economy opens up to international competition. Disseminate information. Increase coal use efficiency in power generation from the current average of 30. This is well demonstrated by India’s steel & cement industry. mass transport. energy conversion. energy transportation. the Committee recommends the following policies. Further. as well as in energy consumption. pumping water. The major areas where efficiency in energy use can make a substantial impact are mining. Promote urban mass transport. Annual audits must include energy audits for all specified energy intensive industries and industries with a turnover exceeding say Rs. heating ventilation & air conditioning.100 crores. In extreme cases resort to black listing of errant suppliers at consumer information web sites and for government procurement. The merged entity should endeavour to achieve financial independence through energy savings it helps generate & may also tap financial support from key industry players with an interest in India’s energy sector. lighting and household appliances. electricity transmission. industrial production processes. freight movement by railways. Promote minimum life cycle cost purchase instead of minimum initial cost procurement by government and public sector. construction. Require a least cost planning approach providing level playing field. Enforce minimum fuel efficiency. Establish benchmarks of energy consumption for all energy intensive sectors. haulage. in the very least. Enforce truthful labelling with major financial repercussions if equipment fails to deliver stated efficiencies. (b) (c) (d) (e) (f) (g) (h) (i) (j) vii . building design. it would have to become more energy efficient. to Negawatts and Megawatts so that regulators permit same return on a watt saved as on the investment needed to supply an additional watt. some of which can be implemented through voluntary targets undertaken by industry associations as opposed to through external dictates and enforcement. Force the pace of energy efficiency improvement in energy using appliances and equipment and incentivise through golden carrots which give substantial rewards to the firm which first commercialises equipment that exceeds energy efficiency target. electricity generation. the same level of service can be provided by alternate means requiring less energy. support training and reward best practices with national level honours in energy efficiency & energy conservation.

isolated deposits of all hydro carbons including coal may be tapped economically through sub leases to the private sector. expected to be 5-6%. India has to succeed in realising the three-stage development process described in the main report and thereby tap its vast thorium resource to become truly energy independent beyond 2050. currently extractable coal resources will be exhausted in about 40 years. hydro electricity’s flexibility and suitability as a peaking power make it valuable. Developing the thorium cycle for nuclear power and exploiting non-conventional energy. (viii) Role of Renewables: From a longer-term perspective and the need to maximally develop domestic supply options as well as the need to diversify energy sources. It viii . the contribution of nuclear energy to India’s energy mix is also. Continuing support to the three-stage development of India’s nuclear potential is considered essential. especially solar. at best. the contribution of hydro to the energy mix would be around 5-6%. offer possibilities for India’s energy independence beyond 2050. (vi) Augmenting Resources: India’s energy resources can be augmented till 2031-32 by exploration to find more of coal. However. enhanced oil recovery and incremental oil recovery technologies can improve the proportion of in-place reserves that can be economically recovered from abandoned/depleted fields. Similarly. it is felt that both regional as well as detailed drilling can be made more comprehensive. only about 45% of the potential coal bearing area has currently been covered by regional surveys. or by recovering a higher percentage of the in-place reserves. Again. flood control and drought control. oil and gas. Finally.(k) Institute specialisations in energy efficiency/energy conservation in all technical colleges and commence certification of such experts. even if a 20-fold increase takes place in India’s nuclear power capacity by 2031-32. Creating such storages is critical to India’s water security. Covering all coal bearing areas with comprehensive regional & detailed drilling could make a significant difference to the estimated life of India’s coal reserves. At a growth rate of 5% in domestic production. Finally. (vii) Role of Hydro and Nuclear: It is seen that even if India succeeds in exploiting its full hydro potential of 150. Further. theoretically offers India the most potent means to long-term energy security. India’s extractable coal resources can be augmented through in-situ coal gasification which permits using coal deposits which are at greater depth or not easily extracted by conventional methods. hydro development especially storage schemes are critical for India as India’s per capita water storage is the lowest among all its comparators. Moreover. Nuclear. Similarly extracting coal bed methane before and during mining can augment the country’s energy resources. on the other hand. Though its contribution to energy requirement is small.000 MW. renewables remain important to India’s energy sector.

and not just outlays (capacity installed). wood gasifier based power plants. Further. operating and maintenance problems etc. actual costs. The Committee’s approach to policy for promoting renewables is to link incentives to outcomes as far as possible. solar photovoltaics. the subsidies should be given for a well-defined period or upto a well-defined limit and should be linked to outcomes (energy generated). solar water heaters.would not be out of place to mention that solar power could be an important player in India attaining energy independence in the long run. Even when a capital subsidy is needed. Even with a concerted push of 20-fold increase in capacity. into their systems. A renewable energy source may be environmentally benign. It is also recommended that Indian Renewable Energy Development Agency Ltd (IREDA) be converted into a national refinancing institution on the lines of NABARD/National Housing Bank (NHB) for the Renewable Energy Sector. Grid connected renewables could improve the quality of supply and provide system benefits by generating energy at the ends of the grid where otherwise supply would have been lax. the distributed nature of renewables can provide many social benefits. bio-diesel and ethanol. Power Regulators must create alternative incentive structures such as mandated feed-in-laws or differential tariffs to encourage utilities to integrate wind. It may be locally available making it possible to supply energy earlier than a centralized system. availability. bio-gas plants. Policies for promoting many specific alternatives are suggested in the main text. It should also report on social benefits. However. A subsidy could also be given in the form of a Tradable Tax Rebate Certificates (TTRC) based on energy generated. solar thermal. renewables can account for around 5-7% of India’s energy mix by 2031-32. ix . renewables may provide employment and livelihood to the poor. IREDA’s own equity base can be expanded by the financial institutions of the country instead of continuing the current system of GOI support. employment created. small hydro. An annual renewable energy report should be published providing details of actual performance of different renewable technologies at the state and national level. This would include actual energy supplied from different renewable options. cogeneration etc. women participation and empowerment. While this is small. These include fuel wood plantations. Subsidy for renewables may be justified on several grounds. The rebate claim becomes payable depending upon the amount of electricity/energy actually certified as having been supplied. it should be linked to outcomes.

to attain energy independence. R&D requires sustained and continued support over a long period of time. (x) Boosting Energy Related R&D: India would find it increasingly harder to import the required commercial energy as India’s share of the incremental world supply of oil & gas could be as high as 20% since its demand is growing faster than that of industrialised nations. also needs to be addressed.(ix) Ensuring Energy Security: India’s energy security. Risks can also be dealt with by increasing ability to withstand supply shocks. felt that obtaining equity oil. India needs to substantially augment the resources for energy related R&D and to x . and providing redundancy to address technical risks. pipelines for importing gas do enhance security of supply if the supplying country makes a major investment in the pipeline. One needs to provide security against such technical risks. The most critical elements of our energy security. by diversifying fuel choices (gas. however.) and supply sources. ethanol. at its broadest level. The policy recommendation include maintaining a strategic reserve for 90 days of oil imports and/or buying options for emergency supplies from neighbouring large storages such as those available in Singapore. Again. Risks can be reduced by reducing the requirement of energy by increasing efficiency in production and use of energy. Even if there is no disruption of supply there can be the market risk of a sudden increase in oil price. and by expanding domestic energy resource base. Generators fail. Reducing energy requirement and increasing energy use efficiency are the most important measures to increase energy security. to meet India’s long-term energy needs. Research and Development (R&D) in the energy sector is critical to augment our energy resources. However. coal and gas abroad. ability to import energy and face market risk. remain the measures suggested herein to increase efficiency. has to do with the continuous availability of primary commercial energy at an affordable price. however. The Committee. but also from the possible disruption or shortfalls in domestic production. even when the country has adequate energy resources. orimulsion tar sands etc. do not represent adequate strategies for enhancing energy security beyond the fact that they help diversify supply sources. transmission lines trip or oil pipeline may spring a leak. In contrast. reduce requirements and augment the domestic energy resource base. technical failures may disrupt the supply of energy to some people. to promote energy efficiency and to enhance our energy security. by substituting imported fuels by domestic fuels. it is still necessary to recognise that India’s growing dependence on energy imports increases uncertainty regarding availability of energy at affordable prices. How do we deal with this supply risk? The threat to energy security arises not just from the uncertainty of availability and price of imported energy. such as from a strike in Coal India or Railways. Supply risk from domestic sources. Energy related R&D has not got the resources that it needs.

500 to Rs. universities. Scaling up to a pilot project follows if the economic potential looks attractive keeping in mind cost reductions that could be achieved through better engineering and mass production. to researchers in different institutions. Demonstration project. the limited availability of local resources for clean cooking energy and the size of the country and its population. efficient appliances. fundamental research etc.100 crores. economic assessment and further R&D to make the new technology acceptable and attractive to customers is required before commercialisation and diffusion can take place. A number of technology missions should be mounted for developing near commercial technologies and rolling out new technologies in a time bound manner. this should collect Rs. bio-mass plantation and wood gasification and community based bio-gas plants. The NEF could provide R&D funding in support of applications. R&D is needed to develop the concept and to prove its feasibility. particularly rural populations. super batteries. This needs to be followed up by a working model at laboratory scale. nuclear technologies related to thorium and fusion. (b) (c) (d) (xi) Household Energy Security . xi .allocate these strategically. The R&D priorities have to be based on a strategic vision which is frequently updated. To take an innovative idea to a commercial application involves many steps. organisations and even individuals working independently. In order to encourage the firms to do their own R&D a rebate of upto 80% of this cess may be given to firms for R&D carried out in-house. hybrid cars.600 crores per year. in-situ gasification. Basic research leading to a fundamental breakthrough may open up possibilities of applications. and hydrogen production. machinery & processes. storage transport and distribution. IGCC and carbon sequestration. Yet. The NEF should periodically commission and fund such studies.Electricity and Clean Fuels for All: One of toughest challenge is to provide electricity and clean fuels to all. innovative new ideas.1% of the turnover of all companies engaged in the field of primary/secondary energy production whose annual turnover exceeds Rs. given the fact that women and the girl child carry most of the burden of the drudgery of gathering fuel wood. bio-fuels such as bio-diesel and ethanol. Some key policy initiatives relevant to energy related R&D are detailed below: (a) A National Energy Fund (NEF) should be set up by levying a cess of 0. solar technologies for thermal and photovoltaics. considering the poor paying capacity. At 2004-05 turnover levels. These include coal technologies (wherein India should take a lead) for efficiency improvement. gas hydrates. Coordinated research and development of all stages of the innovation chain to reach a targeted goal such as in the departments of atomic energy and space research are suggested for more efficient industrial plant.

This burden would reduce over time as 8% GDP growth is expected to reduce poverty at a rate that exceeds population growth.500 crores a year assuming the infrastructure is built under RGGVY. Again. The top 5% of India’s households could pay for this subsidy through a cess on their incomes or a more widely distributed cess on consumption could fund this subsidy burden. The benefits in empowerment. although the benefits do not reach the intended beneficiaries due to poor targeting. The considerable effort spent on gathering the bio-mass and the cow-dung & preparing the same for use is not priced into the cost of such energy. the total need for free electricity is about 7% of the current generation. A system of lifeline tradable entitlements delivered through smart debit cards could potentially be the answer. this subsidy burden would reduce over time with economic growth. The foregoing demonstrates that a well-directed subsidy programme targeted at the intended beneficiary is not unaffordable for a resurgent India. this translates into a subsidy burden of about Rs. Similarly. It is pointed out that even currently over 60% of the estimated subsidy burden is being funded. particularly women and children. environment and reduced pressure on deforestation and hence the water table and soil erosion are well worth the cost – even without considering the benefits from the likely increase in productivity of rural India. The real issue is to target the subsidy programme well and ensure that those falling outside the subsidy net pay the full cost of supply. as xii . Even if one assumes that some 30% of India’s households are unable to pay for a lifeline electricity consumption of 30 units/month and a loss level of about 40% in delivering these 30 units. the subsidy burden amounts to about Rs. They have adverse impact on the health of people.9. if we are to achieve universal primary education for girls.agricultural wastes and animal dung and also bear the brunt of the indoor air pollution. should be considered as a basic necessity. At zero cost to the consumer. Easy availability of a certain amount of clean energy. health. A well-targeted subsidy regime may only marginally raise the current subsidy burden.000 crores annually at Rs. These fuels create smoke and indoor air pollution and are inconvenient to use. required to maintain life. Energy security at the individual level means to ensure supply of such lifeline energy need. promote gender equality and empower women. if one assumes that the same 30% of Indian households cannot pay for a lifeline consumption of 8 cylinders of gas per annum while another 20% can only pay for 25% of the cost of supply of such lifeline consumption of gas.450/cylinder.34. (a) Finance a large scale socio-economic experiment to operate community sized bio-gas plants as a commercial enterprise either by a community cooperative or by a commercial entrepreneur. the urgency to meet the challenge should be high. In addition to the above subsidy other actions are also needed. India cannot be energy secure if her people remain without secure supply of energy at affordable cost.

This will encourage such local generation. Provide finance through self-help groups to transform women. as people would not wait for the grid. an environment that allows multiple players in each element of the energy value chain to compete under transparent & level terms is essential to realising efficiency gains within the energy sector. Couple this to improving ventilation in the cooking area of the dwellings. it may not be easy to reach clean fuels to the poor and they may continue to use fuelwood. (b) Even with subsidies for clean fuel. (c) (d) (e) (xii) Enabling an Environment for Competitive Efficiency: Apart from pricing policies. who are today energy gatherers into micro-entrepreneurs engaged in rural energy markets and energy management. Formulate a tariff policy for such distributed generation for both household and productive use including agriculture. For setting up of off-grid generation facilities in rural areas. Such regulation must in the very last ensure that: (a) The regulatory responsibility/functions of the State are separated from the Ministries that control the Public Sector Units that dominate the energy sector. Currently the Energy Sector is dominated by large Public Sector Companies and some sub-sectors have natural monopoly characteristics potentially offering economies of scale. Cover such distributed generation together with the local grid under the subsidy scheme of RGGVY. As part of the above programme. Such distributed generators may be able to reach electricity to villages sooner than the grid and may be connected to the grid with a feed-in tariff as and when it reaches the villages. independent & informed regulation becomes essential to realising competitive efficiency at least till markets develop and mature. Given this ground reality. village woodlots within one kilometer should be developed. improve the efficiency of domestic chullahs & lanterns from the prevailing 10-12% to 20-25% which is easily attainable. organised sector can be encouraged to adopt rural community/communities in their areas of operation.such bio-gas plants can meet the need for clean cooking energy of a sizable segment of the rural population. To develop sustainable energy supply. To reduce drudgery of those who still need to gather fuel. and xiii . Generate electricity through wood gasifiers or burning surplus biogas from the community bio-gas plants. Women’s groups can form co-operatives for developing and managing fuel wood or oil seed plantations with the same efforts that they put in searching and gathering fuel wood today.

as a signatory to the UN Framework Convention on Climate Change and a country where the impact on its poor due to climate change could be serious. this policy has suggested a number of initiatives that will reduce the green house gas intensity of the economy.(b) Till competitive markets emerge. independent regulators should fix prices or price caps to mimic competitive markets based on principles summarized in para (iv) above. These are— Energy efficiency in all sectors Emphasis on mass transport Active policy on renewable energy including bio-fuels and fuel plantations Accelerated development of nuclear and hydro-electricity Technology Missions for clean coal technologies Focussed R&D on many climate friendly technologies ***** With the recommendations of the Committee. xiv . (xiii) Climate Change Concerns: Concern for the threat of climate change has been an important issue in formulating the energy policy. cost effective way and be on a path of sustainable energy security. Even though India is not required to contain its GHG emissions. India can meet her energy requirements in an efficient.

31 Source: IEA (2005). Key World Energy Statistics 2005.13 6599 Germany 25271 4210 0. http://www.16 0. Figure 2 shows the . Thus the energy challenge is of fundamental importance.38 0. (See Table 1).18 6748 Saudi Arabia 12494 5805 0.22 13066 Japan 26636 4052 0.23 0.21 2429 World TPES: Total Primary Energy Supply kWh/$-2000 PPP 0.14 0. significant reduction in the energy intensity of growth can be achieved based on existing technologies.52 0.29 0. International Energy Agency. India needs economic growth for human development.19 435 Indonesia 3175 753 0. convenient and reliable energy. Paris.15 7816 7868 1688 0.23 1379 Australia 28295 5630 0.29 0. our energy needs will increase correspondingly.14 6231 United States 35487 7835 0. The Challenges India faces formidable challenges in meeting its energy needs and providing adequate energy of desired quality in various forms to users in a sustainable manner and at reasonable costs. However.26 0. The consumption in US was 7.15 1934 Denmark 29082 3852 0. Per capita consumption of energy in India is one of the lowest in the world.21 15397 United Kingdom 26944 3906 0.688 kgoe.20 10640 Brazil 7359 1094 0.1 The Energy Scene 2. it is some 50% higher than Denmark and 50% higher than UK. China and the US. Table 1: Selected Energy Indicators for 2003 GDP Per TPES Per TPES /GDP Electricity CapitaRegion/Country Capita (Kgoe/$-2000 consumption per PPP (US $ (kgoe) PPP) capita (kWh) 2000) China 4838 1090 0. The nature and dimension of this challenge becomes clear when we look at the energy scene in the country today.23 0.27 0. We need clean. India consumed 520 kg. The level of per capita Energy Consumption is a good indicator of the level of economic development as seen from Figure 1 where per capita energy consumption is plotted against per capita Gross Domestic Product (GDP). India’s energy use efficiency for generating GDP in Purchasing Power Parity (PPP) terms is better than the world average.25 0. For the 8% to 10% growth rate that we aspire for.37 0.46 6481 Sweden 27869 5751 0.iea. Japan & Brazil. Along with quantity the quality of energy supply has also to improve.Chapter I. Clearly.835 kgoe per person. of oil equivalent (kgoe) per person of primary energy in 2003 compared to 1090 kgoe in China and the world average of 1.55 0.17 6898 India 2732 520 0. convenient and reliable energy for all.org 3.24 440 Netherlands 27124 4983 0. which in turn requires access to clean. 1.

e.importance of per capita electricity consumption to the level of economic development..r. GDP Per Capita (PPP US$2000) 10 15 25 TPES per capita 5 G D P p e r c a p it a 10000 20000 30000 40000 Data Source: IEA (2005) Figure 2 Kilo Watt Hours of Electricity Per Capita vs. Figures 1 and 2 are plotted on logarithmic scale and thus their slopes indicate elasticity of per capita energy use w. per capita GDP i. Figure 1 Total Primary Energy Supply (TOE) Per Capita (2003) vs. per cent change in per capita energy for every per cent change in per capita GDP.t. GDP Per Capita (PPP US$2000) 10000 30000 KWH per capita G D P p e r c a p it a 10000 20000 30000 40000 Data Source: IEA (2005) 2 .

65 0. Motors are over designed and consume more electricity.9 0. 3 .75 0. 84 million households in the country (over 44. unscheduled outages and low voltage supplies are not included. The extent of power shortage varies from State to State. In 2004 the peak shortage varied from 0 to 25.55 0.45 0. access to electricity is very uneven. reported load shedding and frequency corrections. 2004) is plotted against per capita electricity consumption.7 HDI 0. Voltage stabilisers are needed for most expensive equipment. Even though 85 percent of villages are considered electrified. Equipment often gets damaged. fluctuating voltage and erratic frequency are common. Moreover. In Figure 3.7 percent. one of the most convenient forms of energy. Inverters to tie over power outages are ubiquitous in city homes. load shedding. the Human Development Index (HDI) which is calculated from literacy rate.4 0.1 percent with all India average of 7.5 0.35 0. Electricity Consumption Per Capita in 2002 1 0.e. Figure 3 Human Development Index (HDI) vs. Similarly energy shortage also varied from 0 to 20.2% of households) did not have electricity in 2000..8 0.6 0.4 percent with all India average of 11. Unscheduled outages. we see that per capita consumption in India is way below that in other countries. If we look at the consumption of electricity.3 0 1500 3000 4500 6000 7500 9000 10500 12000 13500 15000 16500 18000 19500 21000 22500 24000 25500 27000 28500 30000 India Electricity consumption per capita (KWh) Note: HDI for India 0. Data Sources: United Nations Development Programme(UNDP-2004) and IEA (2004) 5. infant mortality rate and per capita GDP (UNDP. Improvement in human development is also strongly associated with access to electricity.95 0. And of course idle manpower and loss in production when power supply is interrupted add to the costs.85 0. compressors and pumps get burnt out often. Diesel generators provide backup power to industrial and commercial consumers. These shortages include scheduled cuts. Even those who have access to electricity suffer from shortages and poor quality of supply. Consumers and the economy bear a large burden of this poor quality of supply. around 57 percent of the rural households and 12 percent of the urban households i. Motors.4.595 and Electricity per capita consumption 561 kWhrs.3 percent (Figure 4). However.

00 30.00 10.P A.P J&K H. Figure 5 Percentage of time Frequency in Normal Band (49.00 0.00 20.Figure 4 Peak Power and Energy Shortages in States/UTs. Pr. They are still. Excepting for the Northern region frequency was within normal band for more than 98 percent of the time 2004-05.00 70. Figure 5 shows improvement in frequency fluctuation.P Delhi Assam Peak Deficit Energy Deficit Data source: Central Electricity Authority (CEA). however.B & Sikkim 2001-02 2002-03 2003-04 2004-05 NorthernRegion Western Region Southern Region Eastern Region Source: Powergrid Corporation of India 4 Orissa Ar. Availability based tariffs (ABT) and unscheduled interchange of power introduced in 2003 for inter-state exchange of power have reduced voltage and frequency fluctuations.00 1995-96 1996-97 1997-98 1998-99 PRE ABT / ULDC POST ABT / ULDC 1999-00 2000-01 YEAR W.0-50.00 % OF TIME 60.00 90.00 50. 2005 6.5Hz) 100. Goa U.00 80. in 2004-05 30 25 20 15 10 5 0 Meghalaya Maharashtra Haryana Uttaranchal Chattisgarh Rajasthan Nagaland Mizoram Jharkhand Tamilnadu Karnataka Manipur Gujarat Tripura Punjab Kerala M. not as stable as one would like.P .00 40.

87% per annum over the last 25 years. The power capacity has risen at the rate of 5. The financially sick State Sector Units are thus unable to invest on their own and remain a poor credit risk for private suppliers of energy. This capacity addition programme includes the 41. Gujarat & U. the likely capacity addition will be under 31.8% in 2004-05. The track record so far shows that plan targets have never been met. The sector is dominated by large state monopolies both at the Centre and the State level. the history of emphasis on generation investment results in loading more and more power on a broken down distribution segment and an inadequate transmission network wherein power cannot be easily moved from surplus areas to areas with a deficit. Even in the 10th Plan. remain financially sick. This reflects the gradual improvement in the average Plant Load Factor (PLF) that stood at 74. Aggregate technical and commercial (AT&C) losses which include theft. the generation capacity created does not have the desired mix of peaking. Generation has attracted bulk of the investment both at the Centre & the State level. and transmission and distribution losses. The state owned utilities are given zero or low returns by the Regulators who are under constant pressure not to raise tariffs which are the highest in the world in PPP terms for the paying industrial. and hence. The household sector is managing with the help of inverters. This reality has led to a growth driven by Central Public Sector Units (CPSUs) which is clearly unsustainable in the long-run since their only customer is bankrupt.000 MW of generation capacity by 2012.44% of the utility based generation is in the Public Sector while transmission is almost entirely in the Public Sector.110 MW proposed to be added in the 10th Plan. Further. Delhi and pockets of West Bengal. Consumption is constrained by supply and power shortages continue to plague the country. 5 .P. Private distribution is limited to Orissa. Massive investments required in distributions are unlikely to yield adequate returns in the current set-up. There is good reason to believe that over 40.7. Over 88. 8. billing & collection inefficiency.000 MW. Consequently the state electricity boards. intermediate and base load stations. The total supply of electrical energy has risen at the rate of 7.14% over the same period. SEBs. The Ministry of Power has set a target of adding a 100. Finally. Industrial and commercial establishments have been forced to seek captive and standby generation to meet demand or provide quality supply on a 24X7 basis to support critical processes and provide peaking support. exceed 40% for the country as a whole. commercial and household consumers. unable to adequately meet their investment needs on their own or attract private capital to do so. The capacity addition programme is designed to ensure availability of reliable and quality power and the creation of an adequate reserve margin. The shortages and poor quality of power are the outcome of inadequate investments primarily in distribution & transmission.000 MW of captive and standby capacity is in place. 9. A non-level playing field permeates the market place wherein the Central & Public Sector Units get guaranteed post-tax returns of 14/16% with full payment guarantee backed by the GOI. The Government & the Regulators are struggling to put in place an enabling environment and a Regulatory Framework that would nurture competition in each element of the Electricity Value Chain and yield the necessary efficiency gains through such competition. Maharashtra.

APDRP has to be restructured to an outcome driven programme based on monitorable targets against established baselines. The process of power sector reforms started in 1992 is still continuing. agricultural wastes and firewood for cooking food.6. Despite some progress. The performance of APDRP. at best. commercial & large household consumption. the power sector has some ways to go before becoming a competitive and efficient at meeting demand with quality power and being able to attract investments needed to keep up with the growing demand on commercially viable terms. The 19992000 National Sample Survey (NSS) 55th round revealed that for 86 percent of rural households the primary source of cooking energy was firewood and chips or dung cake. Kerosene is used by 22% of urban households and only 2. 6 . gobar gas. cross-subsidising agricultural and domestic power consumption. The majority of India’s people use traditional fuels such as dung. billing and collection. The tariff structure created incentive to the high paying consumers to pilfer power under the cover provided by unmetered power. has fallen short of the promise held out in support of the programme. electricity and other fuels. mixed. The habit of stealing power is now widespread. thus far. necessary corrective measures were not taken on the basis of the experience gathered over subsequent years of operation.709 crore has been realised in first three years of APDRP. The agricultural sector is supplied un-metered power and the farmers pay a highly subsidised lump sum based on the declared horse power of their pumps. This leads to a zero marginal cost of power which promotes inefficient use and over exploitation of ground water. The power tariffs are structured on the basis of industrial and commercial users 11.10. In urban areas too more than 20% households relied mainly on firewood and chips. With rising cost of supply the burden of the cross subsidy increased and was disproportionately loaded on the paying industrial. An effective way to subsidise farmers and certain other consumption categories that gives them incentive to use power efficiently and that arrests pilferage is very critical for a healthy power sector. A total investment of only Rs. A vested interest lobby has been created and what is euphemistically called AT&C losses remain stubbornly high. Other primary source of cooking energy used by urban and rural household cover coke & charcoal. Privatisation of distribution was also tried in Orissa and Delhi as an alternative but the results are. AT&C losses have to be borne by SEBs.7% of rural households for cooking. Even if such practices could have been justified in the formative years. While some state governments partially compensate the SEBs for subsidy given to farmers and other specified consumers. Only 5 percent of the households in rural areas and 44% households in urban areas used LPG. APDRP was aimed at supporting distribution reforms through investments and incentives by strengthening sub-transmission and distribution network in the states to reduce the aggregate AT&C loss level and encourage efficiency improvements in metering. These fuels cause indoor pollution. The domestic sector also has a range of subsidies based on level of consumption including a heavily subsidised poorest segment which pays a lump sum monthly charge. 12.

Thus. There are social and practical constraints related to ownership and control over productive resources. Women’s micro-enterprises (an important factor in household income.0 0 O th e rs LPG D ung C ake F ire w o o d a n d C h ip s N S S 5 0 th R ound R u ra l N S S 5 5 th R ound N S S 5 0 th R ound N S S 5 5 th R ound U rb a n N o c o o k in g a r ra n g e m e n t Source: NSSO (2001): Energy used by Indian Household 1999-2000. Use of such fuels. 464 (55/1. and/or light-intensive (home industries with work in evenings). lack of exposure to information and training. National Sample Survey Organisation (NSSO). of India. are heat-intensive (food processing). Furthermore.Figure 6 Distribution of Households by Primary Source of Energy Used for Cooking. 14.India Household 1 .0/6). August. as well as in women’s welfare and empowerment). NSS 55th Round. women often face additional barriers in making best use of available opportunities and obtaining improved energy services.2 0 0 . Figure 6 shows that not much change has taken place in rural areas since the 50th round of NSS (1994-95) whereas in urban households use of LPG has nearly doubled.6 0 0 . increases the risks of eye infections and respiratory diseases.300 billion(See Box). labourintensive. Govt. It is estimated that in Rural North India 30 billion hours are spent annually in gathering fuelwood and other traditional fuels. An energy policy responsive to social welfare must address this fact.4 0 0 . 2001. The lack of adequate energy supplies—and other coordinated support—affects women’s ability to use these micro-enterprises profitably and safely. overtime. 7 .0 0 0 .8 0 0 . women are typically excluded/marginalised from decision-making and suffer barriers related to illiteracy. 13. Report No. the economic burden of traditional fuels is some Rs. Lack of access to clean and convenient energy impacts the health of women & the girl child more adversely as they spend more time indoors and are primarily responsible for cooking. The need to gather fuels may deprive the girl child from schooling. Use of traditional fuels for cooking with the attendant pollution and the cost of gathering them impose a heavy burden on people particularly women and girls.

National Sample Survey Organisation.08 176.87 40.) Electricity (BkWh) Dung Cake (Mt.82 0.92 1.54 4.61 10.P.62 8.68 8.43 29.38 1.25 18.92 6. This means that their use would not wither away with economic growth.) L. 2000 20 18 16 14 12 10 8 6 4 2 0 0-225 225-255 255-300 300-340 340-380 380-420 420-470 470-525 525-615 615-775 775-950 950-1100 11001300 13001600 1600+ In KGOE Monthly Per capita Consumption Expenditure (MPCE) Classes Fire Wood & Chips Electricity Dung Cake Kerosene Coal L. (July 1999-June 2000).95 7.95 57.26 4.51 27.63 5. (Mt.98 71.G.74 5. Ministry of Statistics and Programme Implementation.13 4.41 8. Table 2: Household Energy Consumption in India (July 1999 – June 2000) Physical Units MTOE Fuel Type Rural Urban Total Rural Urban Total Fire Wood & Chips (Mt.07 1. Table 2 gives the data on household energy use.03 140.G.25 0.76 132.00 79. The bio-mass based fuels dominate particularly in rural areas.43 98.ltrs) Coal (Mt. Government of India 8 .) Kerosene (M.49 1.69 3. Government of India Figure 7 Pattern of Household Energy Consumption Figure 7(a): Monthly Per capita Household Consumption Pattern Rural India.) 158. National Sample Survey Organisation.51 1.20 1.02 11. (July 1999-June 2000) data. Ministry of Statistics and Programme Implementation.49 3.15.P.41 Source: Derived from NSS 55th Round. Data Source: NSS 55th Round.89 2. In rural areas they are used by households in all consumer expenditure categories (See Figure 7).12 6. The total quantities of traditional fuels used are substantial.

Ministry of Statistics and Programme Implementation. 16% from Bronchitis. and require greater attention and backing. 85 million households spend 30 billion hours annually in fuelwood gathering. New Delhi. demographic and socio-economic information. Data source: NSS 55th Round. The doctors examined a sub-sample of individuals for confirmation of diseases. Gender and energy issues have remained on the periphery of energy policy. Water and Sanitation and its Impact on Rural India” in Parikh Kirit S.299 billion. expenditure on health and person days lost. Forests contribute 39% of the fuelwood need.P. there is a close linkage between gender and energy. Most of them however use multiple fuels.2% from Pulmonary TB and 7% from Chest infection. India. 2000 14 12 10 In KGOE 8 6 4 2 0 0-300 300-350 350-425 425-500 500-575 575-665 665-775 775-915 9151120 11201500 15001925 19252500 25003000 30003500 3500+ Monthly Per capita Consumption Expenditure (MPCE) Classes Fire Wood & Chips Electricity Dung Cake Kerosene Coal L. Indicators for lung functions (Peak Expiratory Flow) were measured for most of the adults present at the time of the survey. National Sample Survey Organisation. India Development Report 2004-2005. As women are the primary sufferers of the adverse impact of use of bio-mass fuels. 11% use kerosene and 5% use LPG for cooking. 293 rural households (HHs) from 148 villages in three states of Rural North India and one state in South India shows the importance of clean fuels. 5% of Adults suffer from Bronchial asthma. et al “Lack of Energy. Risk from all respiratory diseases and eye diseases increases with length of use of bio-fuels. and R. Government of India The Burden of Traditional Fuels in Rural India A study based on an integrated survey covering 15. 314 million tonnes of bio-fuels are gathered annually. Respiratory symptoms are prevalent among 24 million adults of which 17 million have serious symptoms. outside the kitchen and the home were collected. working days lost due to eye infection and respiratory diseases and cost of medicine.). Total economic burden of dirty bio-mass fuel was estimated to be Rs.G. 9 . (July 1999-June 2000). measurements of air quality in the kitchen. This consisted of opportunity cost of time lost in gathering fuel. 8. Oxford University Press. The study estimated that • • • • • • • 96% of households (HHs) use bio-mass energy.Figure 7(b): Monthly Per capita Household Consumption Pattern Urban. Symptoms of diseases related to both air and water pollution. Radhakrishna (eds. Source: Parikh Jyoti et al (2005)* * Parikh Jyoti K.

01 120 M illion Tonnes 100 80 60 40 32. Our consumption of petroleum products is increasing at the rate of 3. The success of these explorations has been marginal in enhancing oil reserves. licensing policy has attracted some private and foreign firms.3 mt to 33. net of exports.14 6. At the same time. reserves of oil have been hovering between 700 MMT and 750 MMT during this period. Figure 8 Domestic Consumption & Production of Crude Oil 140 116. However. The proved reserves to production (R/P) ratio were 22 in 2003-04.01 mt of crude oil products including refinery fuel.16.75 32. India has failed to attract any oil majors to explore in India.02 33. some sizeable gas reserves amounting to 680 mtoe (176 mtoe claimed by Reliance & 504 mtoe claimed by Gujarat’s State Petroleum Corporations (GSPC) have been reported recently. Till 1997.26 1951 1956 8. oil and gas exploration was mainly done by public sector firms.51 1981 1986 1991 1996 2001 2006 57. Not only the domestic production has stagnated.46 0 0. More work is needed to estimate the extractable potential.82 1971 1976 10. Given the rising preference for gas as a fuel and feedstock. This might be an indication of their assessment of the potential in the Indian Sedimentary basins since typically they generally prefer to work large fields.37 106. Data source: Ministry of Petroleum & Natural Gas 17. India consumed 116. This raises serious concerns about India’s energy security. We now import 72.45 1961 1966 19. The total reserves were 739 MMT in 1990-91 & were estimated to be 733 MMT in 2003-04.97 Years (1951-2004) (Production and Consumption Figures Pertain to the Year Ending of the Concerned Financial Year) Domestic Crude Oil Production Domestic Crude Oil Consumption. India is also seeking to significantly raise gas imports through LNG and 10 . Progressive liberalisation of exploration.8% per annum during 2002-2004.2% of our consumption and our import dependence is growing rapidly.86 mt (See Figure 8). our ability to obtain the oil it needs and the impact on the economy of constrained supply and the consequent increase in oil prices in the world markets.26 20 3.43 33.29 0. Despite one of the most liberal exploration licensing regimes. domestic production of crude oil has been between 30. In 2003-04.

8% per annum over the last five years (2000-01—2004-05).000 to 2. This is the outcome of growth of personal motorised transport and the rise in share of road haulage. This reflects improved efficiency of vehicles and better roads. Currently. cars from 539. Petrol and diesel in Transport sector accounted for 25. India’s marginal advantage in becoming a refining hub is not immediately clear.Trans-National gas pipelines.4% and 5.9% & 3. making India a net exporter of petroleum products.881. Table 3 give decadal growth of motor vehicles from 1970-71 to 1990-91. The numbers of two-wheelers have grown from 575.765 to 1.717.7% per annum respectively between 1980-81 and 2003-04.893 to 41. (CMIE) 19. The vehicle population has continued to grow at higher than historical rates. In 2003-04. in the last 5 years (2000-2005) growth in consumption of petrol and diesel has been far more moderate at 6. Ltd.136.1% respectively.088. three-wheelers from 36.6 % of our total oil consumption.478.085. 20. The exception is refining wherein some 26% of capacity is now in private 11 . The total demand for petroleum products has grown at the rate of 5. However. The projected addition to refining capacity both in public and in private sector will far exceed the demand and export of petroleum products could become India’s largest export.475 to 5.456. Oil diplomacy is currently seen as a major tool for ensuring India’s energy security along with acquisition of equity oil & gas overseas. the demand growth has moderated to 2. the refining capacity in the country is more than the domestic requirements.907 to 552. However.899 and trucks from 343. The oil sector remains largely in the hands of the Central Public Sector Units (CPSUs).918 over the period between 1970-71 and 2001-02 (Figure 9). Demand for petrol and diesel has grown at 7.4% per annum between 1980-81 and 2003-04. 18. Figure 9 Growth of Transport Vehicles and Two Wheelers Growth of Transport Vehicles 7000000 G ro w th o f T w o W h e e le rs 45000000 41478136 6000000 5000000 5717456 40000000 35000000 30000000 Number 25000000 20000000 15000000 539475 36765 552899 93907 Num ber 4000000 3000000 2000000 1000000 0 Three Wheelers Cars Busses Class of Vehicles 1970-71 2001-02 Trucks 1881085 2088918 10000000 343000 5000000 0 575893 1970-71 2001-02 Tw o W h e e le r s Data source: Centre for Monitoring Indian Economy Pvt. buses from 93.

rational pricing of petroleum products and natural gas. Efficient cost based private refiners with no marketing obligations have been making a killing in this distorted market. This has restrained the growth of private sector retailers who find it simpler to sell to the CPSU marketing companies at import parity prices. differential state taxes and a pooling of the transport costs leads to multiple distortions. 22. removal of entry barriers for private players in distribution and retail business for creating real market competition. improving administration of LPG and kerosene subsidy and environmental management through products upgradation. demand management of petroleum products. Table 3: Growth of Motorised Transport Vehicles 1970-71 1980-81 1990-91 Two-wheelers 575893 2530441 14199858 Three-wheelers 36765 142073 617365 Cars 539475 900221 2266506 Taxis 60446 100845 243748 Jeeps 82584 120475 443734 Buses 93907 153909 331096 Trucks 343000 554000 1355953 Source: Center for Monitoring Indian Economy Pvt. differential excise duties and central levies on products. Oil product prices were set by the government under an Administered Price Mechanism (APM). The Government of India. regulation of upstream and downstream sectors. These distortions and their impact on profitability of CPSUs and the private refiners are further compounded by the subsidies on LPG and Kerosene. The prices of inputs and the products are now determined on the basis of import parity principle even for products wherein India is a net exporter.hands. through the Ministry of Petroleum and Natural Gas has frequently deviated from the import parity principle in fixing the effective price of domestic crude as well as the price of petroleum products at the retail level. Even the CPSU refineries or upstream operations such as ONGC make large profits while oil marketing companies loose money. 21. 2000 crores and the absence of common carrier principle in the use of distribution & marketing sectors. Finally. A feature of the distorted market is the largescale adulteration of petrol and diesel with subsidised kerosene. The above pricing methodology when coupled to the fact that there are differential custom duties on crude and products. Currently. which was dismantled in April 2002. the prices are fixed collectively by the public sector oil companies and there is no price competition at the refinery gate or retail outlets. (CMIE) 2001-2002 41478136 1881085 5717456 684490 1168868 552899 2088918 12 . the LPG and Kerosene subsidies are not reaching the intended beneficiaries. which is exclusively marketed by the CPSUs. there is no independent regulation of the upstream or downstream petroleum sector. However. Other barriers to private sector’s entry into retailing include a minimum investment hurdle of Rs. Ltd. The challenges facing the petroleum and natural gas sectors include: ensuring crude oil and gas supplies in a constrained world market amidst rising prices.

absence of suitable benchmarks for different operational parameters and the absence of an independent regulator for the sector have constrained the growth of coal industry. 26. Thermal power plants using coal. its passage is still awaited. However. affected the pace of development of the coal sector. Foreign Direct Investment (FDI) in coal mining has been allowed and coal mining by joint venture companies is permitted. Despite large reserves of coal. the import has been sluggish. The increasing share of opencast mines is one of the contributing factors for deterioration in quality. Pending new legislation the captive mining policy was formulated. Indian coal has high ash content and low calorific value. 24. The high ash content results in higher emission of suspended particulate matter (SPM). However. Level of mechanisation of underground workings and success thereof has not met to expectations. Unfortunately coal consumption at coastal sites is currently minimal. Entry of private sector in coal production is essential for realising efficiency gains and augmenting the domestic coal supply. Coal blocks have also been allocated to other PSUs under Central and State Governments for coal mining. gap between demand of noncoking (thermal) coal and its supply is increasing and quality of thermal coal has been deteriorating over the years. Coal sector was nationalised in 1971/1973 after recognising the need for scientific and planned development of resources and improving the working conditions in the existing mines. Coal consumption increased from 140 million tonne in 1984 to over 400 million tonne in 2004 with a growth rate of 5.23. There is only marginal improvement in productivity. However. The country is facing acute shortage of coking coal supplies. The objectives of ‘nationalisation’ have not been realised completely. the average being 4100 kcal/kg compared to 6000 kcal/kg of imported coal. Hence emission of SO2 during combustion is also low. 13 . domestic supply is falling short of demand and coal has to be imported. and several coal blocks have been offered to potential entrepreneurs for exploiting coal for their own consumption. Central PSUs engaged in production of coal and lignite contributes nearly 90% and 73% of total production of coal and lignite respectively.4%. account for 60% of our total generation capacity. within the bounds of existing legislation. Since SPM is relatively easy to trap. Lack of competition. Coal has been the mainstay of India’s energy supply. 25. The average calorific value of coal burnt in India’s power plants is only about 3500 kcal/kg. its pricing has remained nontransparent and distribution is restricted through a complex regime of linkages based on very limited rail infrastructure. This is primarily due to constraints of port capacity and the cost associated with multiple handling and inland transportation of imported coal. stiff legislations covering forest conservation and environment management have. In-spite of low (5%) import duty on thermal coal. The coal sector is dominated by Public Sector Undertakings (PSUs) under the Central & State Governments. Problems of land acquisition & rehabilitation. also to some extent. Consequently. Indian Coal is internationally competitive at the pit-head. Indian coal is relatively clean coal. the sulphur content of Indian coal is very low. the Coal Mines Nationalisation (Amendment) Bill 2000 was introduced in Parliament for bringing in suitable legislative amendments to permit private sector entry into coal sector.

Most of our cities have concentration of one or more pollutants above safe limit. at present uranium shortage has forced us to operate the small nuclear generation capacity that we have created at a load factor below what is technically possible. our ability to develop nuclear power is restricted by the very limited availability of uranium. Run of the river schemes avoid these problems at the cost of much lower utilisation of hydro energy and a much more variable supply of power. Clean coal technologies for improving efficiency of energy conversion and limiting emission. taxis and three-wheelers in Delhi beginning September. Thus power. gives only limited incentive to explore in detail coal beyond 300 m depth. many urban areas. 29. The project affected people need to be resettled and rehabilitated. Lack of competition and without the accountability enforced by a bottom line discipline. They have not yet fully occupied the niches they could have. The limited capacity. Given the shortage of conventional fuels. storage schemes may have other environmental consequences such as impact on aquatic life and downstream ecosystems. 31. coal. 2001. The energy sector in India has evolved under the strong lead provided by public 32. The Supreme Court mandated use of Compressed Natural Gas (CNG) for buses. 28. Environmental problems associated with energy use have become severe in 33. have led to some infirmities in the sector. research & development initiatives for establishing additional sources of energy such as coal bed methane. The pace at which we can expand nuclear power generation using indigenous fuel sources is thus severely limited even though the eventual potential is vast. There is large unexploited hydel potential in the country. coupled with the economics of opencast and underground mines. solar. oil and gas industries are largely under public sector. Some persons thus oppose development of large storage schemes. In fact. etc. The capacity of PSUs engaged in exploration has restricted the pace of proving indicated and inferred resources. While we have developed indigenous technological capability in all aspects of nuclear power. Despite many years of efforts and despite significant growth of mini-hydro and wind power. storage schemes often involve displacement of people and submergence of land. 30. to our total energy use has remained small. biogas.27. Yet in our energy strategy environmental concerns have to be factored in to reduce emission of local pollutants as well as global pollutants to ensure that the energy strategy is ecologically sustainable. 14 . In fact many Indian cities are among the most polluted cities in the world. non-conventional energy sources have had a special attraction for the country. Large estimates of total coal resources give a false sense of security because the current and foreseeable technologies convert only a small fraction of the total resource into mineable category. the contribution of non-conventional energy sources such as wind. Other cities are following this lead. sector.. Development of this involves relatively long gestation lags. Also. Moreover. in-situ gasification of un-mineable and deep seated coal reserves and liquification of coal are promising areas for action but are still in infancy.

35. The continued dependence on bio-mass based fuels quite a bit of it obtained from forests. transparent and consistent regulatory oversight in the energy sector? What is the role of renewables in it? How to promote its development? How to increase India’s known energy resources? What new technologies are relevant for India’s future? How to promote their development? What should be our R&D strategy? What is the scope for increasing energy efficiency of the system? What policies can lead to higher efficiency? How to encourage energy conservation and energy use efficiency? In particular how to reduce the use of petroleum fuels for transport? What policies are needed to promote fuel efficiency and alternatives in transport? How to ensure energy security? What is the role of obtaining equity energy abroad? How to reduce dependence on imported energy? How to encourage an energy system that keeps air pollution within the acceptable limits? The growing global concern for the threat of climate change would require that India continues to grow its energy supply in a responsible manner without compromising its economic growth imperative. From a long-term perspective a number of issues need to be addressed: (a) How much energy do we need over the long run? Given our resources what should be our strategy to meet the growing demand? How to promote efficient allocation of various fuels and energy forms to different uses? What should be the relative prices? What institutional reforms are needed to get competitive efficiency? How do we leverage the strength of public sector units that dominate energy sectors? How to obtain credible. 15 (b) (c) (d) (e) (f) (g) (h) . At the same time these problems should be addressed in the context of our long-term energy requirements and strategic options to fulfil them so that we may not get locked into paths that we may regret later. poses a threat of deforestation. into two categories: those that need to be addressed from a long-term perspective and those that are pressing problems in the short-term.2 The issues The energy scene described above raises a number of issues. Thus the immediate problems are shortages of fuels. independent. We divide these 36. growing dependence on imported oil that is becoming dearer by the day and a power sector with financial health that discourages growth in a country that needs energy for growth and for improving human welfare.34. 37. 1. India’s long-term energy strategy must factor this in. thinning of forests and loss of habitat and bio-diversity.

The broad vision behind the energy policy is to reliably meet the demand for energy services of all sectors including the lifeline energy needs of vulnerable households in all parts of the country with safe and convenient energy at the least cost in technically efficient.g. Petroleum & Natural Gas. transmission and distribution? How to generate investible surpluses with SEBs? How to improve the financial health of SEBs? How to reduce AT&C losses? How to reduce the cost of power and improve its quality? How to do away with cost plus regime? How to introduce competition? How to encourage private sector participation in the power sector? How to provide open access in a level playing field? How to ensure fuel supply for power generation? How to expand coal supply in a cost effective way? How to promote investment in coal production? How to expand production by captive mines? How to facilitate import of coal to meet shortfalls in domestic supply and wherever imports are cost effective? How to provide clean cooking energy to all? How to develop an energy system that is poverty and gender sensitive? How to provide access to electricity to all households? Considering some consumption of electricity as a merit good that we want all to consume.. In other words the goal of the energy policy is to provide energy security to all. Alternative technologies are available and there is substantial scope for exploiting synergy for energy system efficiency to meet requirement for energy services. If the energy system is to be efficient. policies have to look at it as a system and have to be integrated.38. economically viable and sustainable manner considering different fuels and forms of energy.4 Need for An Integrated Policy 40. Power and 16 .3 The Vision 39. both conventional and non-conventional as well as new and emerging energy sources and to ensure this supply at all times with a prescribed confidence level considering the shocks and disruption that can be reasonably expected. The need to have an integrated policy arises because different fuels can substitute each other in both production and consumption. Atomic Energy. The pressing problems are: (a) How to deal with persistent power shortages? How do we expand capacities for generation. 1. poor households or agricultural pumps. how should it be financed? How to provide subsidy for electricity and clean cooking fuels to certain consumers e. Currently with five separate Ministries (Coal. in ways that do not encourage wasteful use of electricity? (b) (c) (d) (e) (f) 1.

(d) Uniform Treatment of Externalities Different fuels may have different externalities in their production and for use. It also requires that taxes on capital goods that use different fuels to produce the same output should be consistent if we desire optimal allocation of resources. (b) Consistent Tax Structure Relative prices can be affected by taxes and subsidies. Their efficiency in use and convenience also differ. We briefly look at issues that call for an integrated policy and describe some of the attributes of such a policy. (c) Level Playing Field All players and energy projects. Moreover. etc. rail roads. For this. Ports. but the air pollution caused by their use may have severe adverse health impact. Transmission networks or gas pipeline networks have large economies of scale. Thus prices of different fuels should not be set independently of each other. policies are not always consistent. Bio-mass based fuels are renewables and may not add carbon emissions. (a) Relative Prices Different fuels have different calorific values. 17 . Their development needs to be coordinated and functioning regulated. opportunities for inter-linkages and synergy are missing and suboptimal solutions emerge. Their relative prices have to be set in a way that the resulting inter-fuel choices are socially desirable. And yet often they are substitutes in specific uses. mega projects or micro projects. they generate different kinds and amounts of pollution. public or private. These are often developed through public efforts or through public-private partnerships. coal involves mining with potential to damage land while nuclear involves much smaller amount of mining but may pose problems of waste disposal. urban mass transport. Policy needs to take an integrated view so that environmental objectives are attained at least cost. roads. each concerned with its own turf. Some of them are natural monopolies. (e) Public Infrastructure Many elements of the energy system constitute public infrastructure with many positive externalities and economies of scale.Non-Conventional Energy sources). play an important role in the energy system. their marginal use values per rupee of fuel need to be equivalent. domestic or foreign should be treated equally if the sector is to be efficient. Thus for example. Excise and import duties have to be consistent across different fuels. large or small..

(g) Consistent Regulation Energy sector requires regulatory oversight to balance consumer and producer interests. Thus Bihar. Freight and transmission equalisation practised in the past. in spite of its natural resources has remained industrially underdeveloped. progressive and implementable. However. then energy policy needs to provide for it. drudgery. policy has to factor in national priorities. (j) Energy for the Poor Some amount of clean cooking fuels (LPG and Kerosene) and electricity are merit goods justifying subsidies to the poor. one should find an implementation solution that is least cost. Also if they could be self-targeting and self-limiting they would be preferable. An integrated policy needs to provide a framework of development. and a strategy of transition to the desired energy future. So for a regionally balanced development energy should be available in all regions. Thus if the country desires that food security is paramount and for that a certain level of fertiliser self-sufficiency is required. Distortion of energy prices do not often serve the purpose. One needs to use more direct instruments where incentives are linked to outcomes. regulation should be consistent across different energy sources and across regions. reduce health impact. (h) National Priorities While competitive efficiency is a desirable goal. (i) Regionally Balanced Development Energy infrastructure is critical for development. These subsidies have to be consistent. However. 18 . If this calls for quantitative allocation of natural gas. an integrated approach can help minimise the cost of distortions and incentives. Large networks need regulation to ensure open access to all so that competitive efficiency is realised. To set priorities among alternative R&D missions and define an optimal R&D strategy require an integrated perspective on the future of the energy system. They relieve. one should consider it. R&D and Transition Strategy Many energy projects involve large investments and have long gestation lags.(f) Long Gestation Lags. In particular R&D for new technologies and new sources may be most successful in a mission mode with long-term commitment and support. especially for women. to ensure efficiency and level playing field. often causes regionally distorted development. increase productivity and enhance livelihood options. As different fuels and resources are differentially distributed geographically.

44. Keeping this in mind our approach to designing an integrated energy policy is based on the following premises: (a) Effective implementability of policy is important. The institutional structure in the public sector that we have so assiduously build up during the last 55 years or so to promote self-sufficiency and self-reliance in energy. consumers.5 41. However. if necessary. the Committee recognises that in a liberalised economy. Competitive set-up that gives appropriate signals to various economic agents. 42. Social objectives should not be sacrificed to the objective of competition but should be made consistent with it through use of direct transfers where possible. by implementing agencies in the framework of plans and programmes at any point of time. Any policy that depends on good behaviour of many people. Regulation should be complemented by appropriate industry structure. are to be preferred. government departments. to behave in ways that result in socially desirable outcomes. However. regulation is not a substitute for competition and by itself cannot give efficient outcomes. such as prices. Thus.1. has led to a monopolistic market structure and systemic infirmities inherent in majority public ownership of an enterprise. These comparisons and choice among them are best left to economic decision takers. 19 (b) (c) (d) (e) (f) (g) . is unlikely to be effectively implementable. the policy recommendations have been presented as broad principles. private sector is expected to play an important role in the energy sector. autonomous public corporations. leaving the details to be evolved. Approach Traditional approach to energy policy. The need is to provide policies that create an enabling environment and provide incentives to economic decision takers. Independent regulators have critical roles to play. relative prices of different fuels and context as well as technological developments. It is also not necessary to precisely compare the economics of alternatives as the policy does not mandate which alternative should be used and when. of determining optimal supply strategy with quantitative targets is no longer appropriate. Policy has to recognise the existing institutional structure of the energy sector and define a transition strategy of reforms. Also relative economics of alternatives depend on particular circumstances. Policies should reflect externalities of energy consumption. or on large amount of information. Incentive compatible policies that factor in stakeholder concerns are more likely to be acceptable and implementable. private firms. 43. The Committee’s approach has been to identify such policies.

(h) The efficiency across the energy chain needs to be improved. 20 . keeping in mind the need for integration and will underline aspects of policies that need to be integrated with other policies. With these principles we will look at energy by each fuel source and at the power sector to address the issues identified earlier. 45.

GDP from cross-country regression comes to 0.82 2.06 3. TPES (Commercial) w.Chapter II. 1990-91—2003-04 GDP (Utilities + Captive) TPES = Total Primary (Commercial) Energy Supply 1 : Elasticity on total 2 : Elasticity based on per capita basis 1.83 per capita GDP ($ PPP 2000 <GDP <8000 0. The elasticities are obtained from cross-country data as well as from time series of India’s energy use data. We project total primary commercial as well as total primary energy consumption including non-commercial energy consumption on the basis of elasticities w. Energy Requirements Long-term projections for energy requirements depend on assumptions of growth of the economy. Electricity 1980-81—2003-04 Generated w. GDP.t. Crores 1993-94) 1990-91—2003-04 0. increase in energy efficiency as well as societal and lifestyle changes. which give percent change in energy consumption for one percent. 2.r.t. 21 .r.09 GDP >8000 B. No wonder the various available projections differ widely.t.241 1. change in GDP.t. 1980-81—2003-04 0.83 for all countries and to 0.80 0.76 2. The elasticity for total commercial primary energy consumption w.r.25 1.r. Cross-Country Regression based on Data of 2003 1.302 1.t.79 for countries in the relevant range of PPP GDP (India’s PPP GDP in 2000 US$ for 2003 was 2732). growth of population.r. GDP (Percent change in energy use for one percent change in GDP) A. the pace at which “non-commercial energy” is replaced by “commercial energy”.t. the progress of energy conservation. TPES (Kgoe/capita) w.24 capita GDP ($ PPP 2000) 2000< GDP <8000 1.1: Energy Use Elasticity w.25 (kWhr/capita) w.971 1.1 Total Energy Needs 2. Regression Using India’s Time Series Aggregate Per Capita 1.r.04 1. Electricity Consumption All Countries 1.r. All Countries 0.t. These elasticities are summarised below: Table 2.082 GDP (Rs. Yet it is useful to have a set of consistent projections with clearly stated assumptions to outline the broad discussion of the challenges facing us in meeting energy needs and to provide a framework for policy formulation.79 2000) GDP >8000 0. per All countries 1.

Normally the overall elasticity falls over time as corroborated by the time series data for India. per capita GDP. In Crore @ (mtoe) 1 (mtoe) 2 GDP Growth GDP Growth 1993-94 prices) Rate Rate 2006-07 1114 2011-12 1197 2016-17 1275 2021-22 1347 2026-27 1411 2031-32 1468 Note: 1.06 for the period since 1990-91 compared to 1.r. However.8 0.2. in fact.8 0.95 0. efficiency of equipment (end-use efficiency). which also shows population projections by the Registrar of Census. Projections assuming no change in elasticities with respect to GDP 7% 8% 1751019 1783901 2455891 2621137 3444520 3851310 4831117 5658837 6775892 8314688 9503539 12217005 7% 8% 385 394 505 537 653 718 843 961 1060 1248 1333 1620 7% 375 483 625 797 1051 1344 8% 381 508 684 901 1234 1633 22 . 5.95 2021-22 to 2031-32 0. there is also a feeling that for India the energy elasticity of GDP growth will not fall any further as rising income levels will foster life style changes that are more energy intense. The elasticities are falling over time (or with increasing GDP).85 0.82 for the period since 1990-91. The two sets of elasticities used are shown in Table 2.t. level of the energy infrastructure and development priorities that affect the structure of the economy. India’s elasticity is comparable to that of countries with per capita GDP exceeding 8000 in PPP US$2000.2. the elasticity for electricity is only 1. There is also a feeling that. for projection purpose we have used two sets of elasticities as shown in Table 2. The two elasticity estimates are consistent.25 for the relevant GDP range from the cross country regression w.80 0.t.3. Based on these alternative views two sets of elasticities were used for projecting India’s commercial energy demand. The trend of falling elasticities has been maintained in our assumed elasticities for projecting energy requirements. Using the above elasticities commercial energy needs were projected for different growth scenarios. changes in technology.75 0.78 0. Table 2. Table 2. For India.95 2011-12 to 2021-22 0.95 4.3: Projections for Total Commercial Energy Requirements (Million Tonnes of Oil Equivalent) Year Population GDP TPES TPES in millions (Rs.2: Elasticities Used for Projections (Total energy w. Based on these. Projections based on falling elasticities with respect to GDP 2.67 0. total GDP) TPES 1 Electricity TPES 2 Electricity (Falling (Falling (Constant (Constant elasticities) elasticities) elasticities) elasticities) 2004-05 to 2011-12 0.8 0. The energy elasticities of GDP can be reshaped by various policy interventions.whereas from time series of India’s data it comes to 0. relative prices of fuels.r. These are given in Table 2. elasticities will not fall any further.

W.2 respectively.5% auxiliary consumption.) Required (G. 72% for 2011-12 to 2020-21 and 70% for 2021-22 and beyond. projected using the elasticities of Table 2.) GDP Growth Rate GDP Growth Rate Total energy Energy Requirement Required at Bus bar GDP Growth GDP Growth Rate Rate 7% 8% 7% 8% 7% 8% 7% 8% 633 633 592 592 88921 88921 131424 131424 747 761 698 712 104843 106945 149806 152610 1031 1097 964 1026 148710 158274 206757 219992 1377 1524 1287 1425 204052 225932 276143 305623 1838 2118 1719 1980 280332 322896 368592 424744 2397 2866 2241 2680 365459 437051 480694 574748 3127 3880 2924 3628 476843 591650 627088 778095 Electricity generation and peak demand in 2003-04 is the total of utilities and non-utilities.2) Billion kWhr Projected Peak Installed Capacity Demand (G.W. Table 2. Planwise projected capacity additions and electricity generation are shown in Figures 2. Year 2003-04 2006-07 2011-12 2016-17 2021-22 2026-27 2031-32 Note: Figure 2.4. Energy requirement at bus bar is estimated assuming 6. Requirement for electricity generation.2 are shown in Table 2.1 Projected Electricity Generation Growth (BkWh) 5000 4000 3000 2000 1000 0 2003-04 7% 8% 2006-07 2011-12 2016-17 20121-22 2026-27 2031-32 23 .2 Required Electricity Generation 6.4: Projections for Electricity Requirement (Based on Falling Elasticities of Table 2. Peak demand is estimated assuming load factor of 76% up to 2010-11.1 and 2.2.

This may not be realised in which case coal dependence would increase.6 is based on somewhat optimistic assumptions of gas availability as also its ability to compete with coal on price. It is stressed that Table 2. wind. In order to understand the broad dimensions of the fuel requirements for power generation. coal. solar. hydro. The level of gas use projected in the scenario under Table 2. etc. The projections of this scenario are summarised in Table 2. coalbased generation will need to fill the gap. nuclear. gas. oil and renewables such as bio-mass.2 Plan-wise Projected Installed Capacity (MW) 250000 7% 8% 200000 150000 100000 50000 0 XI Plan XII Plan XIII Plan IVX Plan VX Plan (2007-12) (2012-17) (2017-22) (2022-27) (2027-32) 7. For comparison purposes.6 represents one possible scenario and to the extent that gas. a possible fuel mix scenario was developed.4 have been used. These include.5: Projections for Electricity Requirement by MOP Billion kWhr Installed Capacity (GW) 7% 8% 7% 8% 700 700 140500 140500 982 1029 197060 206440 1377 1511 276385 303330 1931 2221 387645 445690 2709 3263 543690 654865 3799 4793 762555 962210 Year 2006-07 2011-12 2016-17 2021-22 2026-27 2031-32 8. Table 2. These projections correspond to constant elasticity of 0. 24 .6. In actual reality the choice between coal and gas would be guided by economic and commercial considerations including any policy prescriptions for pricing in certain environmental externalities. hydro or nuclear capacity cannot be realised.Figure 2. Table 2.5 provides projections of electricity demand made by Ministry of Power. The electricity requirement can be met by various alternative fuels. For the purposes of this Chapter the projections of Table 2.95.

50. It may be seen that the demand for coal in the year 2024-25 varies from 971 million tonne for the 25 . India Hydrocarbon Vision 2025. cement etc is assessed by determining the outputs of each sector which in turn are functions of GDP growth.6 assume exploitation of full hydro potential of 1.15. The committee has reviewed the demand projections made by EIA.9. . Projections have been brought to a common year by interpolation/extrapolation for ease of comparison. Long-term demand projection of Coal is quite complex owing to rapid changes in the relative availability and price of different fuels coupled with technological advancements and new policies in the end-use sectors.6: Sources of Electricity Generation – One Possible Scenario Year Total Electricity Generation (BkWh) 7% 8% 633 633 747 761 1031 1097 1377 1524 1735 1983 2397 2866 3127 3880 Hydro (BkWh) 75 100 179 226 283 400 500 Nuclear (BkWh) 18 26 59 110 206 301 441 Wind (BkWh) 3 5 8 12 15 19 24 Thermal energy (BkWh) 7% 537 616 785 1029 1231 1677 2162 8% 537 630 851 1176 1479 2146 2915 Fuel Needs (MMT) Coal @ (MMT) 7% 318 366 455 574 678 885 1096 8% 318 375 493 656 814 1133 1478 NG (MMT) 7% 13 17 23 36 48 69 100 8% 13 18 25 41 58 89 134 Oil # (MMT) 7% 6 6 7 8 11 13 15 8% 6 6 8 9 12 14 17 2003-04 2006-07 2011-12 2016-17 2021-22 2026-27 2031-32 @ Share of coal-based energy generation is projected to decline from 85% in 2003-04 to 78% in 2031-32 where as share of gas based generation is projected to increase to 20% from the current level of 12%. and (c) technological innovations in coal consuming sectors leading to energy efficiency and reduced specific consumption. The demand for oil in power sector covers consumption of petroleum products in diesel based plants as well as secondary oil consumption. a gradual decline in the elasticity of demand of coal against GDP has been observed. capacity addition of 63. (b) substitution of Coal by alternative fuels. Requirement of coal has been estimated by projecting a progressive decline in the share of energy from coal-based power stations from a current level of 85% in 2003-04 to 78% in 2031-32. The possible reason for this decline can be: (a) rising share of the non-energy consuming sector in the aggregate GDP. Working Group Report for the Tenth Plan and the Power & Energy Division of Planning Commission. 11.000 MW from nuclear and 14. India vision 2020. Generation from coal-based stations also include electricity generation from lignite. A summary of projections by various agencies is given in Table 2.000 MW in the country. Table 2. # includes secondary oil consumption for coal-based generation 2. The projections in Table 2. IEA.000 capacity from wind farms.3 India’s Coal Demand for Non-Power Use 10. Similarly gas requirement assumes a progressive rise in the share of electricity generation from gas based power stations to 20% from the present level of 12%. Total demand or the aggregate of demands for various non-power coal consuming sectors such as steel. In the last decade or so. Coal Vision 2025. The projections by IEA and EIA are based on low growth of GDP for India.

It may be seen that the demand for the year 2025 varies from 235 Million Tonnes (MMT) for the Best Case Scenario (BCS) of India Vision 2020 to 368 MMT of India Hydrocarbon Vision (IHV) 2025. Based on the numbers given in IHV 2025 for projected oil demand (364 mtoe) the gas demand would work out to be 291 mtoe if the respective shares are as stated. The projections by IEA and EIA are based on unrealistically low growth rate of GDP for India. IHV 2025.4 India’s Oil Demand 12. saturation of LPG demand and effect of energy conservation measures. 13. Since the projections carried out for Coal Vision 2025 by TERI are based on econometric approach. the Committee has taken its non-power coal projections and extrapolated them for estimating the coal requirement for non-power use in 2031-32. The IRADe-PWC projections exclude Naptha and their projection of 347 MMT under high growth case. Long-term growth in demand of petroleum products depends upon a number of factors such as economic growth (GDP).7. Different agencies have made projections for demand of petroleum products. The IHV 2025 states that the share of oil and gas in India’s energy mix would be 25% and 20% respectively. IRADe-PWC and the Power & Energy Division. This projection is based on the likely demand from power. Working Group Report for the Tenth Plan. A summary of the projections by various agencies is given in Table 2. the same have been intrapolated or extrapolated to bring them to a common year for comparison purposes. IHV 2025 also states that the projected demand for gas in 2025 will be 391 MMSCMD which translates into only 128 mtoe. fertiliser and other industries actually materialising on commercial terms. The committee has reviewed the demand projections made by Energy Information Administration (EIA). Asian Development Bank (ADB). Power & Energy Division and Integrated Research and Action for Development . Naptha demand is dependent on the growth plan for fertiliser and petro-chemicals and its price relative to the price and availability of natural gas. there are only five long-term projections viz. Presently. Petrol and diesel demand is dependent on growth of road facilities. There are a number of estimates available for likely gas demand for the Tenth Plan. 2. India Vision 2020. elasticity of demand for petroleum products with respect to GDP growth. the shares of alternate modes of transport and emergence of substitutes like bio-fuels and/or technologies such as hybrids. Indian Vision 2020 has estimated the demand to be between 65 & 26 . relative price levels of substitute products. India Hydrocarbon Vision 2025. HOG is comparable to 368 MMT of India Hydrocarbon Vision. price of oil and future efficiency of vehicles.Price Waterhouse Coopers (IRADe-PWC).5 India’s Non-Power Natural Gas Demand 14. However. particularly LNG/CNG. India Vision 2020. 2. Indian gas market is supply constrained. However. This error makes the estimates in IHV 2025 inconclusive. The future demand for gas appears to be strong. International Energy Agency (IEA). Most of these projections have not taken into account the price sensitivity of gas. USA.. As the available projections by these agencies are for different years.Business as Usual scenario of India Vision 2020 to 1402 million tonne of India Hydrocarbon Vision 2025.

The total commercial primary energy requirements based on the scenario drawn for power and projection made for non-power oil. The ADB had prepared a natural gas development plan in 1999 and estimated demand for gas based primarily on the principles of economic value of gas for power generation in different regions of the country and ‘make or buy’ options for fertiliser industry.7 BCM under High Output Growth (HOG) scenario for the year 2030.9: Energy Requirements in Physical Units Total Electricity Non-Power.Oil Non-PowerNatural Gas2 Generation BkWh MMT MMT B. Table 2. Natural gas can replace existing fuels in various sectors both for feedstock as well as for energy purposes. As the available projections by these agencies are for different years. 27 .Cu. Putting together the various projections discussed above.9. oil and natural gas are for non-power purposes. The above wide range for gas demand was considered by the Committee. and (iii) remaining end uses of gas will continue to grow at 7% or 8% per annum depending upon GDP growth. IRADe-PWC has projected demand of natural gas and natural gas equivalent of Naptha at 243 BCM under the business as usual (BAU) scenario and 405.71 BCM for the year 2020. (ii) the projected fertiliser (urea) capacity by 2031-32 would be all gas based. 15. mainly Naptha for fertiliser & petrochemicals and coal for power. 2. Figure 2.3 shows percentage shares of different fuels in 2003-04 and projected shares in 2031-32. Therefore. the same have been interpolated or extrapolated to bring them to common years and have been converted into MMSCMD for the purpose of comparison.6 Total Commercial Primary Energy Requirement 17. It may be seen that the demand for gas varies from 155 MMSCMD in low case of EIA to 738 MMSCMD in High output growth case of IRADe-PWC for the year 2024-25. It was agreed to base the demand estimate on: (i) the assumption that 20% of power would be generated using gas by 2031-32. This committee considered this a realistic upper hand on the use of gas.M 7% 8% 7% 8% 7% 8% 7% 8% 2003-04 633 633 91 91 113 113 18 18 2006-07 747 761 123 123 1 17 119 20 20 2011-12 1031 1097 161 164 144 149 29 30 2016-17 1377 1524 212 221 180 192 34 38 2021-22 1838 2118 281 299 223 247 49 56 2026-27 2397 2866 376 408 281 320 64 73 2031-32 3127 3880 506 562 355 418 83 100 Note: Estimated fuel requirements of coal.10 using the common unit of million ton oil equivalent (mtoe). 16. it may be stated that the demand will depend upon the price of natural gas relative to that of alternatives. this substitution will depend upon the relative prices of gas with respect to other fuels. A summary of these projections is given in Table 2.Coal1 Non-Power . However. the total energy requirement can be summarised as shown below in Table 2. 1 Projections by Ministry of coal 2 Based on Projections by IRADE 18. coal & gas are summarised in Table 2.8.

14 8.53 22.2 78 4 19. These are called non-commercial because a major proportion of these are simply gathered by actual users directly as opposed to being traded commercially.3 2003-04 % Share of Commercial Primary Energy Resources 2.76 Hydro Coal Natural Gas Nuclear Oil Hydro Coal Natural gas Nuclear Oil Table 2.7 29 6 4.87 1. With economic growth the mean per capita consumption in different expenditure classes change.7 Natural Gas —MTOE 7% 8% 29 29 35 36 49 52 67 75 92 108 127 155 175 224 7.86 44.6 Oil-MTOE 7% 119 124 151 188 234 294 370 4.36 6.2 916 304 3.1 252 111 2.8 556 156 3.9 1112 304 3.07 23.31 36.6 119 27 4.7 Non-Commercial Energy Requirement 19. 20.0 7. It is also assumed that the pattern of fuel use for 28 . The so-called “Non-commercial” energy.4 153 27 5. the household demands are projected assuming that the income distribution in rural and urban areas remain log-normal with the consumption changes.3 8% 119 125 157 201 259 334 435 4.39 51.9 437 156 2. fuelwood.10: Primary Energy Requirements – MTOE — One Possible Scenario Year 2003-04 2006-07 2011-12 2016-17 2021-22 2026-27 2031-32 Growth Rates 2032 (%) Per capita consumption In 2032 (Kgoe) In 2004 (Kgoe) Ratio 2030/2005 Hydro mtoe 7 9 15 19 24 34 43 6. Based on the latest data available on household energy consumption from the NSS 55th round covering the year 1999-2000. agricultural wastes and dung are primarily used by households for cooking energy.0 8% 327 381 508 684 901 1234 1633 5.7 TPES-MTOE 7% 327 375 483 625 797 1051 1344 5.71 2031-32 % Share of Commercial Primary Energy Resources 2.5 Coal-MTOE 7% 167 200 253 322 393 517 641 4.7 296 111 2.Figure 2.8 8% 167 204 269 360 456 632 816 5.8 Nuclear Mtoe 5 7 15 29 54 79 115 12.7 2.

It is worth noting from a comparisons of Tables 2. most of the households would have been electrified by 2019-20.16 15.88 46.45 14.9.31 45.76 8% 6.29 13.16 52.07 12.39 Electricity 7% 8.12 that for the year 2011 electrification does not reduce kerosene consumption significantly.12: The Impact of Electrification on the Demand Scenario of Various Energy Items for Household Consumption Year 2000 2006 2011 2016 2021 2026 2031 Fire Wood & Chips 7% 8% 74. Table 2.63 48.00 30.84 15. The differences are substantial only for the years 2011 and 2016 as even without the acceleration in rural electrification planned under RGGVY.15 98.P.12.26 45.01 14.94 33. Use of LPG for cooking will increase overtime. It should be noted that the requirement for household consumption of electricity.95 36. what is saved from lighting is used as fuel and the consumption of dung goes down. Figure 2.98 13.18 23.21 56.96 14.13 12.67 31.27 13.55 40. The impact of the RGGVY which targets provision of electricity to all by the year 2009-10 will alter the demand for electricity.17 13.38 50.95 66.02 29.58 74.07 12. The projections are summarised in Table 2.17 15.47 Kerosene 7% 10.61 36.48 50.97 30.10 96.11 41.95 40.14 (Quantity by MTOE) Kerosene L.86 21.89 60.70 34.27 21.82 Dung Cake 7% 8% 19.72 Dung Cake 7% 29.64 106.55 36.46 88.40 8% 10.86 15.52 101.34 30.64 94.61 36.17 27.79 40.85 23.06 104.58 88.62 31.29 42.85 99. These are given in Table 2.85 13.28 34.93 15.95 8% 79.20 48.06 13.44 102. kerosene and gas are included in the projection given in Table 2.13 8% 29.95 19. especially subsidised kerosene.46 94.81 104.96 38.08 12.13 38.4 shows this.a particular monthly per capita consumption expenditure class remains the same as observed in the 55th round.58 13.31 92.50 42.11.68 14.76 51. What changes is consumption of it as fuel.58 32.97 40. This is rational.17 28.19 70.82 31.56 9.36 102.81 87. 7% 8% 7% 8% 9.74 41.23 13.78 74.58 12.P.48 15. To account for it household demands are projected from 2009-10 onwards using the energy use pattern of only those households in the NSS 55th round sample which had electricity.01 101.23 65.12 105.08 Electricity 7% 8% 12.10 18.18 42. 7% 6. It is more convenient and the dung saved has greater value as fertiliser.43 18.65 54.35 42.04 100.64 87.42 15.56 7.55 14. Table 2.62 88.42 14.11: The Demand Scenario of Various Energy Items for Household Consumption in India (Quantity by MTOE) Year 2000 2006 2011 2016 2021 2026 2031 Fire Wood & Chips 7% 79.90 92.17 38.49 22.79 8% 8.68 14.13 17.45 31.12 L.93 41.03 32.08 7.21 32.39 61.43 17.79 29.37 69.11 and 2.12 25.41 15. 29 .G.11 98.10 24.68 31.98 39.62 88. As long as kerosene is available.98 41.42 41.58 49.11 52.59 96.30 14.G.

12.Figure 2. The additional requirement is expected to be met from agricultural residue and increased livestock activity that can be expected with growth rates of 7% to 8%.13. 25. The total primary energy required will be the sum of total primary commercial energy and the total primary non-commercial energy. These are summarised in Table 2.13: Total Primary Energy Requirement (MTOE)@ Year TPCES TPNCES TPES 2006-07 375 381 153 153 528 534 2011-12 483 508 169 169 652 677 2016-17 625 684 177 177 802 861 2021-22 797 901 182 181 979 1082 2026-27 1051 1234 184 183 1235 1417 2031-32 1344 1633 185 185 1529 1818 This includes household requirement as per Table 2. It may be noted that household demand for non-commercial energy (firewood & chips and dung cake) increases from around 95 Mtoe in 2000 to around 131 Mtoe in 2031 in Table 2. 24.11 and consumption in miscellaneous industries 30 @ . then the differences for the 7% and 8% growth rate column in Table 2. The impact of other programmes of Bharat Nirman are difficult to assess. For year 2031 the total household requirement changes by some 3 percent (5 MTOE) with a 1% higher growth rate.12 give some idea of changes in demand.4 Percentage of Household with LPG 90 80 70 60 50 40 30 20 10 0 Rural Urban 2000-01 2031-32 23. If we assume that it will increase rural incomes by 1% every year. In any case our goal should be to progressively substitute these traditional fuels with cleaner and more convenient fuels. Table 2.

) Nuclear (kWh) Hydro (kWh) 257@ 16 69 (375) India 2032 (projected 1112 2643 296 170 927@ 300 341 (1390) @ 8% GDP growth) World Average (2003) 1688 2429 635 538 740 403 423 OECD (2003) 4668 8044 2099 1144 1651 1924 1076 U.A.S. In fact. One should note that these projections imply that progress of energy efficiency and energy conservation. USA 27. of course. Even in 2031. the per capita energy uses in other countries in 2004 are compared with India’s projected needs for 2030 in Table 2. International Energy Agency (IEA) and Energy Information Administration.8 Summing Up 26. 29. even at projected levels of energy consumption in 2031. To put the requirement in perspective. 28.e. (2003) 7840 13066 3426 2176 3410 2624 948 China (2003) 1090 1379 213 32 1073 32 215 South Korea (2003) 4272 7007 2264 627 1541 2570 101 Japan (2003) 4056 7816 2146 845 1247 1859 816 @ Per capita coal consumption of India has been estimated based on the calorific value of hard coal used internationally with a calorific value of 6000 kcal/kg to maintain uniformity.2.14: Per Capita Energy Requirements in Selected Countries (2003) TPES (kgoe) India 2004 304 Electricity Consumption (kWh) 585 Oil (kgoe) 110 Gas (Cu. which should be considered as the most important supply options since it has the potential to reduce consumption by 25-30%. Key World Energy Statistics 2005. India’s total primary energy supply on a per capita basis will remain well below the 2002 world average. This is considered when the supply options are explored. The projected energy requirements can be reduced substantially with accelerated improvement in energy efficiency and conservation. Table 2. opportunities to accelerate or alter the pace of the trends. 4000 kcal/kg.. India’s per capita consumption of energy in its various forms in 2004 is well below that of developed countries and the world average in 2002.14. The challenge facing the country is to ensure that the energy needed to sustain a 7/8% growth rate becomes available. What are the alternative supply options? To what extent can demand be met based on domestic resources? To what extent imports would be needed? These are addressed in the next Chapter. the per capita consumption in India from various sources of energy will be well below the 2002 level of per capita consumption in respect of developed countries. Source: IEA (2005). 31 .m. There are. The figures in brackets are actual per capita consumption based on calorific value of Indian coal i. replacement of non-commercial energy and societal and lifestyle changes will continue as per historical trends.) 29 Coal (Kgs.

7: Demand Scenario for Petroleum Products .International Energy Agency IRADe .India Hydrocarbon Vision 2025 BCS .Price Waterhouse Coopers HOG .Energy Information Administration. USA IEA .Business as Usual PWC . Crude Oil Supply Scenario Indigenous Production of Crude Oil in the perspective period is expected to reach a maximum of 50 MMT against the current production of 34 MMT. the same have been intrapolated or extrapolated Note: to bring them to common years for comparison purposes.Integrated Research and Action for Development BAU .India (BY VARIOUS AGENCIES/ORGANISATIONS) (MMT) Year EIA (2004) Reference Case High Case Low Case BAU Base Year 2001 (105 MMT) 119 139 157 219 264 2001 2001 (105 MMT) (105 MMT) 122 149 194 254 324 115 129 154 189 204 2000 (102MMT) 122 145 171 201 230 271 1998-99 (91 MMT) 132 175 226 288 368 121 153 193 245 309 BCS 2001-02 (108MMT) 2001-02 (108 MMT) 124 147 174 207 240 281 125 162 191 212 260 320 2003-04 (109.7 MMT) 127 176 212 259 347 465 IEA (2004) IHV –2025 (2000) Projections by the Various Agencies India Vision – 2020 (2002) Working Group Report of Tenth Plan (2001-02) Power & Energy Division's Projections (2003-04) IRADe & PWC (2005) BAU * HOG 1997 (83 MMT) 112 135 162 195 235 2004-05 2009-10 2014-15 2019-20 2024-25 2029-30 119 139 164 195 232 276 EIA .High Output Growth IHV . The Balance requirement will have to be met through imports. 32 .Table 2.Best Case Scenario As the available projections by the various agencies are for different years.

India (BY VARIOUS AGENCIES/ORGANISATIONS) (MMSCMD) Year EIA (2004) Projections by the Various Agencies IEA (2004) IHV (2025) (2000) India Vision (2020) (2002) Power & Energy Division's Projections (2003-04) IRADe & PWC * Reference Case High Case Low Case BAU BCS 2001-02 (81MMSCMD) 2003-04 (85MMSCMD) BAU HOG Base Year 2001 (62 MMSCMD) 2001 (62 MMSCMD) 2001 (62 MMSCMD) 2000 (67 MMSCMD) 1999 . USA IEA .Business as Usual BCS .International Energy Agency IHV . 33 .Energy Information Administration.Table 2.Integrated Research and Action for Development EIA .Best Case Scenario PWC . the same have been intrapolated or extrapolated to bring them to common years and have been converted into MMSCMD for the purpose of comparison.High Output Growth * includes Natural Gas & N G equivalent of Naptha Note: As the available projections by the various agencies are for different years.Price Waterhouse Coopers HOG .8: Demand Scenario for Natural Gas .2000 (110 MMSCMD) 1997 (59 MMSCMD) 2004-05 2009-10 2014-15 2019-20 2024-25 2029-30 74 93 124 155 195 77 101 132 171 225 74 93 109 132 155 91 140 189 228 259 295 195 277 329 358 391 89 115 149 194 258 87 111 142 177 226 98 134 183 249 326 430 93 145 226 356 488 667 95 164 285 493 738 1111 IRADe .India Hydrocarbon Vision 2025 BAU .

Comm. 2001 481 Plg.Table 2.15: Demand Projection of Coal by Various Agencies in Million Tonne Source X Plan working group Sectors/Period Power Captive Power Steel Cement Fertiliser Others Total Power Captive Power Fertiliser Steel Cement Others Total Power Captive Power Fertiliser Steel Cement Others Total Base year 06-07 322 28 43 25 4 51 473 322 28 4 43 25 51 473 322 28 4 43 25 51 473 2010 2011-12 469 32 40 24 5 50 620 413 43 53 38 64 611 427 44 54 39 65 630 2015 2016-17 617 37 40 25 5 56 780 517 60 67 58 80 782 553 63 69 61 82 828 1118 538 688 408 374 390 484 612 473 411 439 764 548 447 493 623 920 2020-21 2021-22 2024-25 2025 2030 2001-02 Coal Vision 2025@ 7% GDP 981 635 84 84 88 101 992 699 90 90 95 106 1079 1126 719 102 97 113 117 1147 804 112 105 123 123 1267 1402 659 971 611 481 713 629 490 817 1417 (2031-32) 2006-07 Coal Vision 2025@ 8% GDP Hydrocarbon Vision 2025 India Vision 2020 2006-07 1998-99 1997-98 (311) 2001 1483 EIA Best Case Scenario Business As Usual High Low Reference IEA 2000 P&E Division. @ Projections made by TERI for Coal Vision 2025 957 34 .

1. it is with low calorie and high ash content. While coal is abundant. the most abundant energy resource. Neither of this has been fully certified by Directorate General of Hydrocarbons 2 From deep seated coal (not included in extractable coal reserves) Note: 1 Million Metric Tonne of Coal = 0.2005) Mtoe MMT ? 680 1260-2340 84 - 153 22 29 153 22 52 Gas (as on 1. India is not well-endowed with them. If all the inferred reserves also materialise then coal and lignite can last for more than 140 35 .2005) Mtoe 15497 148 5772 8 33 1 Extractable Coal Mtoe Lignite (as on 1. Table 3. Supply Options The strategies to meet the energy requirement are constrained by country’s energy resources and import possibilities. Unfortunately. Further. 3.1 2.2005) Mtoe Coal Bed Methane Mtoe In-situ Coal Gasification2 * 29 Balance Recoverable Reserves Indicated Gas resource includes 176 Mtoe claimed by Reliance Energy & 504 Mtoe by GSPC.41 Mtoe Conversion factors: 1 Million Metric Tonne of Lignite = 0. Hydro potential is significant. often delays its development. based on current extraction technology remain limited.1. but small compared to our needs and its contribution in terms of energy is likely to remain small.4. gas and uranium are meagre though we have large reserves of thorium.1: India’s Hydro Carbon Reserves Resources Unit Proved (P) 38114 12300 1220 1220 739* 831 765 ? * Inferred (I) 48007 9020 3652 Indicated Production in 2003-04 (Q) Net Reserve/Production Imports ratio In (P+I) / Q P/Q 2003-04 (M) Coal (as on 1. The extractable reserves.2005) Mtoe 13 83 144 Extractable Lignite Oil (as on 1. India’s Energy Reserves India’s Hydro-Carbon Energy Reserves are summarised in Table 3. Reserves of oil. though with low sulphur content and regionally concentrated.Chapter III.1.4. the need to mitigate hydro environmental and social impact.2865 Mtoe 1 Billion Cubic Meter of Gas = 0.9 Mtoe 1 Source: Respective Line Ministries Coal Supply Scenario 3. at the current level of consumption can last for some 80 years. The proved reserves of coal.

in-situ coal gasification at abandoned coalmines might provide an economically attractive option for full extraction of energy from in-place reserves. 6. In-situ coal gasification can thus significantly increase the extractable energy from India’s vast in-place coal reserves. the total extractable coal reserves would run out in around 40 years. only about 45% of the potential coal bearing area has currently been covered by regional surveys. It can sustain the current level of production for 22 years and is less than only 6 years worth of our level of consumption in 2004-05. However. However. The recent large discovery of natural gas by Gujarat State Petroleum Corporation (GSPC) has added to the gas reserves substantially. it is felt that both regional as well as detailed drilling can be made more comprehensive. ONGC is engaged in trials to establish its feasibility and economics for Indian coal and lignite in collaboration with the Russians. In-situ coal gasification. See Table 3.years at the current rate of extraction.2. The problem of overburden removal and ash disposal faced by conventional coal mining and use is eliminated. The problem with coal is how to raise the proportion of extractable reserves. Finally. coal and lignite consumption will increase in future and the reserves would last for far fewer years. Import dependence will keep rising. This is so because in-situ coal gasification can tap energy from coal reserves that cannot be extracted economically based on available open cast/underground extraction technologies. more than 28 years ago. 4. The country has not had any significant oil find since the Bombay High fields. unless dramatic new discoveries are made. In any case India’s supply strategy should not rely solely on the possibility of finding oil domestically. Oil and Gas Supply Scenario 5. the potential for domestic energy supply based on in-situ coal gasification can be large but it has not yet assessed. In-situ coal gasification can increase India’s available energy from domestic resources significantly. Only one third of the potential area has been explored so far. Covering all coal bearing areas with comprehensive regional & detailed drilling could make a significant difference to the estimated life of India’s coal reserves. The technology is available internationally. with or without carbon sequestration could be eligible for carbon credits. The reserves of crude oil are merely 739 MMT. However the reluctance of international majors to explore in India and the poor success rate of ONGC suggest that prospects may not be very bright. the size of the reserves of both these finds are yet to be certified by the Director General of Hydrocarbons (DGH). Further. The situation was similar in the case of natural gas reserves till 200102 before the discovery of gas in Krishna-Godavari basin by Reliance. Of course. ensure adequate production and the need to take care of the environmental impact of coal production and use. Clearly. It is the first step towards a clean coal technology since carbon can be captured from the syn-gas produced and sequestered in the mine or pumped back in oil or gas fields to enhance oil or gas recovery. If domestic coal production continues to grow at 5 percent per year. 36 . There has been no significant step up in the crude oil reserves during the last decade in spite of large investments in exploration activities. In-situ gasification has many environmental advantages. As a result. the crude oil production has stagnated and the gap between the demand and domestic availability of crude oil is widening.

at the very low current rate of production.000 MW of the Pressurised Heavy Water Reactors (PHWR).22 32. The estimated investment in these blocks is about Rs.872 62.51 32.477 2001-02 732.84 6. This programme consists of setting up of Pressurised Heavy Water Reactors (PHWRs) in the first stage. initially through imports of technology and with the long-term objective of indigenisation. the proved gas and CBM together can last for some 50 years.80 31.48 31.032 762. capacity addition will be supplemented by electricity generation through Light Water Reactors (LWRs). Government has formulated CBM policy.044 750.10 33.962 2004-05(p) 739. An additional three blocks have been taken up for development on the basis of nomination.714 2002-03 740. Further.358 1990-91 738.95 29. as these reactors are efficient users of natural uranium for yielding plutonium fuel required for the second stage FBR programme.373 853. 37 . 560 crore and estimated CBM resources are to the tune of 860 BCM (765 mtoe).13 10.01 29.55 33. India is extracting uranium from less than 0. To give impetus to exploration & production.08 33. Indian uranium reserves are of extremely low grade. Based on two rounds of bidding under the CBM Policy. PHWR technology was selected for the first stage. The substantial thorium reserves can be used but that requires that the fertile thorium is converted into fissile material. In this context.998 2000-01 702.45 17. Fast Breeder Reactors (FBRs) in the second stage and reactors based on the Uranium 233-Thorium 232 cycle in the third stage.71 31. Thus.389 2003-04 761. Commercial production of CBM from some of these blocks is expected to start in 2-3 years.777 (p) Provisional * Reserves position as on 1st April of commencing year Source: Ministry of Petroleum & Natural Gas Nuclear 8.1% ores compared to ores with 12-14% uranium in certain resources abroad. This makes Indian nuclear fuel 3-4 times costlier than international supplies.2: Reserves/Production of Crude Oil & Natural Gas Year Crude Oil (MMT) Natural Gas (BCM) * * Production Production Reserves Reserves 1970-71 127. The FBRs will be fuelled by plutonium and will also recycle spent uranium from the PHWR for breeding more plutonium fuel for electricity generation.507 351.The Directorate of Hydro Carbon has estimated the country’s resource 7. It is also envisaged that in the first stage of the programme.981 922. Thorium as blanket material in FBRs will produce Uranium 233 to start the third stage.31 2.426 760.160 686. contracts have been signed with PSUs/Private companies for the exploration and production of CBM in 13 blocks. Table 3. base for Coal Bed Methane (CBM) to be between 1400 BCM (1260 mtoe) to 2600 BCM (2540 mtoe).48 1.445 1980-81 366.60 32. The available uranium can fuel only 10. India is also poorly endowed with uranium. a three-stage nuclear power programme is envisaged.

00.3 shows the potential of nuclear energy with domestic resources in the country.000 MWe LWRs at Kudankulam. Use of FBR technology would enable indigenous uranium resources to support a 20.200 5. A beginning has been made in the introduction of LWRs with the inter-governmental agreement between India and the Russian Federation for cooperation in setting up of 2x1. The Bhabha Atomic Research Centre (BARC) is also engaged in R&D activities to develop an Advanced Heavy Water Reactors of 300 MWe capacity that could provide an alternative route to the thorium-based Stage Three of India’s nuclear power programme.000 In FBR 1.308 42.000-T In PHWR 7. Tamil Nadu.4.000 Very large Source: Department of Atomic Energy 9. Two possible growth paths of nuclear power are summarised in Table 3.950 1. India succeeds in assimilating the LWR technology through import. Research and development on the utilisation of thorium is in progress. 11.4: Possible Development of Nuclear Power Installed Capacity in MW Year 2010 2020 2030 Unit GWe GWe GWe Scenario Optimistic* Pessimistic 11 29 63 9 Remarks These estimates assume that the FBR technology is successfully demonstrated by the 500 MW PFBR 21 currently under construction.000 MWe nuclear power programme by the year 2020.616 117. The pace of development of nuclear power is constrained by the rate at which plutonium can be bred and thorium converted to fissile material. Table 3. Such a FBR programme is critical to developing the thorium-based third stage of India’s nuclear power programme. Table 3.Table 3. Source: Department of Atomic Energy 38 .783.25.027.3: The Approximate Potential Available in Nuclear Energy Amount Thermal Energy Electricity Particulars TWh GWyr. 208 be able to import 8000 MW of Light Water Reactors with fuel over the next ten 2040 GWe 131 2050 GWe 275 * It is assumed that India will years. Without developing the wide-scale use of FBR technology.992 913 330 10. The first stage programme of PHWR technology has reached a stage of maturity. If India is able to import nuclear fuel the pace can be speeded up. A 40 MWe Fast Breeder Test Reactor (FBTR) was set-up in 1985 at Kalpakkam to gain experience in the technology under the second phase. 10.000-T In Breeders 3.000 MWe nuclear capacity based on known indigenous uranium resources. though much later than was initially expected. GWe-Yr. MWe Uranium-Metal 61. 48 becomes completely self-reliant on PHWRs and 104 develops the Advance Heavy Water Reactor for utilising thorium through an alternative route by 2020. The FBR technology is critical to developing stage two of India’s nuclear power programme. India would find it difficult to go beyond 10. This has been followed by progress in the development of technology for the first Prototype Fast Breeder Reactor (PFBR) of 500 MWe capacity and such a plant is currently under construction.50.886 431.000 Thorium-Metal 2.

2 million hectares of intensive cultivation with required inputs.000 MW including some 15.1 Mtoe/year Mtoe/year <1 20* 10 Mtoe/year “ Mtoe/year Mtoe/year - 1200 1200 <1 <1 10 5 based on 50 percent plants under use * The availability of land and inputs for getting projected yields is a critical constraint Source: Respective Line Ministries 13. Such a strategy would ensure that hydro is maximally used for meeting peak loads and all new projects would need to be designed with this objective in mind.000 MW of mini hydel plants (size <25 MW). renewable energy resources become important.50. The undeveloped potential is mainly in the North East.50. India’s renewable energy resources are summarised in Table 3. The accelerated hydro development plan aims to bring 50000 MW of new capacity. Himachal & Uttaranchal.000 1. Out of this 25690 MW are in Arunachal Pradesh. At such a load factor an installed capacity of 1. Table 3. Through plantation of 20* million Ha of wasteland or 7* million hectares of intensive cultivation From 1. particularly 39 .6 @ 0. The current utility based installed capacity is 30955 MW and the average annual generation over the last three years (2002-05) was 71 BkWh giving a load factor of 29%.5. Expected by utilising 5 million Ha wasteland at an efficiency level of 15 percent for Solar Photovoltaic Cells MWe scale power plants using 5 million Ha Onshore potential of 65000 MWe at 20 percent load factor Potential Mtoe/year Mtoe/year 140 0.Renewable Energy Resources 12. If all such options are developed together the combined potential may be less than the sum as we would run out of available land for energy generation as other competing land uses may dominate. The potentials indicated for each of such option is assessed independently. The problems of environment and ecology and social problems of resettlement of project affected people have delayed development of hydro projects. may be justified with the available potential hydroelectric energy. India’s hydel resources are estimated to be 84000 MW at 60 percent load factor.5: Renewable Energy Resources Resources Hydro-power Bio-mass Wood Biogas Bio-Fuels Bio-diesel Ethanol Solar Photovoltaic Thermal Wind Energy Small Hydro-power @ Unit MW Present 30936 Basis of Accessing Potential Total potential assessed is 84000 MW @ 60% of load factor or 1.50.000 MW at lower load factors 620* 4 15 Using 60 million Ha wasteland yielding (20) MT/Ha/year In 12 million family sized plants In community based plants if most of the dung is put through them. 14. Given the limited amount of domestic resources of conventional energy sources. It may be noted that many renewables require land.

18. Currently. What needs to be done to make this energy resource more sustainable is to improve the efficiency and convenience of using this bio-mass.7 million. 16. 1977 40 . (1977) “Mobilisation and Impacts of Bio-Gas Technologies”. Currently. Along with dung cakes which provided 30 mtoe. bio-mass is providing 1/3 of India’s total primary energy. 17. a challenge but is possible (Parikh and Parikh. the total contribution of wind energy to India’s energy mix will remain below 10 Mtoe.000 MW (as estimated by the Wind Power Society) inclusive of off-shore potential and further assumes that technological innovations will raise capacity factors to 20%. perhaps. This yet modern bio-mass would have to be a part of India’s energy supply scene.S. 2 pp. This is mainly agricultural by-products and gathered wood. this would permit a grid-connected wind capacity of as much as 20. Community based plants can process dung from households with less than 3-5 animals required for a family sized plant and also use any excess gas available from family sized plants. bio-mass based fuels provide 81% of domestic energy.those that involve large storage dams. In fact. Energy. 31000 MW are Run of the River (ROR) scheme where these problems are negligible. The rural people aspire to have clean and convenient fuel like their urban counterparts. As a first level of approximation. Of the 50000 MW. The domestic use in 2000 was 80 mtoe. Though falling in its share of total energy mix. 441-445. 15. however. Even though its contribution will be marginal. for example through wood gasification or bio-gas plants. Vol. The actual grid connected wind capacity is only about 3600 MW. Even if one goes by the wind potential of 65. and Parikh K. biomass dependence shall continue to rise in absolute terms. the exaggerated claims of capacity factors. Managing a community sized plant in an incentive compatible way that ensures voluntary cooperation of all stakeholders is. India has had a 40 year old bio-gas programme. it is claimed that Indian wind farms deliver a capacity factor of about 17% on average. This reflects both a poor exploitation of claimed potential and. Evaluation studies show that only half of these are in use. This non-commercial energy sub-sector is essentially managed by women without technology. bio-fuels (vegetable oil and ethanol) and solar energy on sizeable * Parikh Jyoti K. The total number of family size bio-gas plants installed is 3. Onshore wind energy potential is estimated to be around 45000 MW. 1977)*. bio-mass.000 MW at the current size of India’s grid. wind power specially at the lagging ends of the grid provides several benefits and should be pursued wherever it is viable. However. Bio-mass is the major domestic fuel for cooking. the available energy varies from month to month and is estimated that 19660 MW of ROR schemes would generate 2 BkWh of energy in the lean month and 13 BkWh in the high inflow month giving load factors of 14% to 90%. Bio-mass can be a major energy source if fuelwood plantations are developed. This requires land which may have other competing uses. management or investment involving backbreaking drudgery and with likely environmental damage and unsustainable practises.

Wood gasification or direct combustion. The potential is shown in Table 3. its economic practicability depends largely on the yields one can get from wasteland and/or the returns one can get from good quality land with irrigation and fertiliser compared to other crops. Mahua etc. liquefaction or 41 . or if intensive cultivation of land for crops to produce ethanol constitutes an attractive option to farmers. At present ethanol as a transport fuel can make some contribution but is not likely to constitute a major option. both provide possible options for power generation. adequate qualities of ethanol can be available to blend petrol with 10 percent ethanol. Ethanol is used in Brazil as a fuel for cars. 19. Hydrogen production. The present conversion efficiency of commercial available photovoltaic cells is less than 15 percent. the available quantities of ethanol. If technology can be developed to economically collect and convert rice straws which are currently burnt. Hydrogen is seen as the new energy carrier. The average solar insolation in the country is 6 kWh/meter2/day. Potential to reduce costs and increase efficiency exists and a technology mission for it is highly desirable.20/kWh at present. 22. Under Indian situation of scarcity of land and water. 20. At some relative prices farmers may themselves decide to use their land for producing energy. With this efficiency the potential of covering just 5 million hectares of land with photovoltaic cells is 1200 mtoe/year. These benefits should be factored in while assessing the desirability of bio-diesel when the data on land productivity are available. Much of its potential has yet to be exploited. Appropriate policies need to be designed to accelerate the exploitation of this potential. Solar thermal generation has not found acceptance globally. The photovoltaic technology is proven but expensive and the cost of electricity exceeds Rs. Bio-diesel provides an option to substitute diesel. have attracted lot of attention recently. Development of Hydrogen technology is being pursued in many countries. Clearly Table 3. Karanj. Solar thermal is economical for water heating. when used as feedstock for production of chemicals and potable alcohol offer higher economic and opportunity costs to the country rather than its use as an admixture with gasoline.. transporting. storing and distributing hydrogen as well as in the field of fuel cells for efficient end use of hydrogen. 21.scale all require large amount of land. Hydrogen can also be burnt directly in internal combustion engines. A number of projects being undertaken now will provide an assessment in a couple of years. Solar energy has a large potential in the country. The overall efficiency of the hydrogen cycle remains in doubt. While bio-diesel from non-edible oils such as Jatropha. It provides decentralised local fuel which can be used directly without esterification in stationery engines and it can create significant employment. This can be exploited in many direct thermal applications such as for cooking or heating or in photovoltaic cells that directly convert sunlight to electricity. It has other benefits. 23. though the potential to use it in hybrid systems may be there.1 shows that wood plantations offer the best option for bio-mass based supply sources along with a huge employment potential. India also has set-up a Hydrogen Development Board to promote development of technologies for producing.1.

27. Metal hydrides that store hydrogen & release it for direct combustion have been developed for powering two/three-wheelers in the country but not yet commercialised. The scenarios are described in Table 3. 3. However. unless there are technological breakthroughs or large-scale shifts to public transport in place of personal vehicles or to freight movement by railroads in place of trucks. In Chapter II in Table 2. At current prices of oil. Natural gas demand for other than power generation is in the production of fertilisers and chemicals where it cannot be economically substituted. India has large deposits of gas hydrates (which are methane gas trapped inside ice) off the coast in the sea. wind or nuclear energy and through certain microbial processes. 42 . This scenario assumes that the electricity generation will be based on full development of hydro and nuclear potential of the country and use of gas to the extent of 20%.6. Possible fuel wise substitution should be taken into account in considering supply options. One tonne of oil requires 6 tonnes of relatively high quality (5500 + kcal/kg) coal. The technology to exploit it is yet to be developed.compression. hydro. it cannot easily be replaced in significant quantities. To explore the consequences of different alternatives and their quantitative significance a number of scenarios have been developed using a multi-sectoral. The technology of controlled fusion with positive energy gain in an economic way is also yet to be developed. multi period optimising linear programming model*. significant barriers relating to financial and technological viability remain in widespread use of hydrogen in automotive or stationary applications.2 Supply Scenarios 26. this technology may be viable even for Indian coals and should thus be pursued. Such a substitution will depend on the relative availability and price of coal/gas. Hydrogen can be produced using hydro carbons. 24. transportation & storage and final dispensation. In respect of oil for transport use.6 one possible energy mix scenario was outlined. Another emerging technology of interest is liquification of coal. These two sources are not likely to be available in significant amount in the next 25 years. all entail huge amount of energy consumption and loss. The technology was commercially proven in South Africa and has been in use there for a number of decades. The scenarios are designed to assess the importance of critical policy options for meeting energy requirement. Among new energy resources that have yet to be proved are gas hydrates and nuclear fusion. In respect of coal and natural gas there is a clear substitution possibility. Fusion power which requires fuels that can be obtained from sea water offers virtually unlimited power. 25. South Africa leads the world in this technology based on the Sasol process. * The model developed by Observer Research Foundation (ORF) was upgraded and the scenarios developed under the guidance of Dr. This can substitute petrol in cars. bio-mass and splitting water with the use of solar. Kirit Parikh by a team from ORF. Stationary applications or automotive applications using fuel cells are still relatively uncompetitive.

1 shows this graphically. parameters and constraints in particular on the relative costs and prices of the alternative. 50000 MW of bio-mass power and 10 mt of biodiesel. A model scenario critically depends on the assumptions. 4. The requirements are specified in terms of billion units of electricity. The “optimality” of the solution is contingent on them. This is comparable to the scenario of Table 2. 2. the discount rate and the projected requirements. Figure 3.2 to 3.10. Development of the entire (150. 7. 9 plus vehicle efficiency Fuel efficiency of all motorised vehicles increased increased by 50 percent. 11. 8. The importance of the model is that a solution provides a consistent scenario. 28. & Both nuclear and hydro as in 2 and 3. Period wise details for three selected scenarios are given in Figures 3. 5.8. 10 plus renewables 30000 MW wind power. Assumes nuclear development as per the optimistic scenario of Table 3. 7 plus Coal Power Plant Both DSM and coal efficiency together. 3.Table 3. 5 mt of ethanol by 2031. Table 3.6: Some Energy Supply Scenario for 8% GDP Growth Scenario Description 1.4. 10. 5 and Higher Coal Power Efficiency of future coal power plants increased to Plant efficiency 42 percent from 36 percent for the present 500 MW super critical boilers.6 & 2.4. Maximise Hydro Nuclear 4 plus forced Natural 20% of electrical & 14% primary energy comes from Gas natural gas. The freight and passenger traffic projections were made using elasticities with respect to GDP of 1. Efficiency 8 and higher freight Railways freight share increased from 32 percent to share of Railways 50 percent. 9. The scenarios should be looked at primarily as alternative consistent scenarios. 5 plus Demand Side Demand side management reduces electricity Management demand by 15 percent.7 summarises the results of the scenarios. billion tonne-kilometre of freight traffic. Coal-Based Development Maximise Nuclear Forced Hydro Most electricity generation by the most economical option – which turns out to be primarily coal. estimated from data of 1930 to 2000. The model is a linear programming model which obtains the least coast solution subject to constraints over ten 5-year periods.0 and 0. 43 . billion passenger-kilometre of passenger traffic.000 MW) domestic hydro potential by 2031. 10000 MW of solar power. 6.

692 1.494 1.082 5 3 468 114 995 5 89 463 116 1.7: Scenario Summaries for 8% GDP Growth — Fuel Mix in Year 2031-32 Million Tonnes of Oil Equivalent (MTOE) Scenario No.673 1.633 1. Scenario Description Oil Natural Gas Coal Hydro Nuclear Solar Wind Fuelwood Ethanol Bio-diesel Total 1.446 1.383 Coal Dominant Forced Forced Forced Case Nuclear Hydro Nuclear+Hydro 467 114 1.378 1 2 1 2 3 4 5 Forced Nuc+Hyd+ GAS 464 224 807 49 89 6 Forced Nuc+Hyd+GAS+ coal eff 486 181 776 49 89 7 Forced Nuc+Hyd+GAS+ DSM 486 164 706 50 89 8 Forced Nuc+Hyd+GAS+ DSM+ coal eff 486 164 658 50 89 9 Forced Nuc+Hyd+GAS+ DSM+ coal eff+ rail share up 487 164 658 50 89 10 Forced Nuc+Hyd+GAS+DSM +coal eff+rail share up+transport eff 416 163 659 50 89 11 Scenario 10+Forced Renewables 406 168 573 50 89 4 0 1 0 0 0 0 0 12 69 4 8 1.031 49 3 1 0 493 121 940 49 89 Oil Natural Gas Coal Hydro Nuclear Solar Wind Fuelwood Ethanol Bio-diesel Total 28% 7% 65% 0% 0% 0% 0% 0% 28% 7% 60% 0% 5% 0% 0% 0% 28% 7% 62% 3% 0% 0% 0% 0% 29% 7% 56% 3% 5% 0% 0% 0% 28% 14% 49% 3% 5% 0% 0% 0% 31% 11% 49% 3% 6% 0% 0% 0% 33% 11% 47% 3% 6% 0% 0% 0% 34% 11% 45% 3% 6% 0% 0% 0% 34% 11% 45% 3% 6% 0% 0% 0% 30% 12% 48% 4% 6% 0% 0% 0% 29% 12% 42% 4% 6% 0% 1% 5% 0% 1% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 44 .672 1.663 1.Table 3.447 1.581 1.

200 MTOE 1.006 2.800 1.000 800 600 400 200 0 2.2 Coal Dominant Scenario 1 .800 1.011 2.000 2.021 2.Figure 3.600 MTOE consumption 1.200 1.031 Year Crude Oil Natural Gas Coal Hydro Nuclear 45 .026 2.600 1.1 Fuel Mix Comparison in Year 2031-32 1.016 2.400 1.Fuel mix yearwise 1.400 1.000 800 600 400 200 0 Scenario 10 Scenario 11 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 Scenario 8 Scenario 9 Oil Solar Natural Gas Wind Coal Fuel wood Hydro Ethanol Nuclear Bio diesel Figure 3.

4 Forced Renewables Scenario 11 .Figure 3.031 Year Crude Oil Natural Gas Coal Hydro Nuclear Figure 3.006 2.Fuel mix yearwise 1.016 2.021 2.3 Forced Hydro.200 1.400 1.600 1.000 MTOE 800 600 400 200 0 2000 2006 2011 2016 2021 2026 2031 Year Crude Oil Solar Natural Gas Wind Coal Fuel wood Hydro Ethanol Nuclear Biodiesel 46 .000 2.400 1.600 1. Nuclear and Gas Scenario 5 .800 1.026 2.200 MTOE 1.Fuel mix yearwise 1.011 2.000 800 600 400 200 0 2.

3%. Based on these assumptions our imports need for the various scenarios would be as shown in Table 3. If we don’t make major new discoveries our production can increase only marginally. Thus with an 8 percent growth of GDP an import dependence for energy in 2031-32 could be as low as 20 percent and as high as 60 percent. the production of coal and lignite by 2031-32 would be around 1400 mmt. Increasing coal production and associated infrastructure of transport. The main hurdle could be inability to expand production at the pace needed. At a modest growth rate of production of 5. The CO2 generation from energy use are in different scenarios shown in Figure 3. 31. Our production of coal is constrained by our ability to successfully use our ample domestic resources of coal. the difference is some 35 percent.5. The required growth rate looks achievable when compared to the 5. Domestic Production and Imports for 8 percent Growth for year 2031-32 Range of Assumed Range of Range of Import Fuel Requirement Domestic Imports (Percent) in Scenarios Production (R) (P) (I) (I/R) Oil (mt) 406–493 35 371–458 91–93 114–224 200 0–24 0–11 Natural Gas (mtoe) including CBM Coal (mtoe) 573–1082 560 13–522 2–48 TCPES 1378–1692 — 384–1004 28–59 30. coal dominant scenario and scenario 11 with all efficiency and DSM measures and renewables. We can only guess what the production would be and be ready for the worst. This entails an annual growth of 5. The level of imports depend on the level of domestic production.5 percent per year.1. environmental constraints due to required deforestation and social problem of resettlement.3% to 6. These scenarios help us in assessing the significance of various options. Based on the various scenarios developed the total commercial energy requirement for India varies from a low of 1378 mtoe to a high of 1692 mtoe. a rate slightly higher than what has been achieved over the previous 25 years.05% over 2003-04 level in commercial energy supply to sustain the 8% growth rate. Between Scenarios 1. Table 3.29. domestic production of oil and gas will depend critically on new finds. Thus we assume that we can produce by 203132 only 35 mtoe of oil per year and between 100 and 200 mt of natural gas including coal bed methane. 47 . They also suggest our likely dependence on energy imports.8.7% growth in energy consumption over the previous 25 years for an annualised GDP growth rate of 5.8: Ranges of Commercial Energy Requirement. Given our resources shown in Table 3. increasing energy use efficiency in generation and use are critical if we are to reduce our dependence on imported energy.

would require timely resolution of issues of water rights.. Coal is the only domestically available resource if the nuclear and natural gas import options are not taken up and hydro development also does not take place. In this “coal-based development” the total demand for coal increases from 175 MTOE in 2004-05 to 1080 MTOE in 203132. which would increase our energy dependency on imports even more than today.000 CO2 Emission (Million tonnes) 6. The expansion of electricity in this case has to be based almost entirely on domestic and imported coal.000 3. The results of the scenarios in the context of the brief review of energy resources show the following: (a) Any supply strategy over the coming decades would have to emphasise India’s major resource. 48 (b) Scenario 11 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 Scenario 8 Scenario 9 .000 4.3 Implications for Supply Options 32. the requirement of coal would increase from 415 million tonnes in 2004-05 to 2700 million tonnes in 2031-32! The quality of Indian coal is deteriorating progressively. has to be given due priority. Measured in million tonnes of Indian coal with 4100–4000 kcal/kg.000 0 Scenario 10 Electricity Agriculture Transport Residential Industry Commercial 3.Figure 3. This order of increase may call for massive quantity in coal imports. apart from CO2 emission. Development of hydropower as a clean power. Full development of hydro potential while technically feasible. A 5% deterioration over the next 25 years would raise the coal requirement to 2842 million tons by 2031-32 in terms of Indian coal.000 1. coal.000 5. coal use need to be moderated till clean coal technologies are developed. Since use of coal is associated with environmental problem of mining and local air pollution.5 CO2 Generation comparison in year 2031-32 7.000 2.

Today the PHWR is economically competitive with coal-based plants. Clearly.000 MW of renewable capacity over the next 25 years compared to 6161 MW as on March 2005. In million tonnes of coal. India’s energy intensity of growth has been falling and is about half what it used 49 (d) (e) (f) (g) . This is consistent with various projections worldwide that shows that the fossil fuel dependence of the world as a whole will continue to rise till 2031-32. over the next 25 years energy efficiency & conservation is the most important virtual supply source that India has. India’s conventional energy reserves are limited and India has to develop all the available and economic alternatives. India cannot deliver a sustained 8% growth over the next 25 years without energy and water and these two together shall pose the biggest constraints to India’s growth. this is an option we cannot afford not to pursue. with particular emphasis on efficiency of electricity generation and transmission. in addition. When.resettlement of project affected people and environmental concerns. or through coal bed methane (CBM). longer term consideration of even a modest degree of energy self-sufficiency suggests the need to pursue the development of nuclear power using Thorium. if we require that 20 percent of total primary energy comes from gas either through more gas found domestically or through imports. the contribution of renewables to our energy mix does not go beyond 4. Even then a major stress must be laid on energy efficiency and conservation. this is an increase from 415 million tonnes in 2004-05 to 2100 million tonnes in 2031. The irrigation and flood control benefits of hydropower and its operational flexibility can justify the higher costs of hydel plants. (c) Though nuclear energy can make only a modest contribution over the next 25 years.5% of total electricity required in 2031-32. Full development of hydro potential and realisation of the optimistic nuclear scenario by 2031-32 reduces coal requirement from 1200 mtoe by some 120 mtoe (288 mt of Indian coal). A disturbing fact that emerges from the above scenario is that even if India somehow succeeds in developing 100. and nuclear energy will expand from the present 2860 MW to 59500 MW. It is pointed out that India needs to create water storage capacity. These issues can be and must be resolved satisfactorily. Its storage per capita at 207m3/capita is one of the lowest in the world and compares purely with the corresponding levels of 1964 and 1111 in the US & China.000 MW in 2031-32 of which hydro capacity will be 150. This scenario implies total electricity generation capacity of 789. distribution & its end use. Despite the many delays and disappointments in achieving set targets of nuclear energy development in the past.000 MW. the total demand for coal in 2031 comes down to 868 MTOE.

The total world trade in coal is currently 700 million tonnes out of total production of around 4 billion tonnes. If Demand Side Management (DSM) options are pursued to reduce demand for electricity through energy efficient processes.14 and Japan at 0. a reduction of 170 mtoe (408 mt of Indian coal) in coal requirement takes place. it is doubtful that Coal 50 (i) (j) (k) (l) . coal demand comes down to 629 mtoe (1500 mt of Indian coal). However there are several countries in Europe at or below 0.12 with Brazil at 0. The average efficiency of generation from coal power plants is 30.19 kilogram of oil equivalent per dollar of GDP expressed in purchasing parity terms. This will increase over time but the number for India will clearly be large.to be in the early seventies but there is significant room to improve. Studies have shown that economically attractive options of DSM exist to attain such reductions. This shows that energy intensity can be brought down by 25-30% in India with current. Policies to promote these are described in Chapter VI. Our projections imply that our need for coal will increase from the present level of 415 million tonnes to somewhere between 1500 to 2900 million tonnes. (h) Efficiency of coal power plants themselves can be improved substantially. equipment. This compares to 0. A massive effort is clearly needed to expand domestic coal production. The coal requirement of 636 mtoe (1526 mt) by 2031-32 now almost seems possible to meet through domestic production. Thus a very high priority should be given to developing or obtaining the technology for coal-based plants of high efficiency.21. If both energy efficiency of coal generation and DSM are pursued together along with higher freight share by Railways. This alone can reduce coal requirement by 114 mtoe of coal (274 mt of Indian coal). The upper end projection may involve very heavy coal imports which could push up coal prices in the world market. so that electricity demand is reduced by 15% by 2031-32.5 percent. Currently India consumes 0. commercially available technologies. lighting and buildings.15.21 kilograms of China.22 kilograms of the US and a World average of 0. India would need to and must succeed in achieving much lower energy intensity compared to its current level. the challenge is to ensure supply of coal. Given that coal mines take 8 years to develop and Coal India suffers from several problems. Germany is even claiming conversion efficiency of 46%. The best in the world operates with super critical boilers and gets an efficiency of 42 percent. Energy efficiency and DSM should have a very high priority. 0. It should be possible to get an efficiency of 40 percent at an economically attractive cost for all new coal-based plants. Since these are feasible options.

oil use efficiency. If energy efficiency of all motorised transport vehicles are increased by 50 percent. The CO2 emissions would rise from 1 billion tonnes at present to 5. The same is true of gas. This is about four times as much as we import today. If we assume no dramatic new finds of oil in the country our oil imports will be around 360 mt in 2031-32. Improving transport efficiency is thus very important. (m) The carbon emission implications of our coal-based strategy will be significant.India can meet this need. conservation and substitution by other forms of energy are major options to reduce oil imports.5 percent of global trade. The optimistic nuclear development as envisaged is contingent on 6000 MW of additional import of light water reactors whose plutonium could be used in fast breeder reactors along with the plutonium from the 10000 MWe reactors based on our own uranium. Since domestic oil supply has stagnated at a low level and requirements are growing. Assuming that world trade over this period would grow from 2 billion tonnes (bt) today to 4 bt by that time. 51 (n) (o) (p) (q) . India’s imports will constitute 7.5 billion tonnes of CO2! This level of coal production or a lower level supplemented by imports of some 200 mt to 400 mt of coal would require development of appropriate port and transport capacities. Captive mining alone will not suffice. We must build a climate of understanding to allow changes in the coal sector to happen sooner rather than later. though the prospects of finding gas looks somewhat brighter. Import of the additional 6000 MW of light water reactors (and associated fuel) depends upon agreements with Nuclear Suppliers Group (NSG) countries.9 billion tonnes per year by 2031-32 in the high coal use projection and 4. The US emissions today are in excess of 5. our oil requirement can go down by some 50 mt by 2031-32.1 billion tonnes in the low coal and renewable projection. Bulk of the oil consumption is in the transport sector and economic substitutes are not obvious or abundant. Thus together transport efficiency improvement can reduce oil requirement by some 20 percent. If on the other hand railways are able to win back the freight traffic they have lost to trucks and manage to carry 50 percent of freight btkm. an efficiency level that is already achieved in the world today. then oil requirement can go down by 20 mt. Twenty-five years from now we will be burning an additional 1100 to 2500 million tonnes of coal per year compared to the current consumption of 415 million tonnes. Opening up the coal sector to private mining using the best technology is unavoidable. Thus energy efficiency of vehicles and use of mass transport have to have high priority.

Thus development of urban mass transport of quality and convenience that can attract passengers can contribute significantly to energy conservation. 35. Table 3. Comparison of energy requirement and the resource base suggests that our resources of hydrocarbons are limited. Assess offshore wind power potential. 33. 52 • • • • . Mass transport also reduces road congestion and air pollution. Gas should not be used for power generation. Mount R&D effort to develop commercially viable In-situ coal gasification technology. compared to private vehicles. Undertake a technology mission on carbon sequestration. The following options exist to substitute oil: • Industrial use of Naptha. 36.9 shows the energy use by sectors for the year 2003-04. India needs to grow its energy share in a market with constrained supply and rising prices. We need to augment our resources. deployment and use. FO and HSDO and domestic use of LPG and Kerosene can all be replaced by natural gas. Continue R&D on all aspects of hydrogen production. Undertake R&D for exploiting gas-hydrates. President Kalam in his Independence Day address to the nation has also called for energy independence. Expand electrification of railways to reduce diesel needs. Improve railways’ freight service so that all long distance goods traffic prefer railways thereby substantially reducing HSDO used for transport. • • • • • • • • • Develop fully the nuclear option using thorium.4 34.(r) Urban mass transport is much more fuel efficient per passenger kilometre. What can be an energy independence scenario? The main challenges are to augment total domestic energy supply. Undertake R&D for fusion to keep open that option for unlimited power. looks more promising than oil. Domestic availability of gas. World energy supplies are becoming increasingly constrained. Undertake pilot projects to assess the economics and social benefits of bio-mass plantations and bio-fuels Undertake a solar technology mission to make solar power using photovoltaics or solar thermal economically attractive. Energy Independence in an Oil Scarce World 3. today. Produce bio-diesel in a decentralised manner and substitute all agricultural use of HSDO by it. India’s new demand could account for 6% to 7% of world in crude oil supplies. Provide adequate quality power to reduce the need for diesel used for standby generators and diesel pumps. From a longer term perspective we need to take a number of actions.

India could eliminate its oil dependence over the next 40-50 years by: • • Developing cheap batteries hybrids/electric vehicles. As suggested by President Kalam. 37. with high storage density for Developing solar power. The surplus solar power during day time can be used to split water to produce hydrogen that can provide electricity at night and can also be used to run motor vehicles using fuel cells as engines.• • • Promote urban mass transport to reduce demand for petrol for personal motorised vehicles. Under Dr. Improve fuel efficiency of motorised vehicles by a factor of two through better vehicle design and hybrids. Kalam’s vision for energy independence. without increasing the cost. • 53 . Developing nuclear power based on thorium. Encourage hybrid vehicles which are now available commercially in cost competitive terms. we can have all the power we need at competitive costs by covering a small fraction of our land (the land required can be further reduced by putting photovoltaic cells on all roof tops). if efficiency of solar photovoltaics can be increased from present 15 percent to 50 percent.

9: Sectorwise & Sourcewise Consumption of Commercial Energy (2003-04) Sector /Source Coal Lignite LPG Kerosene HSD LDO FO LSHS MS ATF NAPTHA Bitumen Pet cake Lubes etc Others* TOTAL Gas Thermal Hydel Oil Gas Wind Nuclear TOTAL Availability Domestic Import# 162.00 0.90 0.002 2.00 52.53 1.53 0.72 7.Table 3.01 0.65 6.55 Consumption Loss/Self Household Agriculture Transport Industry consumption $ 0.51 10.19 2.17 0.32 Table Contd………… 54 .01 14.21 3.61 0.00 Total 184.78 2.63 82.65 32.45 2.38 27.25 0.34 3.24 4.37 0.49 0.75 12.47 0.36 1.98 0.78 1.66 2.76 0.63 Coal & Lignite Oil & Products Gas Electricity 33.99 8.71 31.60** 7.003 0.61 19.81 Total @ 52.63 14.96 10.74 10.52 19.45 2.05 0.28 9.38 19.35 Power Generation 131.34 3.07 6.62 - 116.61 0.33 8.61 109.04 17.12 34.46 0.19 Services 0.78 1.34 8.83 3.53 - - 45.02 0.69 7.42 7.29 4.00 1.15 0.25 2.68 10.69 35.04 0.12 4.58 1.03 4.66 9.55 8.00 27.00 2.74 3.25 2.01 22.74 3.29 1.53 45.08 7.02 8.06 0.79 10.

94 - - - 32.62 - - 27.57 17.89 155.90 TOTAL ENERGY CONSUMED 366.37 35.44 Agro Waste 17.71 133.44 55 . T&D and commercial losses Note: ##To support the above level of energy services total primary commercial energy consumed is 327 mtoe giving an overall fuel efficiency of 64% TOTAL COMMERCIAL ENERGY CONSUMPTION Fuelwood 115.62 Commercial Bio-gas 0.87 22.89 ## - 12.12 Non Dung Cake 22.62 0.72 92.33 86.03 15.155.46 22.90 TOTAL NON-COMMERCIAL ENERGY CONSUMPTION 155.87 210.34 # net of exports $ includes Non-energy uses All figures are in Mtoe @ excluding power generation * Others under Services column include various consumers using petroleum products ** includes self consumption.71 TOTAL 155.12 22.

. Energy Security 4. Energy up to a certain level is a basic necessity and whether the state supplies it or not people will procure it in any way. “shocks and disruptions” and “reasonably expected”.e. What is Energy Security? Security of obtaining adequate supply of a traded commodity.Chapter IV. The World Energy Assessment (UNDP 1999) report defines energy security as – the continuous availability of energy in varied forms in sufficient quantities at reasonable prices. “at all times”. Energy security requires that the lifeline energy needs of the Nation are met in full. demand backed up by ability to pay for it. particularly of women and 56 (b) (c) (d) (e) . When the energy needs of only some citizens are met. find willing suppliers for what they want. “effective demand”. “prescribed confidence level”. should be met fully. “various needs”. the rich will get what they desire but the poorer classes would not. The rich with the power to pay the price. This definition needs to be modified to reflect better our situation. Lifeline energy consumption for those who cannot afford energy at the market driven price has to be made through subsidies. Effective demand. “at affordable costs”. We define energy security as follows: “The country is energy secure when we can supply lifeline energy to all our citizens as well as meet their effective demand for safe and convenient energy to satisfy various needs at affordable costs at all times with a prescribed confidence level considering shocks and disruptions that can be reasonably expected”. at market determined prices. is generally a problem of the poor people. 2. Safe and convenient energy is desirable as use of traditional fuels such as wood or dung cakes cause indoor air pollution and lead to adverse impact on the health.1. be it food or fuel. it cannot be a sustainable situation. These are motivated by the following considerations: (a) It is important that energy is supplied to all citizens. “ safe and convenient energy”. If it is not. If the state does not provide it environmental degradation can be expected. poor regions or poor nations. It is necessary to provide “lifeline” energy to all the citizens irrespective of their paying capacity. The various elements of this definition that may be noted are: “all her citizens”. i. “lifeline energy”.

Supply risk from domestic sources. thus is an important concern for India’s energy policy. One can think of many such eventualities.children. Not only oil and gas but also coal imports are likely to grow substantially. (g) (h) 4. What is of particular concern is that imports comprise largely of oil.85% of Total Primary Commercial Energy Supply (TPCES) in 1991 imports accounted for 30% of our TPCES in 2003. Energy security. Would we get all the oil that we need even when we are willing and able to pay the price? What do we do if supply is disrupted due to events outside our control? Wars. However. Energy should be available at all times. political upheavals in the oil exporting countries can suddenly drastically reduce global oil supply. but also from the possible disruption or shortfalls in domestic production. At the same time our dependence on imported energy has increased. How do we keep our economy going in such a situation? How do we deal with this supply risk? The threat to energy security arises not just from the uncertainty of availability and price of imported energy. Fuel cells or batteries could replace IC engines using petrol or diesel but at a cost.1).2 The Nature of the Problem 3. The first is the uncertainty regarding availability of oil. India’s requirements as a proportion of global energy availability is expected to increase substantially (See Figure 4. 5. The projection of energy requirement and various supply options show the country’s growing dependence on import of energy. To ensure energy security at all times. Ability to withstand shocks and disruptions is essential for energy security. Energy security has become a growing concern because India’s energy needs are growing rapidly with rising income levels and a growing population. 57 . since anything is possible. Also in a situation of conflict. For example kerosene can replace electricity for lighting but at a cost and a loss in quality of service. Interruptions in energy availability can impose high costs on the economy and also on human well-being. such as from a strike in Coal India or Railways. One can ensure supply only within a certain prescribed confidence level. oil blockage may be imposed against India. shocks and disruptions that can be reasonably expected must be anticipated. From a level of 17. strikes. also needs to be addressed. The dependence on imports of oil causes two concerns. The surety of energy supply cannot be 100 percent. Energy in one form cannot be easily substituted by other forms of energy. 4. one cannot guard against all possible shocks at affordable costs. Oil imports constitute 72% of our total oil consumption and 26% of our TPCES. Often such substitution involves cost or loss in the quality of service. (f) Energy is required in different forms to meet different needs.

The adverse impact on the economy of sudden and large increase in oil price may be perceived as a more likely risk that we face compared to the risk of supply disruption. While we may be able to pay for imports.Figure 4.2). The second concern is not disruption of supply but market risk of a sudden increase in oil price.1 India’s Growing Share in Global Energy Consumption (a) Proejcted Oil Consumption (MTOE) 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 5775 3639 119 435 2003 World 2003 India (Actual) (Actual) 2030 World 2030 India (b) Projected Gas Consumption (MTOE) (c) Projected Coal Cosumption (MTOE) 4500 4000 3500 3000 2500 2000 1500 1000 500 0 4125 2243 224 29 2003 World (Actual) 2003 India (Actual) 2030 World 2030 India 4000 3500 3000 2500 2000 1500 1000 500 0 3597 2581 816 167 2003 World (Actual) 2003 India (Actual) 2030 World 2030 India Source: For World-IEA. World oil prices have fluctuated substantially over the years (See Figure 4. slow down the economy and impose hardship on our people. 58 . 2005 Projections for India are based on GDP Growth Rate of 8% 6. the high oil price can cause inflation.

59 . This requires certain resilience in the government finances.Figure 4. For example. The measures are reducing need for energy and imports. if the price increase persists. To be able to insulate consumers against such sudden price increase. transmission lines trip or oil pipeline may spring a leak. Even when the country has adequate energy resources. 8. Of course. The effectiveness of measures to enhance energy security depends on the nature of disruption.2 World Oil Prices Trend of Crude oil prices 100 90 80 70 60 50 40 30 20 10 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 US$/BBL Constt. technical failures may disrupt the supply of energy to some people. it has to be transmitted to the consumers sooner or later. if an increase in the price of oil or a disruption of oil supply or erratic power supply forces farmers to reduce the use of their pumps and tractors. diversification of supply sources. 2005 US$/BBL Nominal prices US$/BBL 7. maintenance of strategic reserve and obtaining equity oil or gas abroad that help in reducing the consequences of both supply risk and market risk. Thus a Government may not transmit immediately a sudden large increase in the international price of imported energy to consumers. 4. There may be many such accidents that disrupt the supply of energy. One wants to minimise the expected cost for a desired level of confidence.3 Policy Options for Energy Security 9. Government may have to bear the burden of price rise for some time. The costs of the various measures also differ. One needs to provide security against such technical risks. as energy is critical for economic growth and for human survival and well-being. Any disruption in access to energy can be very expensive in welfare terms. the consequent reduction in agricultural output and employment can have serious adverse impact on the poor. Generators fail.

Considering the large dependence on coal-based power plants. Increase redundancy to deal with technical risk. Some such examples are detailed below: (a) India’s recovery of in-place reserves can improve easily by 5-10 percentage points. lowering mining costs.3.1 Reduce Energy Requirements 11.The action to improve energy security can be classified broadly in two 10. energy distribution and end-use of energy. and using technologically advanced mining techniques are all valid options. Fuel efficiency of Coal Power Plants: The average fuel conversion efficiency of Indian power plants is just about 30%. One that reduces risks and another that deals with the risks. energy conversion. Dealing with Risks Increase ability to withstand supply shocks. The major policy options are: (a) (b) Reducing Risks Reduce the requirement of energy by increasing efficiency in production and use of energy. Improvement in energy efficiency or conservation is akin to creating a domestic energy resource base. In the case of oil and gas Improved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR) techniques can improve exploitation of in-place reserves. Expand domestic energy resource base. groups. 60 (b) . Better mine design. Diversify fuel choices and supply sources. The state of the art super critical pulverised fuel fired boilers can reach an efficiency level of 46% depending on plant location. Increase ability to import energy and face market risk. Reduce import dependence by substituting imported fuels by domestic fuels. the first target should be to obtain this technology for all new power plants. Major opportunities exist in reducing energy requirements without reducing energy services. Such efficiency improvements can be made in energy extraction. if available at reasonable price otherwise set-up a technology mission to develop it independently. 4. All of these efficiency improvements can come from currently commercial technologies. The needed policies are: (i) Purchase technology. energy transmission. for the same level of energy used for extraction. A 20 percent reduction in coal requirement for power generations translated into 200 mt/coal per year in the minimum coal scenario of Chapter II. Under Indian conditions an efficiency level of 40-42% should be attainable.

(iv) (d) Energy efficiency and demand side management have also large scope to reduce energy requirement. preferably by operating scheduled goods trains between large cities. Some advance actions that can be taken now are as follows: (i) Develop effective and attractive mass transport such as underground. From a long-term point of view. The cross subsidy from freight rates to passengers traffic should be reduced. light rail or dedicated bus lanes in existing metros. Even existing land owners should be required to purchase the additional right to build. particularly the need for imported oil and gas. in the country that year. cogeneration. Assuming that all of this goods traffic would have been carried by Railways using diesel. the diesel saved in year 2003-04 is around 5 mt. 61 (e) (ii) (iii) . make plans for efficient public transport corridors to serve future population and acquire the right of way. promotion of public transport in urban areas can significantly reduce energy consumption. Had the railway carried 70 percent of the goods traffic. energy efficient buildings. it would have carried 300 btkm of additional traffic. Public transport can be developed as the city develops. The share of railways in total tonne kilometre (tkm) of goods traffic came down from 70% in 1970-71 to 39% in 2003-04. distributed generation for Combined Heat and Power (CHP) generation. energy efficient and well-maintained irrigation pumps. Thus a significant saving of diesel is possible. etc. Development of the city infrastructure can be financed by gradually increasing permissible built up area or Floor Space Index (FSI) and auctioning the right to build. say 700 MW from any firm that first commercialises 42% efficiency coal fired boiler for Indian coals at a price prescribed in advance. These include energy efficient appliances. elevated trains.(ii) Offer to buy 20 plants of a standard size. out of a total consumption of 40 mt. energy efficient automobiles. efficient lighting. (c) Another major option is provided by freight traffic. The needed policies are: (i) (ii) (iii) The monopoly of CONCOR for the container traffic on railways should be ended. smokeless improved woodstoves. if not eliminated. hybrid cars. For medium size cities. Timely delivery of goods should be guaranteed. if railways operations can be upgraded to win back the haulage lost to road traffic. Congestion charges and parking fees should be levied in central cities to discourage use of private cars. Develop dedicated corridors for goods traffic between metros. The needed specific policy initiatives are discussed in a separate Chapter.

(b) (c) (d) (e) (f) 4. At $60 a barrel crude oil electric traction can be economically attractive on routes with lower traffic density than before. cars. If hydrogen can be produced with locally available energy sources. If the domestic substitutes increase dependence on one particular fuel it can increase domestic supply risk. energy by substituting it with other forms of energy. Some important options are the following: (a) Electrification of railways can substitute diesel. Sasol is routinely available at filling stations along with petro and diesel. This would reduce the need for future gas/coal imports. Wood plantations with a potential of generating up to 20 tonnes of wood could significantly expand the domestic energy resource base. The technology is well-developed and in use for years. Bio-diesel and Ethanol. The impact of short-term disruption of a normal source of supply will depend on how important is that source in our total imports. Wood can be burned directly or gasified for power generation. it can also reduce supply risk. Of course this calls for investment in electrification of tracks.3 Diversify Supply Sources 13. particularly if the substitutes are local renewables. Ethanol can also be obtained from other starchy crops. which may have other economically more paying uses.2 Substitute Imported Energy by Domestic Alternatives Energy security can be increased by reducing the need for imported 12. Coal can be converted into oil as the South Africans do. Thus the first 62 . Such electrification can substitute imported diesel with domestic coal. However if substitutes diversify domestic energy mix. Use of hybrid vehicles and/or of electric vehicles. This requires development of low weight.3. The competition for crop land poses the main challenge. electric locomotives and electricity generation. hydrogen based vehicles can be another option to reduce dependence on oil imports. Ethanol can be obtained from molasses. These can substitute diesel and petrol.4. Though this does not reduce the need for total energy. it reduces import dependence. An advantage of such vehicles is that individuals can adopt this technology without any development of fuel supply network as would be required by hydrogen or fuel cell based vehicles. scooters and motorbikes can significantly reduce requirements of petrol. Bio-diesel becomes particularly attractive when it is derived from inedible oilseeds from trees needing little water and fertiliser and which grow on wasteland.3. high density batteries.

1: Sources of India’s Oil Imports – 2004-05 Oil Imports % of Total Country (mmt) Imports Iran 9.08 15. Nigeria.33 8.35 0.03 Iraq 8.66 Sub Total 64. gas.96 UAE 6..43 6.measure for increasing security is to diversify our sources of supply both domestic as well as for import of oil or gas.00 14.14 0.57 Total 95. An economy that uses coal.34 Thailand 0.81 0.28 2. i.1.15 0.93 24.14 Middle East Region Qatar 1. nuclear.36 Congo 0.21 Equador 0.84 Cameroon 0.28 Sub Total 31.55 Brazil 0. oil. One should assess the uses in which different fuels or energy forms can substitute each other.85 Neutral Zone 0.61 10.73 Russia 0.19 1. Saudi Arabia. While we import oil from 25 different countries.29 0. it can be made less costly by encouraging use of substitutes by specific users.71 Yemen 3. Kuwait and Iran.66 1.15 0.12 2. hydro and renewables of various kinds naturally is less dependent on one particular fuel. In an emergency if rationing of a particular fuel is needed. Energy security can be increased not only by diversifying sources of import of a particular fuel but also diversifying the energy mix by using different types of fuels.16 Equitorial Guiena 1.28 0.47 1. and hence less vulnerable to supply disruption of either domestic or imported energy sources.15 Oman 0.33 0.14 Egypt 2.38 Nigeria 15. The security provided by such diversification is enhanced where the ability of the users to switch fuels increases.16 0.27 0.69 Kuwait 11.29 Libya 1.51 3.58 Mexico 2.e.43 Angola 2.43 3. Table 4. This can also have a bearing on the size of the strategic reserve that one needs.14 0.30 Brunei 0.36 11.16 Sudan 0.44 2. nearly two-thirds of our imports are from four countries.23 32.24 Saudi Arabia 23.53 Malaysia 3.64 67. 63 .73 Other Regions Gabon 0.86 100. India currently imports oil from many different countries as can be seen from Table 4.

For example. Apart from sourcing oil or LNG imports from different countries. The problem of arriving at an agreement on the price of power needs to be resolved. Supplying country typically invests in the pipeline and. With this the disruption can be of only a short duration. have redundancy in regasification facility and ensure that in case of disruption supplier would be obligated to provide LNG to compensate for the disruption in the supply of gas. (c) 4. diversification can also be achieved by importing gas through pipelines or hydropower from neighbouring countries.4 Expand Resource Base and Develop Alternative Energy Sources 16. The development of a market for power trading in the country provides a benchmark that should make this task simpler. Since the global gas market has developed and LNG trade has increased. Import of Hydro-Power Through Nepal/Bhutan: Substantial scope exists for import of hydro-power from Nepal and Bhutan. Also Pakistan would earn transit fees. or from Central Asia through Afghanistan and Pakistan or from Myanmar through Bangladesh does provide a higher degree of energy security compared to equity oil or gas. There raise their own issues concerning energy security. Resource base can be expanded in many ways: Enhance recovery from existing resource base. There are economies of scale that reduce costs for Pakistan over the alternative of obtaining gas through a pipeline of its own. has a stake in maintaining the supply.15. alternate buyers along the route may be difficult to find and the pipeline cannot be easily diverted like a LNG ship for example. (a) Import of Gas Through Pipelines: Gas imports from Iran through Pakistan. Enlarge the domestic buffer stock of LNG. This is so because of security of supply. however. 64 . There is. This can be guarded against by the following: (i) Create an interest in the pipeline in the transiting country. Thus the cost advantage of piped gas is likely to be not very large and has to be balanced against the risks of pipeline discussed above. Thus risk of disruption from the supplier is relatively smaller. explore to find new reserves. obtain equity energy abroad and develop new sources of energy through R&D.3. the risk of sabotage of the pipeline in the transiting country. Also. natural gas price is likely to match the opportunity cost of selling it as LNG. a common pipeline shared by India and Pakistan will have substantial gains for Pakistan too. (ii) (b) Import of LNG: Importing LNG through long-term contracts provides a flexible alternative to pipelines. This could enhance energy security as hydro-power which is particularly suited for meeting peak power demand can replace natural gas based generators which are also used for peaking purposes. if supply to India is stopped. hence. Nepal and Bhutan may be given the right to sell power to anyone on the market.

The Government has formulated a CBM policy in 1997 and development of CBM is a concurrent responsibility of Ministry of Petroleum & Natural Gas and Ministry of Coal. The political risk of disruption of equity oil through embargos or nationalisation etc. in finding gas shows the need to attract more players in exploration in the country. Recent success by private as well as public sector companies such as Reliance and Gujarat State Petroleum Corporation Ltd. metres (bcm) (12602340 mtoe).600 billion cu. In-situ Coal Gasification: Similarly for coalfields. Director General of Hydrocarbon (DGH) may conduct a comprehensive review on enhanced oil recovery (EOL) schemes being implemented and its potential in all fields presently under production. Coal Abroad: Obtaining equity oil abroad does not particularly increase oil security against supply risk. in-situ gasification may permit much higher recovery of coal than can be economically mined by conventional techniques. So far. constitute diversification of supply sources and thus has some value. In addition to this. Promotion of CBM exploration and production is essential to expanding the domestic resource base in the short to medium-term.(a) Enhanced Recovery: Enhanced oil or gas recovery from existing fields is an obvious option. Gas. To 65 (b) (c) (d) (e) . Tapping and utilising the CBM as a source of commercial energy has been in vogue in the US & Australia for several years. Equity Oil.. The estimated CBM resources in these blocks are 850 bcm (765 mtoe) and a total production of about 23 MMSCMD at peak production level is expected from these blocks. Coal Bed Methane: Methane is adsorbed in coal seams. 13 blocks have been awarded on competitive bidding basis to various PSUs/private companies and 3 blocks on nomination basis for exploration and production of CBM. against market risk of sudden increase in prices on the world market. Exploration: Efforts can be stepped up to find new reserves. This Coal Bed Methane (CBM) usually escapes into the atmosphere when coal is mined. It also provides a price cushion for a period that is typically longer than that provided by options and futures contracts. however. would be similar to risk entailed in oil import from the same country. The estimated potential of CBM in the country is in the range of 1400-2. Technology development for in-situ gasification should be vigorously pursued. However this should be optimised to balance the cost of such recovery against the total amount of oil or gas that may be recovered from the field. It does. Recovery of oil and gas from abandoned and/or marginal fields may also be taken up. Ministry of Coal with the assistance of UNDP/GEF is implementing a CBM Recovery and Utilisation Demonstration Project in Jharia coalfields under Coal S&T programme.

whether it is brought to India or sold in the international market. If the amount of money invested in obtaining equity oil were to earn a higher return in an alternate investment. natural gas liquids may be another option. Nuclear Power: With meagre availability of uranium in the country and vast resources of thorium. such investments.. Thus obtaining equity oil abroad should be mainly looked upon as a commercial investment decision.50. however. New Domestic Sources: The domestic resource base can also be expanded through developing hitherto poorly developed or new sources of energy. with country political and logistic risks. even on commercial basis. India. the potential size of the resource makes it mandatory to vigorously pursue R&D. Thus we should explore and seize economically attractive opportunities for equity energy abroad. However. Major investments are being planned for conversion of gas to liquid in countries with large gas reserves viz. (f) Gas to Liquid (GTL): In addition to sourcing piped natural gas and LNG. The country may nationalise the industry and give you inadequate compensation. may not be attractive in some cases.000 MW 66 (g) (ii) . the value remains the same. Some of these resources may require R&D to make them economical. available resources and economics would be necessary prior to entering into collaborative arrangement. Success in these efforts could deliver some 2. the long-term strategy has to be based on thorium. with strong political ties with Russia and CIS countries. A simple way to ensure an independent oversite of the technoeconomic viability of a new investment would be to require that it raises at least two-thirds of the funding required through offshore commercial loans/equity on a stand-alone basis without recourse to sovereign guarantees and without recourse to the balance sheets of India’s national energy companies. Technology to exploit these economically in ecologically safe ways is yet to be developed. Among these are: (i) Gas Hydrates: Very large reserves exist in Indian waters and have the potential to provide vast amount of gas. However. However. The three state strategy of development of nuclear power from pressurised heavy water based reactors to fast breeder to thorium based reactors requires sustained R&D effort. The results in terms of actual yield of profits from overseas investments so far made have to be evaluated. Nigeria and Australia. a comprehensive study evaluating technology. can consider setting up GTL plants in those countries under long-term arrangements wherein India gets a share of the liquids produced. Some ground rules for project/investment appraisal should be evolved. Equity oil. does increase the country’s access to imports. that would provide a better level of comfort against future increase in oil prices.the extent India owns that oil abroad. Qatar.

Thus all compensatory afforestation should be made with energy plantations. if it can be economically exploited constitutes a major energy resource of the country. Moreover since this is a renewable fuel.000 MW. currently provide about 15% conversion efficiency. gas and coal it pursued to meet the hot water demand in industry and households. Since the country’s energy needs are growing. However. imports of coal and LNG are also likely to grow and be sizeable. Both. no net carbon emission takes place. solar thermal and solar photovoltaic route to electricity remains a major scope for enhancing India’s energy security. its contribution to energy security would be very limited. Failure to develop India’s nuclear potential to the full would significantly increase India’s dependence on domestic/imported coal. The offshore wind power potential has not yet been assessed.000 MW. Given the limited resources of oil. For example. Solar electricity generated through thermal route or through photovoltaic cells provide comparable amount of electricity per unit of collector area. Solar: Solar energy. the total contribution to energy from these plants would be relatively small. if 10 million hectares of wasteland can be converted to fuelwood plantations with a sustained yield of 100 million tonnes of wood per year. the thorium based nuclear option must be pursued. The scope for such plantations is substantial. 67 (iv) (v) . Nano-technology holds the hope for making a major breakthrough in solar photovoltaic technology. Thus fuelwood plantations can help improve energy security. (iii) Wind: The potential for onshore wind power is assessed at 45. While it is clear that the ratio of capital cost to efficiency of energy conversion needs to be brought down significantly. This will improve India’s energy security. given that the average capacity factor realised by India’s wind farms is only about 17%.of nuclear power by 2050 and much more thereafter. Energy Plantations: Growing fuelwood for running power plants either directly or after gasification can save coal or gas used for generating power. gas and uranium. It is stressed here that solar water heating is cost effective for India today and can reduce India’s demand for oil. This can replace 100 million tonnes of domestic coal as the calorific value is identical. The Wind Energy Society of India claims it to be as high as 100. Such assessments should be taken up immediately. Nuclear power cannot only enhance energy security but also yield rich dividends by reducing carbon emissions. Thus while wind power may be pursued for environmental and economic reasons.

Thus. Pachauri (2005)* argues as follows: 19. “Strategic reserves of crude oil and petroleum products were first recognised as a policy tool in the aftermath of first oil shock in 1973. it seems practical to * Pachauri.5) and Vishakhapatnam (1.3. which is integrated to a fair extent. such as might occur through a blockade in a situation of conflict. This excludes the cost of crude. which was charged with the task of coordinating the purchase of oil during a future shock and of coordinating the drawdown of reserves during the hour of crisis.5). According to an estimate prepared by the Engineers India Limited (EIL). If the supply disruption is total. Currently. R. Oak ridge National Laboratory.4214 crores and this will provide cover of only 24 days”. The maintenance cost of these facilities is calculated as 29. New Delhi. Paul N. November 2000) who concluded that benefits from expanding the size of reserves for the US economy are enormous”. poorer countries can reap the benefits of strategic reserves without holding it.5 Increase Ability to Withstand Supply Shocks 17. “The strategic reserves of crude oil/petroleum products.S. Draw down of such reserves during a crisis has an impact on the world oil market. 2000) concluded “emergency oil stocks could be the most effective means for minimising the economic cost of interrupted supplies and high oil prices”. 68 . (APEC – Emergency oil stocks and Energy Security. IEA member countries hold strategic stocks of about 90 days of net imports and there are already talks of increasing the cover to 120 days. which at $25/bbl will come to around Rs. Strategic reserves do not come cheap. 18. The stock of oil can be kept either in storage tanks or it can be in the form of oil wells underground which are kept in reserve and which may be brought under production at short notice. is a very expensive alternative.4. “No extensive exercise has been done evaluating the benefits of Strategic Petroleum Reserve (SPR) for India. Mangalore (1. In today’s world local wars are not likely to last or would not be allowed to continue by the world community. beyond a few weeks. Strategic Petroleum Reserve. the shortage due to disruption of supply from any one country would be small and can be dealt with by maintaining a strategic reserve. 21. held by developed countries serve as a global common good. Otherwise also.1225. Similar conclusion was reached by Leiby and Bowman (The Value of Expanding the U. The reserve could be that of oil or of dollars to facilitate import from alternative sources. the capital cost of building a strategic reserve of 5 MMT of crude oil at Rajkot (2. however.K. Major industrialised nations got together and formed the International Energy Agency (IEA).3 crores. Once the imports are minimised and diversified. Tokyo March 2000). It further said that this was true for a large economy or a group of economies. A report prepared for the Asian Development Bank by The Energy and Resources Institute (TERI).0) are Rs.2 crores with a mixture of concrete tanks and rock caverns. the size of the buffer stock needed would depend on the expected length of supply disruption. (2005): Addressing the Challenge of Energy Security. Leiby 7 David Bowman. 20. Thus the size of the buffer stock need not be very large. APEC (APEC. This.

Regional cooperation in South Asia in this respect can be fruitful. 4. For a country like India.6 Increase Ability to Import Energy and Face Market Risks 23. Options contract and futures market can be used to reduce the risk of price volatility. 4. electrical networks minimise loss of load probability by providing alternate routes. Policies and Initiatives for Energy Security India’s energy security concerns have. special schemes may have to be designed to provide incentives to minimise their import costs. power plants carry standby capacity or a spinning reserve to address the technical risk of some station going off the grid or a sudden increase in demand. thus far. 4. 22. options and futures may not be available for long duration. Strategic reserves can also help in reducing the impact of transient fluctuations in prices as instead of importing stock may be depleted. rationing to restrict some uses and promoting thrift thereby making it possible to sustain a longer supply disruption. Thus.3. Equity oil or gas abroad may provide security against sudden price increases. for public sector management.have regional strategic reserves that would not only entail lower costs but will also expand the possible benefits among many countries. 25. Some redundancy must be built into the design of all energy installations to address technical risks. treating the strategic reserve as a buffer stock this way can reduce the effectiveness of strategic reserve against supply risk. To guard against the market risk of sudden price increase. the country needs to keep its energy import bill within a certain proportion of its foreign exchange earnings or maintain a stock of foreign exchange to address such volatility. 24. the poor may not get clean energy. been largely defined by 69 . However. Even when the country has adequate energy and even when there are no technical failures. 4. given the uncertainty about benefits. The issues and policies for providing energy security to the poor are discussed later in Chapter VIII. If the energy market is competitive then the managers can be expected to use these instruments to reduce their risk.4 Energy Security for the Poor 27. it may be more economical to hold the minimum reserves required to tide over very short-term supply disruptions”. Even then. However. Such a reserve can also provide enough room to curtail domestic needs by switching over to alternate fuels. for example.3. The obvious solution against technical risks is to provide redundancy.7 Increase Redundancy to Deal with Technical Risk 26. Similarly.5 28. A strategic oil reserve of 90 days is maintained by many countries and we might use that thumb rule.

LNG. institution of well-targeted “lifeline” entitlements. at its broadest level. Planning Commission. In reality.a narrow focus on supply disruption and the consequent need to increase redundancy in our stocks of crude oil and petroleum product through the creation of a strategic storage. as additional energy sources should be considered. India’s ability to effectively manage such risks can only grow with her rising economic and political stature in the World economy. also emphasising equity coal. coal. While the Government must aggressively support acquisition of energy assets overseas. today. there are certain additional policies that can be instituted to enhance India’s energy security and the same are discussed below. Today. to any form of commercial energy barring unreliable and often costly supply of PDS kerosene primarily for lighting. we may have a sudden increase in supply of natural gas of some 30 mtoe a year. recognising the looming coal import requirements has been. 29. imports from other countries can be enhanced for strategic diversification of supply sources. Advance planning should be done to use the gas in the most 70 . This will not only provide independent oversight on the quality of such acquisitions but also strengthen legal claim over these assets under extreme situations. Further. Equity oil and gas have been recognised as essential elements of such a strategy and are being currently pursued. for the past three years. India’s energy security concerns go well beyond a narrow focus on a likely supply disruption in our crude oil imports. almost 100% of our energy import is in the form of crude oil with 67% being sourced from the Middle East. India’s energy security. Another mitigating policy could be to diversify the imported fuels as well as the sources of such imports. We have discussed how to reduce risk to our energy security by way of policies aimed at reducing our energy requirement and import dependence (through efficient production. development of efficient energy markets. distribution and use of energy. Power plants at coastal locations should be set-up with their own jetty to run on imported or domestic coal brought through coastal shipping to increase ability to use imported coal economically and increase diversity of supply. Yet. A strategy to import larger quantities of Gas. the temptation would be to use it in power generation. A legal claim to energy resources abroad can enhance India’s energy security. After meeting the feedstock requirement for fertilizer and chemical plants. companies active in this field must be forced to securitise the assets with international funding instead of the current practice of acquisitions based on 100% equity. ethanol etc. If and when the gas pipeline from Iran materialises. has to do with the continuous availability of primary commercial energy at an affordable price to fuel India’s economic growth on one hand and providing affordable and reliable access to modern forms of primary and secondary energy/energy services to over 50% of its population that lacks such access. and diversifying/expanding the domestic resource base using commercial or nearcommercial technologies). ore emulsion.

71 . a 90-day strategic reserve is considered adequate for providing security against shortterm supply disruption and/or extreme price spikes. Japan follows this practice and requires its oil companies to carry and maintain a strategic reserve. maintained by Indian oil. India could earmark part of the available storage capacity with oil companies as strategic reserve controlled by the Government. However. or in combined gas and solar thermal power plants where we can augment our energy resources. Internationally. these stocks are more in the nature of raw material and finished good inventories (for which facilities got built during the comfortable cost plus regime) and not in the nature of strategic reserves. India currently has stocks equal to about 85 days of requirement excluding line-pack and the strategic stocks for the defence department.appropriate uses such as in distributed generation and CHP applications where we can get an efficiency of 80% or more. Additional strategic storage may also be built to supplement such mandated strategic reserves.

India’s energy needs to fuel a sustained 8% annual growth pose major challenges. 3. is living below the poverty line. roads and water grow by factors of 3 to 6 times by 2031-32 with Nuclear and Renewables rising to over 20 times their current capacities under some scenarios. India has committed itself to eradicating poverty and empower its people with education and health. With the current emphasis on market driven growth what this means is that India needs to create an enabling environment that attracts the required investments into energy and related infrastructure. ports. today.2% per annum. even when clean energy is available. the poor may not be able to pay for it at market prices. This level of commercial energy consumption yields a growth in energy consumption that ranges from a low of 5. an environment that exploits the synergy of public private partnership. This level of growth does not appear very daunting when one considers the fact that energy consumption has grown by 5. Even a conservative projection of India’s energy needs to fuel this level of economic growth requires that basic capacities in the energy sector and related physical infrastructure such as rail.67 billion tonne oil equivalent by 2031-32 compared to the current level of about 327 MTOE). “Lifeline” Energy for All: Access to reliable and affordable commercial energy is vital for the well-being of people. 5. The good news is that 72 . Energy for Growth: The discussion in Chapters I through IV provides the necessary backdrop to the Energy Policy Options/Initiatives that India needs to pursue. These policies have to be formulated in an integrated framework and in the context of the emerging backdrop detailed below. The opportunities and economics for substitution vary with place. to supply the energy needed.1 The Emerging Backdrop 2. we cannot grow at 8% per annum. once again give energy the importance given to it during the first 30 years of its planned development. and other productive needs such as milling and processing agricultural produce. Given that the population is expected to reach 1. Clean cooking energy is essential for freeing women and girls from the burden of indoor air pollution and the drudgery of long hours spent in gathering fuelwood and dung. and the fact that sizeable part of India’s population. time and application. such “lifeline” consumption might need to be subsidised for some consumers till income levels rise to make such consumption affordable for all households. In order that options selected by individuals and firms lead to an efficient strategy for the country.Chapter V. appropriate policies need to be followed. Clean cooking energy is thus a tool for empowering girls & women to pursue education and enriched livelihoods.7% per annum in the previous 25 years for a much lower level of annualised GDP growth.5% per annum to a high of 6.47 billion by 2031-32. No progressive Government can ignore its responsibility for providing “lifeline” level of energy input in the form of electricity and clean cooking fuel. Such “lifeline” consumption is an essential part of energy security for India’s people. However.38 to 1. If we cannot assure supply of even the projected conservative levels of commercial energy (1. However. rapid growth at around 8% per annum over the next 25 years has become essential for attaining these goals. it is essential that India. Energy Policy Options/Initiatives India has to depend on a mix of different fuels to meet its energy requirement. Further. Energy is also required for water lifting.

With proper targeting only about a fifth of the total consumption for lifeline support. What is essential. gas. uranium and hydro-power. Even under the most optimistic scenarios for hydro and nuclear growth. and targeted subsidies on commercial fuels for cooking.21. Abundant Thorium and Solar resources might become important sources for India beyond 2050 provided we promote R&D now to realise their potential in future. 4. the contributions from the two together do not exceed 10% of commercial energy supply in 2031-32. India’s import dependence for commercial energy would rise to about 40% by 2031-32 from the current level of under 30%. Role of Different Fuels: Given India’s limited resources of oil. This compares with 0. may have to be subsidised initially but this would be significantly lower by 2031-32.such “lifeline” consumption may not require more than 100-110 billion kilowatt hours of electricity (about 3% of the projected net electricity requirement by 2031-32) and some 55-60 MTOE of LPG (about 4% of the projected commercial energy consumption by 2031-32). the numbers above clearly show that energy intensity can be brought down significantly in India with commercially available technologies and India must 73 . Further. However. However. Share of coal varies between 41% and 65% and that of oil and gas together between 35% and 45%.22 kilograms of the US and a World average of 0. it needs to develop all economically viable sources of energy. Hydro for providing much needed storage capacity for water and nuclear from long-term energy self-sufficiency based on thorium. India’s Energy Intensity: India’s energy intensity of growth has been 5. However.19 kilogram of oil equivalent per dollar of GDP expressed in purchasing power parity terms. Currently India consumes 0. oil (3 times current levels) and gas (8 times current levels). 0. India’s reliance on traditional non-commercial energy sources will rise to some 185 MTOE from the current level of about 140 MTOE by 2031-32 even as its share in total primary energy consumption.21 kilograms of China. reduces from about 30% to 10%. as poverty would reduce drastically with 8 percent growth. there are several countries in Europe at or below 0. The integrated analysis of various energy resources and supply options reveals that even under aggressive growth assumptions for hydro (7 times current levels) and nuclear (21 times current levels). Despite this renewables remain important from the point of view of increasing the domestic resource base. and domestic supply levels for coal (3 times current levels). though. falling and is about half what it use to be in the early seventies but there is significant room to improve. is efficient targeting that ensures that: (a) only lifeline level consumption is subsidised. Improvement in energy intensity creates a virtual source of energy by reduction in total energy requirement to sustain a given level of growth. Fossil fuels maintain their domination just as in other parts of the world. even when it rises to over 20 times its current capacity will. commercial renewable energy. And while differences in the structures of different economies may result in different energy intensities.12 with Brazil at 0.15. both hydro and nuclear remain strategically important.14 and Japan at 0. at best meet only about 5-7% of India’s commercial energy demand by 203132. Domestic commercial energy supplies would need to rise four times in aggregate over the next 25 years if import dependence for commercial energy is not to exceed say 40%. 20-22 BkWh of electricity and 11-12 mtoe of LPG. and (b) the subsidy is enjoyed only by those who cannot afford to pay for such lifeline consumption. even with full electrification.

assuming world’s fossil fuel supply grows at about 2%. the uncertainties of energy markets. The world gas production is expected to rise from 2420 MTOE to 3418 MTOE by 2020 at a growth rate of 2. India should be prepared for it. It is pointed out that it is this incremental demand of India when coupled to the even high share of China in the incremental supply of fossil fuels that is putting pressure on fuel prices and raising apprehensions in the world community. just about equal China’s current per capita consumption or be an eighth of the current US per capita consumption. In comparison. Together. sources of energy take their place. India would in the most fossil fuel intensive scenario account for 21% of the incremental world supply of fossil based commercial energy by 2031-32. 6. What it means is that India that on per capita basis. more competitive. However.8% per annum. never leads to exhaustion of reserves because. India and China with 40 percent of the global population could account for as much as 50% of the incremental world supply of fossil fuels under certain scenarios. On an incremental basis. India Needs to Grow in a Constrained Energy Market: Irrespective of the final level of demand. The world oil and gas production are expected to peak in the 2010-15 and 2015-2020 time frame respectively. The world oil demand is expected to grow from the current level of 81-82 million barrels per day to 110 million barrels a day by 2020 at a growth rate of 1. The US production of oil peaked in 1970 and the North American gas production is widely believed to have peaked in 2000. India’s per capita commercial energy consumption (based on the mid point of the range of scenarios developed under Chapter III) would. With a projected population of just under 1. over time. Nevertheless. currently consumes under 4% of what the US consumes and about 45% of what China consumes will by 2031-32 consume just over 11% of what the US consumes today and equal China’s current per capita consumption. less than 25% of gas is traded across borders primarily through pipelines (natural gas) and to a lesser extent as LNG that accounts for about 30% of the total gas trade. Even if this is considered to be pessimistic. On simple considerations of equity India cannot be denied this level of energy consumption by 2031-32.2% per annum. 74 . it is seen that China’s current consumption is 1100-1200 MTOE and USA’s current consumption is 2400-2500 MTOE of commercial energy. with the right price signals new.endeavour to do so. coupled with long lead times of new investments in developing new and alternate reserves/sources of primary energy reinforce the view that the supply-demand balance for oil and gas is likely to remain tight for the foreseeable future. Some 65% of crude oil is traded across borders. India’s share in the likely world supply of commercial energy in 2031-32 would range between a high of 12% to a low of 8% compared to the current level of about 4% today. 7. The growth in the demand of primary energies. India consumes about 327 MTOE of commercial energy. particularly in moving supplies to where they are needed. India’s Energy Demand in the Global Context: Putting India’s likely energy demand in 2031-32 into a global perspective. In the least fossil fuel intensive scenario India’s share of the incremental world supply of fossil fuel based commercial energy would be 13% by 2031-32. India’s growing demand for commercial energy supplies has to be seen in the context of a tightening global energy market with rising prices and stagnant output.5 billion by 2031-32.

In fact in comparable 2003 dollars oil prices were at an all time high of $80 a barrel in 1980 and $72 a barrel during the four year period 1979-1982.4 times current production) to 2. Gas under various scenarios is seen to account for some 7-14% only of our energy mix by 2031-32. Coal is India’s Most Important Energy Source: Coal emerges as the 8. India’s currently known reserves of extractable coal will not last beyond 30-40 years.6 billion tonnes (over 6.5. Thus. It is thus of utmost importance that alternatives to oil are pushed which are based on domestic resources. India could also import 250 to 500 million tonnes of superior coal to reduce local coal requirement by some 375 to 750 million tonnes per annum. Need to Develop New Sources: However. The additional coal requirement from domestic sources would be even higher if the past trend of falling domestic coal quality is not arrested. If one looks at historical oil prices in constant 2003 dollars then the recent average of about $ 54-55 per barrel is comparable to the average price of 53. 10. 9. most important energy source for India accounting for not less than 41% of our energy mix under any scenario and potentially reaching 61% of the energy mix under certain scenarios. It provides the basis for the Integrated Energy Policy Committee to support Planning Commission’s Tenth Plan proposal for Creation of an Apex Body on Energy under the chairmanship of the Prime Minister. however. The above backdrop and the discussion in the previous four Chapters establish: (i) the inescapable dependence of growth across all sectors of the economy (including social sectors) on assured availability of affordable energy supplies.The common belief that current prices of oil are high is only true in nominal terms. cost reduction and efficiency gains underline the need for an integrated energy policy. Achieving a gas share in the mid teens in India’s energy mix presumes successful development of the KG potential. Some of the possibilities are identified in Section 3. we have to stretch out our energy resources as much as we can by promoting energy efficiency and conservation. that currently only about 700-800 million tonnes of coal is internationally traded. Even at the 41% level India would need some 1.4 billion tonnes (over 3.5$ that prevailed during the 12 year period 1974-1985.5 times current production) of coal from domestic sources. energy conservation. These facts are behind the low impact that currently nominally high oil prices are having on global inflation and the predictions of higher prices to come. Such a body at the highest level of the Government is essential for 75 . (ii) the existence of cross cutting issues impacting various subsectors of energy and the related infrastructure for its production and delivery. It is pointed out. exploitation of coal bed methane and success with transnational gas pipelines and LNG imports. Associated port and rail handling would have to rise to achieve any of the above scenarios. and (iii) the massive investment needs of the sector. Clearly India’s policy framework must recognise the pre-eminence of coal and the required technology to maximally exploit the large in-place reserves of coal. depending upon the level or increase in domestic coal production to meet growing demand. The opportunities for inter-fuel substitutions. To augment our energy resources we should also promote development of new sources of energy. Energy efficiency. development of substitutes and R&D to make them economically viable should get high priority.

Many of these PSUs are financially strong but their strength is acquired in a protected public sector environment. 76 . Externalities and Institutions 11. mega projects or micro-projects.2 Policies Covering Energy Markets. Subsidies. the regulators should meet regularly and arrive at common principles that emerge from this Integrated Policy. The policies to achieve competitive and transparent markets must recognise the dominance by large public sector units in most energy sub-sectors. Energy efficiency in production and consumption requires that all players and energy projects. large or small. The presence and strength of dominant but efficient public sector units can be an asset in the transition to a competitive set-up as they could provide a starting benchmark for the market. Some key specific initiatives that would result from such an overall policy commitment across the energy sector and for each of the energy sub-sectors are described below.operationalising the kind of policy decisions enumerated below. transmission. distribution and consumption of all available types of energy and that provides incentives to supply required energy. Taxation. to provide cohesion and consistency of regulation across all energy sub-sectors. a common regulator is not recommended for all energy sub-sectors. Thus the regulatory framework must recognise/deliver the following: To ensure genuinely independent regulation across each sub-sector of the energy value chain. Such competitive markets provide the best means to extract efficiency gains from the sector. Since domain knowledge is important. Such an apex body has already been created to review and approve policies for the energy sector as a whole. However. public or private. Moreover appropriate pricing of various energy sources and services is needed to realise efficient choice across fuels. domestic or foreign are treated equally. the regulatory responsibility/functions of the State must be separated from the Ministries that control the PSUs that dominate the energy sector as the principal owner of over 75% of India’s energy assets and related infrastructure. Pricing. Meeting Growing Energy Needs in a Cost-Effective Way: To meet the growing energy needs in an efficient cost-effective way requires a policy framework that realises efficiency in production. Promoting transparent and competitive markets for all forms of energy supplies/services is the first policy initiative that the Government must take as part of its integrated energy policy. There should be a common appellate tribunal for all the energy subsectors. natural monopoly characteristics of networks and dominance of public sector. Independent Regulation: Independent regulation is critical to attaining competitive efficiency in the energy sector since it is characterised by large economies of scale. Transparent and competitive markets that offer a level playing field to all participants and are regulated independently are essential to creation of an enabling environment for domestic and foreign investment flows from public and private sources to the energy sector. Their competitive efficiency has yet to be tested. 12. as required. Regulation. 5.

At the margin.. To obtain competitive efficiency in this environment requires continuous engagement by policy makers at the senior most administrative and political levels and a set of dedicated and fiercely independent Regulators to achieve near optimal market behaviour 77 . Add to this mix. role in choice of fuel and energy form. In a competitive set-up if the marginal use value of different fuels which are substitutes.Improve functioning of regulatory institutions by: • • • • • • • • Creating an autonomous Regulatory Academy. hence. inconsistent. In perfect markets relative prices of different energy supplies and services yield most optimal fuel mixes. Institutionalising the selection of regulators and their impact assessment under the Regulatory Academy Mandating training for all regulators Granting financial autonomy to regulatory institutions. Prices of different fuels cannot be set independently of each other. that are not correctly priced in – all combine to thwart rational markets for energy. such perfect energy markets do not exist in most countries. Relative Prices for Efficiency: Relative prices play the most important 13. However. competing energy sources providing the same end service are priced identically per unit of such service delivered. affordability considerations that impose subsidy regimes that are rarely well-directed and are. investment flows and economic outcomes. are equal at a given place and time and if the prices of different fuels at different places do not differ by more than the cost of transporting the fuels. Limiting the quasi-judicial role of regulators to tariff setting and dispute resolution Providing for a system that makes regulators accountable to Parliament Mandating annual reports from all regulators on compliance with the Act they are regulating Regulating transient need In order to give independent regulation a fair chance of success. differences in environmental impact etc. sub-optimal for achieving stated objectives. externalities such as ease of use. They are thus the most vital aspect of Integrated Energy Policy that promotes efficient fuel choices and facilitate fuel substitution to save specific objectives. 14. policies that look upon energy supplies/services selectively and differently for the purpose of raising resources. this is the current practice and the domestic energy prices are not only uncompetitive but suffer from a number of distortions as detailed in Paragraph 15 below. and politically different perceptions of what constitutes long-term “social good” and what is best in “national interest” – and what one gets is a recipe for ad-hoc policies that are. the government should create the enabling policy environment for competitive and transparent market by eliminating entry barriers and removing pro-public sector bias. more often than not. then the resulting inter-fuel choices would be socially desirable. differences in achievable levels of efficiency. differences in specific investment levels per unit of energy. lack of substitutability. However. Supply/resource constraints.

Given India’s energy supply constraints and its energy security concerns. While keeping energy prices high has helped limit demand. commercial and large domestic consumers) since less than 50% of the energy through put is paid for and collected by the State utilities. all commercial primary energy sources must be priced at trade parity prices at the point of sale. and the Himalayan geology makes siltation a major issue in hydro development and realising the full hydro potential thereby affecting costs of hydro-power. (iv) India’s competitiveness is raised. National priorities would require that all available energy resources be optimally exploited. Rational pricing of energy supplies and services must ensure that: (i) the distortions are removed across all energy and energy service sub-sectors. Several arguments are forwarded to maintain status quo in the oil sector. Power a secondary form of commercial energy is grossly overpriced (for the paying industrial. (iii) energy conservation and energy efficiency are encouraged. India’s hydro sector has been plagued with significant delays & cost over-runs. Energy Pricing: Based on purchasing power parity comparisons. As a general rule. There is a need to examine (a) why the so called import parity price is used for oil products which are not imported. However. Coal has been deregulated under a monopoly supplier and the import and transportation infrastructure for moving coal is both deficient and managed by natural monopolies. Access to petroleum products including subsidised kerosene meant for the Public Distribution System is limited. This is particularly relevant to the oil sector wherein import parity prices are currently being used. Supplies of coal barely match demand. Petroleum products are priced at international parity without any competition among incumbents and then loaded with taxes and levies. (b) rationale for not using trade parity prices. Once 78 . Key policy principles and initiatives in pricing energy supplies and services that cut across all energy sub-sectors of India are enumerated below. agriculture and commerce less competitive and has constrained consumption.15. Natural gas supplies are well below current demand levels and multiple prices prevail in the market. for its energy supplies/services. (ii) development of local energy resources and related infrastructure takes place in their right priorities. Taxes on petroleum products are a key source for Government revenue and not uniform across products and finally differential State taxes and differential custom duties on crude & products introduce further distortions in energy pricing in India. among its comparators. and (v) economic growth is spurred. High energy prices are akin to a tax burden on the consumer and the economy. 16. (c) the basic data on which import parity is calculated and (d) the leakage in subsidised products namely kerosene and LPG. the only legitimate alternative to trade parity prices is full price competition at refinery gate and retail level in a competitive environment with low entry barriers and multiple players. Wind power in India is delivering only about 17% capacity factor on average. it has definitely made Indian industry. Indian uranium fuel for its Nuclear Plants is at least five times costlier compared to international prices due to very poor deposits. Non-commercial energy is practically free since opportunity costs of labour spent in collecting firewood or cow dung and preparing the same is rarely factored in. Both these factors subdue economic growth. the Indian consumer pays the highest tariffs in the World.

commercial. would be obviated and efficiency gains will show up in procurement/pricing.full price competition is permitted on the inputs as well as the outputs at all levels. All of these end-users could compete for the natural gas available from domestic sources but the floor price would be the net-back-price that the producer could have obtained as described above. LNG or piped gas imports can then be allowed to compete with domestic natural gas and coal to meet the demand of the foregoing select sectors or find an end use in the household. Prices of non-traded commercial energy supplies can be determined through competition among different producers (this presumes multiple sources. industrial and captive or CHP applications. The producers of associated and non-associated natural gas have the option of liquefying the gas and transforming it into a tradable commodity or alternatively piping it to an export market. To illustrate this point. low entry barriers. A final option could be to price nontraded energy supplies on a net-back-basis. If adequate gas is available the marginal use in India would be power generation where natural gas will have to compete with domestic or imported coal. petrochemicals. New domestic gas developments and the Joint Venture fields developed under NELP rounds would need to take the foregoing pricing policies into account. economic considerations may well require that domestically available gas be made available first to those end-uses that extract its economic value best among competing end uses. While the above works for traded goods. The upper limit would be the price of imported LNG re-gasified and brought to the consuming point. as being currently done. This net-back-price should then become the minimum price for the domestic user of such natural gas. and a competitive supply-demand balance) or independently regulated on a cost plus basis including reasonable returns (where competing supply sources are absent. be CNG vehicles. the cost plus regime pricing natural gas in India does not take the full credit for by-products as it continues to price the C2/C3 components of natural gas well below their traded or competitive prices. Given limited production of natural gas in India. The netback-realisation by the gas producer would thus be the price of gas at the landfall point that makes it possible for the gas producer to incur the extra cost of making it tradeable and yet compete effectively in the end market with other suppliers of natural gas or alternate energy forms. The cost plus regulation must take into account any realisation that is achieved out of by-products priced & sold on competitive terms. Either option adds cost (inclusive of return on capital employed) to transform the non-tradable natural gas to a tradable commodity based on investments. Prices of petroleum products will also vary across the country reflecting actual costs and relative regional strengths of the oil companies. Such end uses in India could. It must be recognised that bulk of the Indian coal cannot be easily 79 . let us take the case of domestic natural gas. the need for building up costs on a normative basis. non-traded goods have to be handled differently. for example. To illustrate this principle. entry barriers are high and demand exceeds available supply). fertilizer and power.

Haryana. Maharashtra. including reasonable return on investment. At the ports domestic coal has to compete with imported coal and the delivered price of coal calorie cannot exceed the landed cost of imported coal calorie. Goa. This also puts a natural constraint on coal prices at mine mouths which have to be below the landed cost of imports less transportation cost from mine to port. shipping and handling of coal typically accounts for 30-35% of the cost of coal with an average calorific value of about 6000 kcal/kg. A competitive coal market is important for setting a proper price of natural gas on a net-back-basis. entry of new players in coal mining facilitated and trading of coal should be made completely free. the mine mouth price cannot exceed FOB price minus the transport cost. 80 . In international trade. Coal prices should be left to the market. With an ash content of over 40% and a calorific value averaging only 3500 kcal/kg most of the coal sold to the power sector would have to be “prepared” to be made tradable. Eliminating cross subsidy surcharges on movement of primary energy sources and other bulk freight items. New entrants would whittle away any excess profits. If coal is exported. This makes imported coal (even at the current inflated world prices of coal) competitive at coastal locations all along India’s Western Coast and parts of Tamilnadu. In India transport and handling costs can reach 200% to 300% of the pit head price of coal when moved to Tamilnadu. Gujarat. the marginal use of gas will be power generation in competition with coal. that there are many producers and that there are no entry barriers to new producers. A central planner is highly unlikely to have the needed information to set prices in a rational manner. The Power Sector consumes 80% of the domestic coal. Delhi. Would this make coal expensive? As long as there is competition also on the supply side.traded. would not only make energy prices more competitive but would also shift freight traffic from the far less energy efficient road sector to the Railways. This would entail both cost and investment. coal prices would remain near to its cost of production. Punjab and parts of UP. it brings into focus the need to gradually decrease cross subsidies in Railways and transfer passenger fare subsidies to the budget since the rail freight for coal and other commodities is higher than what can be economically justified. Rajasthan. Offering open access to rail lines for private movers may be another way to make rail movements more efficient. Even when domestic producers take time to augment production. This is so because in a market that does not have any constraints in gas supply. Further. Cost of production varies with the scale and technique of production as well as with geological conditions. Only a competitive free market can do an efficient job of price determination. The price of coal should vary with quality and its calorific content. The foregoing reinforces the need for washing and preparation of coal by the coal supplier since high grade energy used for traction is used up to transport a low grade fuel. Karnataka. competition from imports would keep the price in check. Competitive market requires that there is also competition on the supply side.

the taxes are not applied consistently. More importantly. All secondary energy resources should be priced based on competitive procurement by the service provider and Regulators must facilitate multiple suppliers for all secondary energy resources and energy services. The equivalence of taxes across competing fuels should be uniform with respect to per unit of energy service delivered duly adjusted for prevailing overall energy efficiency levels and any other specific externality relevant to specific fuels. This would be the least distortionary as it would take into account effective calories that take into account conversion efficiencies of alternate fuels.Entry barriers for new mining companies must be dismantled. Central and State taxes on commercial energy supplies need to be rationalised so as to become neutral to fuel choices and investment decisions. and time taken for awarding blocks. Consistency of Taxes Across Fuels: Currently Central & State taxes on various forms of primary and secondary energy are a significant part of the price. This can be done in a revenue neutral way. duty differentials on crude and petroleum products. 17. differential levies on alternate fuels. nil or a uniform low custom duty on all imports for energy sector projects/investments/supplies are other measures critical to rationalising taxes to minimise distortions in energy markets. Eliminating custom alternate fuels. rents must be independently regulated and where possible competitively procured under normative and regulated caps. Where the said service is provided by a natural monopoly such as a pipeline or a distribution network. Relative prices of fuels can be distorted if taxes and subsidies are not equivalent across fuels. Improved port capacities and coastal power plants with dedicated jetties would not only yield competitive efficiency through imports but also raise the proportion of domestic coal moved through coastal shipping — thereby providing a competitive alternative to stretched bulk freight capacity of railways. All such natural monopolies must be pure common carriers and service providers with no interest in the content. In other words they should be such that producer and consumer choices as to which fuel and which technology to use are not affected by the taxes and subsidies. thereby resulting in significant price distortions. granting clearances and opening mines reduced significantly. 81 . Taxes are essential to raising revenues but the following policies are essential ensuring that they least affect energy choices. India also needs to invest in port facilities and create coast based power generation capacity to facilitate trade and benefit from the discipline of competition that trade provides. Making the energy sector fully “Vatable” or rationalising taxes and eliminating differential taxation by State Governments can reduce distortions.

Removal of misplaced incentives such as those available to Mega Power Projects as an example. While the rest of the world is recognising the higher efficiency of distributed generating facilities, India is providing incentives to Mega Projects. The consequence is that State Governments opt for Mega projects to claim the incentives and then swap power among themselves to meet the guidelines of Mega power policy thereby creating unnecessary transmission capacity and movement of power back and forth. There should be no discrimination by size or fuel used. 18. Dealing with Externalities: While taxes to raise revenues should be levied in a way that least affects fuel/energy choices, environmental taxes and subsidies can be used to actually affect fuel/energy choices. Some options available to deal with environmental externalities could be:

A consistent application of polluter pays principle or consumer pays principle should be made to attain environmental objectives at least cost. Using incentives, cross subsidies, tax breaks for public investments to maximise the more energy efficient rail freight, electrification of railways building double decked freight trains, improved mass transportation options, R&D for efficient engines or fuel alternatives etc., could also help mitigate environmental concerns. Certain conservation objectives may be better served through appropriate regulations such as minimum vehicle occupancy ratios, minimum fuel efficiency norms allowing odd and even numbered vehicles on road on alternate days etc. Taxes and subsidies to create differential pricing to achieve the above objectives run the risk of creating perverse incentives. As an example, lower taxation of diesel to boost public transport sector has several negative outcomes such as adulteration, less emphasis on efficiency in road transport carriage, agricultural applications, and off-road applications, negative environmental impact and spawning of diesel passenger vehicles enhancing all of the foregoing negatives. Thus care should be exercised in using taxes and subsidies. 19. Subsidies for the Weaker Sections: Subsidies designed for the benefit of the weaker sections of the society remain poorly targeted and result in serious price distortions and malpractices. Most of the LPG subsidy is actually benefiting the rich and the upper middle classes. A large part of the PDS kerosene is adulterating diesel and being burned in standby generating sets. Agriculture and household subsidy on electricity provides the basis for theft of power by industrial and commercial consumers. The following policy options exist to address this concern: Moving the prevailing subsidies & cross subsidies in the energy sector designed for the weaker sections of the economy to the Central and State Budgets would go a long way in removing price distortions,
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providing optimal pricing signals and eliminating malpractices. Subsidies that cannot be targeted in a full-proof manner to the targeted beneficiaries should be made available as minimal entitlements to everyone. Consumption in excess of the minimum should be charged at full cost of supply. Further, the entitlements should be made tradable if not consumed with the service provider required to cash the entitlement at the full marginal cost of supplying the underlying energy resource or service. Another way providing subsidies efficiently is to service providers to bid for making the entitlements available to the beneficiaries at least cost to the State. 20. Institutional Reforms for Competitive Efficiency: Neither appropriate pricing nor independent regulation by itself, can lead to competitive efficiency, if dominance by one or two large public or private sector units continues and if public sector remains handicapped by lack of authority to take commercial decisions. Ease of entry for other players from both public and private sectors and competition from the world market create incentives to be efficient. 21. Public Sector Autonomy to Ensure a Commercial Culture: All public sector companies must be managed by independent Boards of Directors with no more than two Government nominated directors including just one from the incumbent Ministry. All other directors to be nominated independently with necessary sitting fees and consequent responsibilities under the Companies Act. No Director to have a direct or indirect beneficial interest in the company exceeding a prescribed monetary equivalent, say Rs. 2 lakhs, in any financial year. 22. Dismantling Entry Barriers: Entry of others central sector, state sector or private sector into all sub-sectors of energy should be easy and facilitated. Thus, open access to distribution network, removing, discouraging restrictions on captive coal mines, allocation for coal, oil and gas blocks in competitive transparent manner and level playing field to all players are needed to generate competition. 23. Developing Long-Term Debt Markets: The Central and State Governments as well as the term lending institutions must seed the market for long-term (20 years plus) debt. Options could include one or more of the following: (a) (b) capital market based instruments; debt structures with 20 year repayment schedules including bullets at the end of years 10-12 along with undertakings for taking out financing of the bullets as they fall due; guarantees for later maturities; repayment term based on 20 years with built-in refinancing every 5 years; partial risk guarantees and other similar structures that effectively provide 20 year plus funding for the energy sector.

(c) (d) (e)

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Chapter VI. Policy for Energy Efficiency and Demand Side Management
6.1 Large Potential for Saving Energy

The importance of energy efficiency and DSM has clearly emerged from the various supply scenarios and is underlined by the rising oil prices. Efficiency can be increased in energy extraction, energy conversion, energy transportation, as well as in energy consumption. Further, the same level of service can be provided by alternate means requiring less energy. The major areas where efficiency in energy use can make a substantial impact are mining, electricity generation, electricity transmission, electricity distribution, pumping water, industrial production, transport equipment, mass transport, building design, construction, heating ventilation & air conditioning, lighting and household appliances. It may be noted that a unit of energy saved by a user is greater than a unit produced, as it saves on production losses, transport, transmission and distribution losses. Thus a “Negawatt” (a negative Megawatt), produced by reducing energy need saves more than a Megawatt generated. 2. In the 1990’s several studies have estimated the potential and cost effectiveness of energy efficiency and DSM in India (Nadel et al. (1991)*, Banerjee and Parikh (1993)†, Parikh et al. (1994)‡, Parikh et al. (1996)§. Despite these potential studies, the actual implementation has been sluggish. The 8th Five Year Plan made a provision of Rs.1,000 crores for energy efficiency to provide targeted energy savings of 5000 MW and 6 million tonnes in the electricity and petroleum sectors respectively. However this money was not explicitly spent for this purpose. A review of the 8th Plan performance does not quantify actual costs and savings achieved. The 9th Five Year Plan proposed the passing of the Energy Conservation Act and the setting up of the Bureau of Energy Efficiency. 3. The 10th Five Year Plan proposes benchmarking of the hydrocarbon sector against the rest in the world. It also suggests demand side management specifically in the transport sector. The target for energy savings in the 10th Plan is 95,000 Million Units (Planning commission of India) (13% of the estimated demand) in the projected terminal year of 7,19,000 Million Units. However, unlike the case of generation targets there is no specific allocation to meet this target. It is also likely that the performance review would not indicate the actual savings realised. 4. A study for the Asian Development Bank (ADB, 2003) estimated an immediate market potential of energy saving of 54,500 Million Units and peak saving of 9240 MW. This has an investment potential of 14,000 crores. Though there is some uncertainty in any aggregate estimates, it is clear that the cost-effective saving potential is at least 10% of the total generation through Demand Side Management. Additional savings are possible by auxiliary reduction in generation plants. At present an estimate of the total volume of the energy efficiency consulting business (Audit,

*

§

Nadel, S., V. Kothari, and S. Gopinath (1991): Opportunities for Improving End-Use Electricity Efficiency in India, American Council for an Energy-Efficient Economy, Washington, DC. Banerjee R., Parikh J.K. (1993): Demand Side Management in Power Planning – An exercise for H.T. Industries in Maharashtra, Economic and Political Weekly, August, 7-14, pp. 1659-70. Parikh J.K., Reddy B.S., Banerjee R. (1994): Planning for Demand Side Management in Electricity Sector, Tata Mc-Graw Hill Company Ltd., New Delhi. Parikh J.K., Reddy B.S., Banerjee R. & Koundinya S. (1996): DSM Survey in India: Awareness, Barriers and Implementability, Energy, Vol. 21, No. 10, pp. 955-966. 84

bee-india. To demonstrate delivery of energy efficiency services as mandated in the EC Act through private-public partnerships. plan and manage energy conservation programs as envisaged in the Energy Conservation Act. Transport Bhawan. Shram Shakti Bhawan. Task forces in 7 Energy Intensive Sectors have been set-up and best practices on energy conservation are being discussed by these task forces. These relate to high transaction cost.performance contract. 5. 2004)*. 2001 with effect from 1 March. monitor and verify energy efficiency results in individual sectors as well as at a macro level. inadequate awareness. perceived uncertainty concerning savings. While BEE has made a beginning (See Box). 2001 with effect from 1st March. R&R Hospital. Sanchar Bhawan. lack of incentives to utilities who perceive DSM as loss of market. Actions taken by BEE so far are given below: BEE has conducted National Certificate Examinations for selection of Energy Managers and Energy Auditors. South Block (Defence Ministry). Rail Bhawan. The Bureau of Energy Efficiency was established under the Energy Conservation Act.C. lack of access to capital. To interpret. engineering and technical assistance consultancy) is less than 1% of this potential (DSCL. buildings have been completed that include Rashtrapati Bhawan. To conserve petroleum products Petroleum Conservation Research Association (PCRA) was set-up by Ministry of Petroleum and Natural Gas (MOPNG) in 1978. Energy auditing agencies for accreditation on the basis of their energy auditing capabilities and institutional set-up have been cleared by BEE. BUREAU OF ENERGY EFFICIENCY (BEE) BEE was established under the Energy Conservation Act. To leverage multi-lateral and bi-lateral and private sector support in implementation of Energy Conservation Act and efficient use of energy and its conservation programs. G. Delhi Airport and All India Institute of Medical Sciences (AIIMS) and implementation plans have been prepared. Energy Audits for 9 Govt. Datta Roy Presentation available at www. Industries are being motivated to take up energy efficiency measures through institution of National Energy Conservation Award Scheme of Ministry of Power. Prime Minister’s office. a lot more needs to be done.nic. The mission of BEE is to develop policies and strategies on self-regulation and market principles within the overall framework of the Energy Conservation Act with primary objective of reducing energy intensity of the Indian economy. BEE does not have a fulltime head and its staff strength as of September 2005 was only 4 professionals. 2002 to meet the following objectives: st • • • • • • To exert leadership and provide policy framework and direction to national energy conservation and efficiency efforts and programs. high private discount rate and limited testing infrastructure for ascertaining savings. Draft norms for fixation of specific energy consumption in Cement and Pulp & Paper Industries have been framed and these norms are under discussion prior to finalisation.in 85 . To coordinate energy efficiency and conservation policies and programs and take it to the stakeholders To establish systems and procedures to measure. Since most Energy Efficiency/DSM schemes are often cost effective is it necessary to have policy interventions? In actual practice there are several barriers that constrain the adoption of EE/DSM. Policy interventions are required to address these barriers. 2002 under the Ministry of Power (MOP). Energy Conservation Building Code has been prepared and under review by the stakeholders. 6. * DSCL (2004): Catalysing Markets Through Innovative Financing and Competitive Procurement for Energy Efficiency.

Encouragement to develop and deploy more efficient technologies has to be provided. An enabling institutional framework is essential to achieve the objectives listed in Paragraph 7. It should be funded by contribution from all energy Ministries or a cess on fuels and electricity adjusted for cess on fuels used for generating electricity. 8. BEE staffing should be substantially strengthened. Mechanisms for independent monitoring and verification of energy savings achieved and cost effectiveness of programmes must be established. In extreme cases resort to black listing of errant suppliers at consumer information web sites and for government procurement. This will ensure that BEE is responsible for energy efficiency for all sectors and all end uses. To mobilise them the first task is to create awareness of the scope of possibilities and the extent of gains one can make. The feedback from the monitoring exercises should help in modifying programme designs. An annual report of the investments and savings made through specific energy efficiency and demand side management (DSM) programmes should be prepared by the BEE and reported to the Parliament. These standards should be at levels equal to or near current international norms. Existing national energy efficiency organisations like the Petroleum Conservation Research Association (PCRA) should be merged with BEE. Energy efficiency and conservation programmes and standards should be established and enforced. Energy efficiency improvement and DSM require actions by a large number of persons and institutions.To promote energy efficiency and conservation we need to create an 7. Public policy can set the pace of such development by offering attractive rewards and imposing biting penalties. Promote and facilitate energy service companies (ESCOs) that can identify energy saving options and provide needed technical support to industries and 86 . Enforce truthful labelling with major financial repercussions if equipment fails to deliver stated efficiencies. Under such an institutional framework: BEE should be made autonomous and independent of the Ministry of Power. Evaluation reports should be quantitative and should be publicly available. appropriate set of incentives through pricing and other policy measures. National Building Codes should be revised to facilitate energy efficient buildings. Barriers to adoption of efficient technologies have to be removed. Innovative energy efficient building technologies should be widely publicised through an annual prize. The Bureau of Energy Efficiency (BEE) should develop such standards for all energy intensive industries and appliances and develop modalities for a system of incentives/penalties for compliance/noncompliance.

Improving efficiency of Municipal Water Pumping: Institute measures that encourage adoption of efficient pumping systems and shifting of pumping load to off-peak hours. This will help 87 . Private sector could be encouraged to do so through time of day pricing. the permissible built up area may be gradually increased.commercial establishments to execute them. Shifting Freight Traffic to Railways: Improve railway service to win back the long-distance freight traffic carried by trucks today who consume five times as much diesel per net tonne kilometer of freight carried. which are internationally already commercial. Appropriate policy initiatives can yield quick returns from some low hanging fruits. These could include — Increasing Efficiency of Coal-Based Power Plants: Require NTPC and SEBs to acquire technology to enhance the fuel conversion efficiency of the existing population of thermal power stations from an average of 30% to 35%. Carrying 3000 billion tkm of freight (half of projected freight traffic in 2031) by rail instead of by trucks can save some 50 million tonnes of diesel per year. Also promote the already commercial flexi fuel vehicles that can burn varying proportions of ethanol-blended fuels. pollution and parking charges on those who use personalised motor transport. Construction of dedicated freight corridors and dismantling of CONCOR monopoly are critical measures for this. document a few potential case studies illustrating the potential for shifting loads and provide information and analytical support along with implementation of the TOD tariff. which it can auction to finance mass transport and other urban infrastructure. Utilities should support load research to understand the nature of different sectoral load profiles and the price elasticities of these loads between different time periods to correctly assess the impact of differential tariffs during the day. The utility should have focus group meetings of industrial or large commercial consumers. 9. The public sector should be mandated to do so. As the city grows. No new thermal power plant to be allowed without a certified fuel conversion efficiency of at least 38%. Facilitating grid interconnection for Cogenerators: Enforce mandatory purchase of electricity at fixed prices from cogenerators (at declared avoided costs of the utility) by the grid to encourage cogeneration. Promote Urban Mass Transport: Promote urban mass transport by providing quality service which may be partially financed by imposing congestion. Plan for future mass transport corridors in smaller cities and acquire the right-of-way. The buying/selling price should be time – differentiated and declared by the state regulatory commissions at the time of each tariff notification. However the additional right to build should vest with the local government. Fuel Efficient Vehicles: Promote hybrid vehicles in India. Implementing Time of Day (TOD) Tariffs: All utilities should introduce TOD tariffs for large industrial and commercial consumers to flatten the load curve.

Regulatory commissions can allow utilities to factor EE/DSM expenditure into the tariff. For example. A road map (10-20 years) should be created for energy efficiency improvements in 88 .efficientlighting.reduce peak demand and energy demand. Medium to large term initiatives could include — Adoption of a least cost planning and policy approach that ensures that energy efficiency and Demand Side Management (DSM) have a level playing field with supply options. incentives.000-50. the utility can ask for bids from Independent Power Producers (IPPs) as well as Energy Service Companies (ESCOs). deferred payment through utility bill savings. A large number of pilot programmes that target the barriers involved and have low transaction costs need to be designed need to be tried with different institutions.000/peak kW generated. hospitals. This would then become part of the least cost plan before putting in new power plants that may cost Rs. Instituting Efficient Motors Programme: This initiative should focus on manufacturers/rewinding shops and target market transformation (provide incentives to supply energy efficient motors). and implementation strategies. the best practice and specific steps required to reduce the energy consumption. 10. Similar exercises should be adopted for the oil sector. Undertaking Efficient Lighting Initiative: Utilities should launch pilot efficient lighting initiatives in towns/cities (similar to the BESCOM programme in Bangalore). The regulatory commissions should invite bids for DSM while approving new capacity additions. Promoting Variable Speed Drives: All large industries should be required to assess suitability of variable speed drives for their major pumping and fan loads. Each energy supply company/utility should set-up a DSM/ energy efficiency cell. buildings.net) Making Energy Audits Compulsory For All Loads Above 1 MW: Energy audit should be done periodically and be made mandatory for public buildings. large establishments (connected load >1 MW or equivalent energy use >1MVA) and energy intensive industries. an efficient lighting programme may offer to save 150 MW at a cost of Rs. In each segment the benchmark would provide the theoretical minimum energy consumption. Thus. Initiate benchmarking exercises for different industrial sectors. Innovative programme designs can be rewarded. hotels. 40. (International examples are available at www. BEE can facilitate this process by providing guidelines and necessary training inputs. the minimum achievable. Reaping Daylight Savings: Finally saving daylight by introducing two time zones in the country can save a lot of energy. etc. 5000/peak kW saved. Features should include warranties by manufacturers. if a state requires an additional peak demand of 1000 MW in the next five years.

7 00 1198 240 Cost of electricity as % of ALCC 99. A manual should be prepared establishing the methodology for annualised life cycle costing with a simple spreadsheet package to enable easy implementation.6 Motor EE Motor Incandescent Lamp CFL 20 hp 20 hp 100 W 11 W 11. BEE can catalyse the benchmarking process by bringing together energy auditors. 1. 4. The basis for selecting a vendor usually is based on the lowest initial cost. No. water heaters. It is recommended that the procurement process be modified based on the minimum annualised life cycle cost (See Box). refrigerators. However the operating costs are often not perceived.000 502.0 97. It is clear that for these products the main cost component is the annual electricity cost.0 98. 89 . Thus the manufacturers of equipment and appliances should be targeted to force the pace of energy efficiency improvement. Initial Cost and Life Cycle Cost In many cases of energy equipment the annual costs of operation predominate as compared to the capital cost. At 8 percent growth rate we will nearly double our capital stock in nine years. Equipment Rating Initial cost (Rs) 45. The Super Energy Efficient Refrigerator Project in the US is a successful example (See Figure). pumpsets.000 10 350 Annual Electricity Cost (Rs) 600. researchers. 3.each industry segment. 2. Defence and public sector units constitute a large market segment for energy intensive products. Energy using equipment and appliances will also spread rapidly.600 1168 128 ALCC (Rs) 605. Table shows the initial cost and the annualised life cycle for some typical energy equipment.5 53. The Government (Central/State). Table: Comparison of Initial Cost and Life Cycle Cost Sl. The purchase decision is based on the initial cost. boilers. The following steps may be taken to improve efficiency of energy consuming equipment: Mandate time bound targets of energy efficiency for equipment and appliances such as motor vehicles. say a minimum saving of 20% over the best existing design within a given time frame.000 60.7 20 512. end users and providing the funding required. as it is part of the total electricity bill. Railways. Create competition among manufacturers to be the first to achieve the target through a “golden carrot” which is a large monetary reward to the first one to commercialise products which provide. etc.

partial credit guarantee. * Wiel. government buildings). and Lighting. Combine this with consumer awareness programmes that illustrate the savings & gains that can be made. (2001)* Mandate clear and informative labelling in well-designed standardised form for equipment and appliances. Equipment. (Washington. venture capital. S. 90 . Energy service companies (ESCOs) can provide such support. The labelling/standards initiative should be supported by analytical studies to establish equipment consumption benchmarks (minimum achievable energy consumption targets). Industries may need technical support to identify and execute energy saving options. (2001): Introduction. Some possibilities include— Financing Support – The support for ESCOs could be in the form of payment security mechanism (this may be required for projects in municipalities.C. 12. eds.1 Reduction in the Energy Consumption of Refrigerators sold in the United States of America Source: Wiel.. Collaborative Labelling and Appliance Standards Program (CLASP). Wiel and J.E. D. To strengthen the labelling initiative create regional testing facilities for testing and certification. We need to promote and facilitate ESCOs.Figure 6. McMahon. S. Energy Efficiency Labels and Standards: A Guidebook for Appliances. S.

Encouraging different business models – For ESCOs to be successful in India a variety of alternative business models need to be attempted to determine the appropriate ones in the Indian context. Providing an institutional framework for independent monitoring & evaluation of projects delivered by ESCOs. These should be welldocumented. BEE could facilitate 15-20 demonstration ESCO projects in different sectors. 91 . independently monitored and made available to the public. ESCOs as producers of “Negawatts” may be given the same tax breaks that are available for renewable energy programmes or other energy investments. This will encourage more entrepreneurs to invest in ESCOs.

1 shows a listing of some of the commonly used renewable options. cooking and for almost any enduse that is presently met by fossil fuels. Adverse local environment impacts (SOx. 2. Many renewables have high initial costs (See Table 7. cooling.1 Renewable Energy Options Renewable Energy Options Solar Bio-mass Wind* OTEC* Wave* Tidal* Hydro* Solar PV* Solar Thermal* Run of the river Storage dams (exhaustible) Ethanol* Bio-diesel* Fuelwood Crop Residue Dung Biogas* Wood Gasifier* *Modern Renewables 3.Chapter VII. Our efforts in the past have not been as successful as we would have liked. NOx. The actual share of modern renewables in India’s energy mix is significantly lower (about 2% of the total). water pumping. Also there are externalities of use of renewables. Figure 7. As the country is short of energy resources the need to develop all energy sources including the renewable options is paramount. the benefits of which do not accrue to the user. SPM) and global environmental impacts (green house gas emissions mainly due to carbon dioxide) associated with fossil fuel use have resulted in an increased emphasis on renewables. .1). Of this. Renewables can be used for space heating. Often development efforts have been sub-critical and subsidy driven growth did not provide incentive for technical improvement or cost reduction. the major contributor is traditional bio-mass that is used for cooking followed by electricity generation from large hydro plants. Policy for Renewable and Non-Conventional Energy Sources An examination of India’s primary energy balance shows that renewables account for about 33% of the primary energy consumption in India. Figure 7.

by the end of the 10th Plan linked to creation of renewable grid power capacity.0 2.50-3.5 15. Source Capital Cost Estimated Cost Total Installed Capacity of Generation No. Solar Photovoltaic 26. cogeneration etc.43 Source: Ministry of Non-Conventional Energy Sources (MNES) 4.54 7.00 2483.94 2. Renewable energy may need special policies to encourage them. All incentives must be linked to energy generated as opposed to capacity created. It may provide employment and livelihood to the poor.62 2. Similar coordination is also called for between the rural electrification programs.00 3. Price subsidy for renewables may be justified on several grounds. telecom and road connectivity initiatives and certain social sector programs. A renewable energy source may be environmentally benign. Energy from Waste 2.00 2. Small Hydro-Power 5.00-3.50 41. It may be locally available making it possible to supply energy earlier than when a centralised system can do.00 2. Bio-mass Gasifier 1.00 1.20 6.50-3.Table 7. MNES’s rural electrification programme and the newly developed Village Energy Security program./kWh) 1. into their systems. Bagasse Cogeneration 3.00 379. Phase out capital subsidies. small hydro.50-3.00-5. as provided under the Electricity Act and as are mandated in many countries. Power Regulators must seek alternative incentive structures that encourage utilities to integrate wind. which only encourage investment without ensuing outcome. 5.1: Capital Costs and the Typical Cost of Generated Electricity from the Renewable Options Sl.00-6. where appropriate. MOP and MNES need to better coordinate the outcomes of RGGVY.50-10. Bio-mass Power 4.00-20.5 2.50-2. (Crores of (MW) Per Unit Rs/MW) (Rs. 93 ..50 60. Respective power regulators should mandate feed-in laws for renewable energy.00 5.50 1601. Wind Power 4.00 2. Bundling of services is likely to achieve greater access and is more likely to yield sustainable structures that are replicable through separate franchises.50 234. (See Box: International Feed-in Tariff) With the capital subsidy available for improving rural access having become uniform for both remote and grid-connected villages/habitations. This should be done for a well-defined period or up to a well-defined limit and should be done in a way that encourages outcomes and not just outlays.43 4.50-7.

<5kW) 22.0 (2001) Comm .5% per year Ref. (December-2003) RBI + 2003 data b c d e Sites that achieve more than 150% of reference output For new installation price reduced by 5%. (2003) * T. T. 2.63 26.5 MW 5.2 4.5 OR 20.48 (2002) a 2.4 2002 data Since 2002 tariff reduced by 1. < 12 MW) France 5.6 OR Premium of e 1.5 TO 34.31 Rs.9 10.27 5-20 MW 4.2 3.4 (Windy sites) 4. R.5-5 MW 5.International Feed-in Tariffs Conventional Dom.6 (Mainland) (Cap.: Source: Rates for Euro = 57.99 6. Gross (2003): Review of renewable energy development in Europe and the US. Germany * Wind (Windy sites ) 1st 5 years a b Photovoltaics (Non windy) 5.83 (2002) 1st 5 years Next 15 years Spain + 5. Foxon.6 Guaranteed for 20 years c Bio-mass 0-0.00 (2001) Fixed 3. October 2003.7 (Cap. Imperial College. Stenzel. Report for the DTI Renewables Innovation Review.6 1.21 (2002) 1.85 0. ICCEPT. The obligation to pay ends when total installed capacity reaches 1000 MW Premiums and tariff set by Government Uniform fixed price for 13 years (2003) * Source: Stenzel et al.5 Austria * 6.54 (1995) 4.4 3.32 1.4 4.6 4.2 (Overseas) (Cap >5kW) 12.4 TO 9. <5 MW) 27.3 (2002) 5. London.7 17.29 (2001) 2. < 50MW) d Next 15 years (Cap.6 3.6 (Intermediate) 4.2 (Cap. .4 8.6 (Non windy) 4.

RC’s should ensure that the renewables are given a tariff equal to the avoided cost of generation. This is preferably in the form of an annualised subsidy to be provided based on actual generation. can be linked to the amount of power actually generated. for example.) to improve its load factor and hence its economic viability. this is also true for rural electrification. The monitoring should also encompass other parameters like user profile (in order to ensure that government support is indeed going to poor households). independent power producers or renewable energy service companies. where the monitoring parameter should be not just the number of connections but also the various impacts described above. The project would be given to the lowest bidder. This is already provided for in the Electricity Act. improved food security and gender impacts. Thus. livelihood outcomes such as increased income. For grid connected renewables Regulatory Commissions (RC’s) should provide feed laws to permit renewables to supply electricity to the grid. This is feasible using existing technologies of remote monitoring and would add only incrementally to the system cost. wind-diesel. Supply companies/ entrepreneurs should be free to set-up micro-grids and recover revenues from customers. capital subsidy may be required. This would include actual energy supplied from different renewable options. A critical issue in distributed generation for rural electrification is the cost recovery and the implementation mechanism. For isolated systems it is beneficial to link the DG system to an industrial load (cold storage. In addition to 95 . 7. 8. oil mill etc. The need to keep the certificates tradable arises from the possibility that small generators may not have adequate taxable income to benefit fully from tax rebate. operating and maintenance problems. 10. In fact. microhydel. however. giving a capital subsidy on wind power plant provides encouragement to set-up a power plant but does not provide additional incentive to generate power. if it is given in the form of Tradable Tax Rebate Certificates (TTRC). non-renewables and fuels causing environmental damage. Price subsidy should be linked to outcomes. For example if it is decided to electrify a village using a dedicated producer gas engine and bio-mass gasifier. Different policy experiments for implementation of DG in different regions should be attempted. actual costs. bio-oil-engine) for their village. Each state should clearly define guidelines to facilitate this. there should be minimum clearances/permissions required for setting up a Distributed Generation (DG) system. This would require actual tracking of annual generation. The capital subsidy should be based on the annual generation. These pilot projects can be set-up by panchayats.The environmental subsidy for renewables should be financed by a cess on 6. An annual renewable energy report should be published providing details of actual performance of different renewable technologies at the state and national level. Instead a price premium on feed-in tariff for wind power into power grid ensures outcome for the outlay. A mechanism of bidding can be used to obtain the annualised subsidy level. availability. 9. Such capital subsidy. This will also encourage exploitation of better wind sites earlier. The village panchayat aided by the state energy agency and technical experts should decide the appropriate technology option (biogas. For such a plant. bio-mass gasification. bids may be obtained from suppliers for the support required annually for the first three years per kWh of actual generation. A premium on feed-in tariff may not benefit a stand alone plant in a remote area. The rebate claim becomes payable when electricity is generated and linked to the amount of electricity generated. In areas where there is no electricity grid.

One could leave it to the private parties to fix this price but an implicit MSP with a promised inflation linkage would help and encourage 96 . in case the price of diesel falls below this. Identified sites should be auctioned. the entrepreneurs should be encouraged to supply power to meet other requirements such as agro processing and milling. As a renewable fuel. Bio-Diesel: The production of bio-diesel needs to be encouraged in a way that does not involve undue subsidy and only economic production results. If the plant can feed into a grid. the production of which also generates rural employment bio-diesel should not be taxed. the bio-diesel producers should get TTRC as a premium for local. Financial institutions should be encouraged to set-up Venture Capital Funds for energy entrepreneurs. It is essential to ensure that independent assessment of performance is done for all renewable projects receiving Government funding. repeating mistakes and providing mid-course correction. In addition to attract private parties to set-up transesterification units to produce bio-diesel. Oil companies should be required to purchase bio-diesel of prescribed quality at the opportunity cost of diesel. The obligation of oil companies to purchase bio-diesel ceases once 10 percent blending is attained. since diesel price fluctuates. and the plant site should be auctioned off for minimum premium in the form of TTRC linked to output. 12. The following recommended: specific policies to promote various renewables are Mini Hydro: A detailed survey should be carried out to identify potential sites. Spain. Such 100 percent tax exemption is given in many countries such as Germany. The bio-diesel oil price should be linked with Minimum Support Price (MSP) for oil seeds that transesterification units should pay to the farmers. Biodiesel producers also need some assurance of a market. bio-diesel price should be revised every six months based on a prescribed principle such as the average price of diesel over the past six months or the rate of inflation in other agricultural crops. energy efficiency or rural energy also need finance.monitoring the performance of devices. At the same time. Wind Power: For wind power. The responsibility for investments for connecting to the grid should be fixed in advance before the bidding. This would help in tracking programmes. For plants which are not connected to grid bid for lowest tariff with a pre-specified premium in the form of Tradable Tax Rebate Certificates should be invited. Apart from the facilities of existing Technology Business Incubators being setup by DST energy entrepreneurs for renewable energy. government should also announce a Minimum Purchase Price for diesel. In addition. For village level plants. renewable and environmentally preferable fuel. the assessment should critically review the programme objectives and the strategy adopted and suggest course corrections as required. Bio-diesel can be blended up to 10 percent with diesel without requiring any change in vehicle engines. Thus there may be need to auction only sites on public property. Italy and USA. site selection is freer than hydro-power and wind plants can be set-up on private land. the grid should be required to accept power at the going time of day tariff. The same two types of auctions may be followed as described above for hydro-power plants. 11. Information on any system that is receiving government support should be made publicly available.

Women should be encouraged to set-up and manage such plantations so that the time they now spend in gathering fuel can be spent productively in a way that empowers them. Cooperatives which are open to all members of the community and which are non-discriminatory should be given government land on long-term lease. Ltd. they may be made mandatory. Parikh et al (1997)*.K. To encourage large-scale plantations. revised every six months.farmers to plant oilseed-bearing trees such as Jatropha. Energy. These include an announced purchase price. that last for many years. rebates in transfer fees or electricity connection charges. Field based NGOs could also be involved in this activity. Tata McGraw Hill Publishing Co. requires an appropriate operating strategy. Electricity from Wood Gasification: This can provide electricity based on gasification of wood and can be very useful especially in remote villages. they need to be provided land and finance. Alternatively incentives may be given in the form of property tax rebates. Fuelwood Plantation: Cooperatives should be encouraged and facilitated to grow tree plantations in villages. contract farming should be facilitated. If organised and managed properly. 97 . Ethanol: The same kind of policies are required for blending ethanol with petrol as are required to promote bio-diesel. The last two are preferable as they are one time rebate. They should also be provided finance. and Reddy B. such plantations are economic and successful as shown by the experience of National Tree Growers Cooperatives Federation. and Parikh K. To encourage all new buildings and factories to have solar water heaters. Editors (1997): Sustainable Regeneration of Degraded Lands through people’s participation”. Sudhakara. Since ethanol is produced from crops for which an MSP regime exists. 2. Solar Thermal Power Plants: The economic viability of solar thermal plants have not yet been fully established. Parikh and Parikh (1977)† have shown the possibility of such a strategy. and installation of SWH should be made compulsory in government buildings. Solar Thermal Water Heaters (SWH): These are economical and the main barrier refers to expense of retrofitting in households and industries. To encourage entrepreneurs to invest in it. indicated for micro hydel and wind power plants should be followed here. tax exemption and environmental premium through TTRC. pp. Bio Gas Plants: The real potential of bio gas is in community level plants. The same set of policies. 441-445. Also to have the willing participation of all the cattle owners in the community. obligation to buy up to 10 percent blending. New Delhi.S. a higher premium of feed-in tariff may be given. The essential policy required is provision of land and finance. Village community based institutions such as Self-Help Groups (SHGs) particularly of women should be encouraged and provided support to undertake plantations and manage the operations. etc. The higher premium can be * Parikh Jyoti K. (1977): Mobilisation and Impacts of Bio-Gas Technologies. Vol. Karanj. The government including defence and public sector account for a significant amount of new construction.. † Parikh J. but with a minimum purchase price. To encourage private or community entrepreneurs to set these up. it may be necessary to coordinate it for its energy value..

incentive to commercialise and lower the cost may be provided through a higher feed-in tariff. Some institutional arrangements to promote renewable energy are needed: Restructure existing commission for additional sources of energy (case) providing it independent status and authority de-linking it from the Ministry of Non-Conventional Energy Sources and making it responsible for overall development of Renewable Energy Programmes in the country.justified for the higher risk and may be available to only the first 5000 MW of solar thermal plants. Convert existing IREDA (Indian Renewable Energy Development Agency Ltd) into a national apex refinancing institution on the lines of NABARD/National Housing Bank (NHB) for the Renewable Energy Sector by bringing equity from banks. 13. 98 . Solar Photovoltaics: Even though the present cost is very high. since the ultimate potential is very large. again for the first 5000 MW of installed capacity. Insurance companies and financial institutions of the country.

special action is needed to facilitate and encourage decentralised 99 . Energy security at the individual level means to ensure such energy. should be considered as a basic necessity.000 unelectrified villages. The considerable effort spent on gathering the bio-mass and the cow-dung & preparing the same for use is not priced into the cost of such energy. The 5. need to gather wood. Such expansion of connectivity will require a corresponding expansion of supply capability. We may set a goal to provide clean cooking energy such as LPG. One needs to recognise the need to provide energy to increase livelihood opportunities. connect all the estimated 2. This requires: (a) Access of electricity to all households –Already the government policy is to ensure this by 2009-10. if we are to achieve universal primary education for girls. Energy security for the poor should go beyond providing energy for subsistence. (b) (c) 2. the urgency to meet the challenge should be high. production capacities and incomes so that eventually they can afford clean and convenient energy sources.34 crore unelectrified households below the poverty line (BPL) with 90 percent subsidy on connecting costs and augment the backbone network in all the already electrified 4. considering the poor paying capacity. the limited availability of local resources for clean cooking energy and the size of the country and its population. particularly rural populations. Meanwhile we may provide fuelwood plantations within one kilometre of all habitations. Given the present widespread and endemic shortage of power in many states. Household Energy Security: Electricity and Clean Fuels for All One of toughest challenge is to provide electricity and clean fuels to all. It may be noted that the requirement of cooking energy does not increase indefinitely with income. particularly women and children. 4.5 billion persons is around 55 mtoe. agricultural wastes and animal dung and also bear the brunt of indoor air pollution.62 lakh households by 2010. are expected to get electricity connection on their own without any subsidy.1 Electricity 3.Chapter VIII.46 crore households above the poverty line. NG. Those who do not have access or also cannot afford even subsidised clean fuels. required to maintain life. promote gender equality and empower women. These fuels create smoke and indoor air pollution and are inconvenient to use. Thus the total amount of LPG required to provide cooking energy to 1. For the poor in rural areas we need integrated rural energy programme to ensure energy security.25. Neighbourhood plantations can ease the burden and time to gather and transport it. Yet considering that women carry most of the burden of drudgery of gathering fuelwood. which are currently unelectrified. biogas or kerosene to all with 10 years. What needs to be done is discussed below: 8. The Rajiv Gandhi Gram Vidyutikaran Yojana (RGGVY) aim’s to electrify the 1. They have adverse impact on the health of people. Easy availability of certain amount of clean energy.

distributed generation (DG) system so that communities can take their destiny in their own hands instead of waiting for utility companies to supply electricity reliably. Power plants based on wood gasification have been shown to be feasible as 5. well as economical. Enough woody bio-mass is available in many parts of the country for a village to generate adequate electricity to meet its needs. The fact that grid connection is promised in the next 5 years should not be a cause for discouraging distributed generation which can supply electricity at much less than the avoided cost. 6. A business plan that would make RGGVY financially viable needs to be elaborated. A clear pricing and subsidy policy and the means of targeting the subsidy need to be announced soon. The DG plants should be given the same financial support as the utilities for meeting RGGVY obligations. 7. As per the NSS 55th Round Survey in 1999-2000, among the households in rural areas who had electricity, the households who belonged to the poorest 5 percent of all rural households, spent more than Rs.300 per year for electricity. Thus a charge of Rs.1.0 per kWhr for the first 30 units per month should be within the capacity and willingness of even the poorest 5 percent households. Above 30 units per month the normal charge should be levied. For this electricity would have to be metered. An effective way of targeting the subsidy to BPL households will have to be found.

8.2

Cooking Energy

8. Providing clean cooking energy to all is even a bigger challenge. The 2001 census finds that in rural India nearly 300 million people do not have access to electricity, but what is more, even larger number viz., 625 million do not have access to modern (cooking) fuels, even though it takes more investment, management and technology skills to provide electricity than supplying modern fuels! It may not reflect gender bias but one suspects so. One-fourth of India’s total energy is ‘managed’ mostly by women with too little inputs of investment, management or technology and little political or administrative backing. They need attention and help. 9. The clean cooking fuels are LPG, bio-gas, kerosene and electricity. Electricity is in our context a relatively expensive form of cooking energy and should be provided as such only in specific circumstances such as in hilly regions where the cost of distributing LPG or kerosene may be very high where the cold climate makes bio-gas not a round the year option. 10. If most of the animal dung available in rural India is fed into community size bio-gas plants (each producing >20 m3 of gas per day), supplemented with suitable other bio-mass and with improved micro-organisms, some 30 to 40 percent of rural cooking energy need can be met by bio-gas. Such bio-gas plants managed as commercial enterprises need to be encouraged with finance and provision of land. 11. LPG is the most convenient cooking fuel. If we desire that all households use it, besides setting up a distribution network. the poor will have to be provided financial assistance.

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12. Distribution of subsidised kerosene has not been without problems. Based on NSS data we estimate that only 56 percent of kerosene released by States reach people as PDS kerosene. Removing the subsidy may improve the availability of kerosene in rural areas for at least those who can afford it. They will use more of kerosene freeing bio-mass based fuels for the poor. Once houses are electrified under RGGVY, the need to subsidise kerosene for lighting would no longer be there.

8.3

Subsidy through Debit Cards to BPL Households

13. The best way for providing subsidy for electricity and cleaner fuels, kerosene or LPG, is to give an entitlement to the BPL households of say Rs.30 per month worth of electricity per month and Rs. 100 per month worth of LPG, kerosene or biogas purchased from a local community size plant. A system of debit cards may be introduced whereby each household gets—Rs.30 towards electricity bill and Rs.100 for LPG bill every month. The entitlements can only be used for purchase of these products. With modern ICT, debit card readers operated on battery and feeding data using mobile technology, can work in rural areas of the country too. 14. Even if a household decides to sell the entitlement and not use power or LPG, it would still be welfare improving. The poor who prefer to sell their entitlement and still gather bio-mass based fuels would be better off as there would be much less competition for it. The effort and time involved mainly of women and girls in gathering would go down. For reducing the adverse impact of indoor air pollution on their health, women should be informed about possible defensive measures; ventilate the kitchen by removing a brick or two under the roof, use improved smokeless chulah, keep the children away, minimise the exposure to smoke, etc.

8.4

Fuelwood Mission

15. To reduce drudgery of gathering fuel, village woodlots within one kilometer should be developed. To develop sustainable energy supply, women’s groups can form tree-growing co-operatives for developing and managing fuelwood or oil seed plantations with the same efforts that they put in searching and gathering fuelwood today. Finance through self-help groups should be provided to transform women, who are today energy gatherers into micro-entrepreneurs for energy management. 16. Within this broad strategy the following policy actions are suggested to provide electricity and cleaner fuels to all: Provide entitlement of Rs.30 per month towards electricity subsidy and Rs.100 per month towards fuel subsidy to purchase cleaner fuels to BPL households through a system of Smart Debit Cards. To facilitate distributed generation by local plants, states should notify generously under the Electricity Act large part of the state as rural areas where such plants can be set-up. Distributed generating companies should be provided the same support as is provided to RGGVY for connecting BPL households. RGGVY tariff policy for rural consumers should be announced so that communities would be indifferent to whether the supply is from grid or a local DG and DGs would be encouraged.
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Eventually when the grid supply reaches the village, the DG should have the option to feed in the power to the grid at the avoided cost of the grid or at a price announced by the regulator. Finance a large-scale socio-economic experiment to operate community sized bio-gas plants either by a community cooperative or by a commercial entrepreneur. This should assess various management models in a scientific manner and examine whether the inclusion of poor and disadvantaged can be guaranteed. Successful management models should be replicated on a largescale. Allocate community land to women’s self-help groups and provide them finance and technical help to develop fuelwood plantation in convenient locations.

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particularly when it requires coordination of action in a number of different areas which may involve different government ministries. To take an innovative idea to a commercial application involves many steps. coordinated research and development of all stages of the innovation chain to reach a targeted goal such as in the departments of atomic energy and space research and broad based R&D support to research institutions. Energy Information Administration (EIA). Demonstration project.100 crores a year. 103 . universities and others through project funding. Scaling up to a pilot project follows if the economic potential looks attractive keeping in mind cost reductions that could be achieved through better engineering and mass production. Basic research leading to fundamental breakthrough may open up possibilities of applications. 4. this will collect Rs. Energy R&D has not got the resources that it needs.1% of the turnover of all energy firms whose turnover exceeds Rs. The nature of the support and the institutional arrangement will differ. Energy R&D Research and Development (R&D) in the energy sector is critical to augment our energy resources. our most abundant primary energy resource. 5. At each stage appropriate support needs to be provided for R&D. 3. We need to substantially augment the resources for energy R&D and to allocate these strategically.Chapter IX. Equally important are to increase fuel use efficiency. British Petroleum (BP) and Shell reveals the continuing growth in global fossil fuel consumption till 2030. We have used technology missions such as for rural telephony. This needs to be followed up by a working model at laboratory scale. to meet our long-term energy needs. 2. and adopt leading commercial or near commercial low carbon and high-energy-efficiency technologies that use coal.600 crores per year and will increase overtime. to promote energy efficiency and to enhance our energy security. In order to encourage the firms to do their own R&D a rebate of up to 80% of this cess may be given to firms for R&D carried out by themselves. departments or levels. R&D is needed to develop the concept and to prove its feasibility. R&D also requires a sustained and continued support over a long period of time. The policy initiatives that stand out for India based on currently commercial or near-commercial technologies are detailed below. The solution for India lies in seeking to augment its domestic energy resources. economic assessment and further R&D to make it acceptable and attractive to customers is required before commercialisation and diffusion can take place. A look at the projections of International Energy Agency (IEA). As per 2004-05 turnover. India would find it harder and harder to import the required energy as India’s requirements are growing faster than industrialised nations. Based on these considerations we recommend the following: A National Energy Fund (NEF) should be set-up by putting a cess of 0. Energy R&D has a critical role to play here. to attain energy independence. promote oil substitutes and shift to fuel efficient modes in the transport sector to reduce requirement for oil. Technology Missions are most appropriate for developing near commercial technologies and rolling out new technologies in a time bound manner.500 to Rs.

(iii) carbon capture and sequestration. We have already identified some projects for R&D earlier. The resources devoted to research in different areas depend on the economic importance of that particular area and technology and the likelihood of success of R&D to develop these. A technology mission should be mounted to bring down the cost of solar photovoltaics or solar thermal by a factor of five as soon as possible. DST and DBT (Department of Biotechnology) etc. namely: (i) recovering coal bed methane and mine mouth methane. The board for energy research should promote the formation of consortia between industry. It would support all stages of R&D from basic research to diffusion with appropriate policies. For the Medium-term goals of technology development based on the R&D vision and priorities there should be an open competition for technology development fund. India should target to be a global leader for energy technology and research. resources and institutions. fundamental research should be provided a focus for research related to potential energy applications.The fund should be governed by an Independent Board with representation of Department of Science & Technology (DST). should be created to assist in pooling of resources and exploiting the synergies. The Oil and the Coal PSUs must be actively engaged along with the gas and power majors such as GAIL and NTPC in these technology missions. Planning Commission and Energy Ministries. CSIR labs. Bio-fuels: A bio-fuel mission to plant Jatropha or other appropriate oil plants on half a million hectare of wasteland within two years should be undertaken 104 . However. Given that solar energy is one of our major energy source and the only renewable energy source with sufficient potential to meet almost all our energy needs. While proved coal bed methane will double India’s proved gas reserves. For the long-term. The NEF should encourage and fund such studies and periodically commission them. Solar: Solar technology is often seen as relevant for niche applications. and (iv) integrated gasification combined cycle (IGCC) to pull together all available efforts and resources being devoted to these technologies and place their responsibilities under separate but single chain of command with specific and time bound deliverables. A virtual network of energy research institutions. in-situ coal gasification could release usable gas from in-extractable coal reserves below 600 meter depth and bring the energy to surface without the accompanying ash while providing the potential for injecting back the captured carbon dioxide. academia in each of the energy technology areas. (ii) in-situ coal gasification. The latter changes with time as new development in Science & Technology takes place and the uncertainty reduces.. the majority should be of outside experts. The R&D priorities have to be based on a strategic vision which is frequently updated. we should give a high priority to development of solar technology for largescale deployment. However. (a) The following technology missions are suggested: Coal technologies: India should mount National Technology Missions in each of the four near-commercial coal technologies which are also environment friendly. research institutions. we recognise that the world of technology is dynamic and one should be flexible in one’s strategy.

has to be produced with using some energy. (b) Coordinated research and development efforts are suggested for the following: Nuclear technology including fusion power: Maintain the lead that India has in the Fast Breeder Nuclear Reactors while continuing all diplomatic efforts to procure fuel to fire Tarapur and some 6000MW of additional imported light water reactors. Similarly private sector should also undertake commercialisation of MNES’s metal hydride based two wheeler and three wheeler hydrogen vehicles. Develop fully the nuclear option using thorium. Battery Technology: Battery technology is important for exploiting solar power as well as for automotive sector. however. Bio-mass plantation and wood gasification: Undertake pilot projects to assess the economics and social benefits of bio-mass plantations linked to wood gasification and evaluate alternative management structures for distributed generation.000 hectares at Rs. This research must be spearheaded by the major companies in the auto sector in the private sector. Also to have the willing participation of all the cattle owners in the community. The rural energy security programme of MNES should be supported. the expenditure could be justified as an oil exploration effort that failed as well as by the large local employment generated. Funds available under REGA (Rural Employment Guarantee Act) could be used for meeting the cost of planting for 500. 105 . deployment and use. Hydrogen. to identify germ plasm of promise and to develop high yielding varieties. This can be gas. solar energy.000 per hectare. coal. Continue R&D under the national hydrogen energy board on all aspects of hydrogen production. modified if need be and stepped up. It is also possible to produce it through microbial action. cultural practices and input levels. In any case the cost of plantation would be around Rs. The essential policy required is provision of land and finance. The 6000 MW of LWRs must be pursued even at the cost of limited islanding of international inspection. hydro or nuclear energy. as they are critical to India’s longterm energy security needs based on the abundant thorium reserves. they need to be provided land and finance. requires an appropriate operating strategy.500 crores over three years. storage. Undertake R&D for fusion to keep open that option for unlimited power. Hydrogen is an energy carrier and can be used to generate electricity in a fuel cell and can be burnt directly in internal combustion engines. bio-mass. Community bio-gas plants run on commercial basis: The real potential of bio gas is in community level plants. assessed. Hydrogen: Development of Hydrogen technology is pursued in many countries. oil. Seek technology for super batteries and engage in research to develop such batteries in a time-bound manner for the two-wheeler and three-wheeler market in the first instance followed by electric cars. Even if the experiment shows little scope for economic exploitation of bio-diesel.to assess yields under alternative agro-climatic and soil conditions.1. To encourage private or community entrepreneurs to set these up.30. transport.

Among the areas that have been identified are the following. (c) R&D support for application. Promote development of energy efficient technologies. 106 . fundamental research etc. organisations and even individuals..Gas hydrates: Undertake R&D for exploiting gas-hydrates. innovation of new ideas. Support new ideas. may be given to researches from different institution. However the NEF should not restrict funding only to these topics. Assess offshore wind power potential. innovations and fundamental research. universities.

They do not have the resources to invest themselves nor have the credibility to attract private investors. The cross subsidy cannot be raised any further as they have reached a level where industries find it cheaper to set-up their own generating plants. Part of the losses and subsidy are sought to be financed by cross subsidy from industrial and commercial consumers. 4. viability gap funding for privatisation would be reduced. Power Sector Policy Power shortage has been a persistent problem for a long time. The problems with APDRP are – lack of baseline data to assign accountability and assess outcomes. Capacity expansion currently is done mainly by the Central PSUs who have been insulated from payments problems by the Tripartite Agreement (TPA) involving SEB. 3. The ratio of energy billed to energy available was a low 68 percent in 2004-05. The performance so far has been well below the target. however. this 42 percent of energy yields over 70 percent of the actual revenue collected by the state utilities. APDRP aimed to bring down AT&C losses to 15 percent in 5 years. To this we have to add the fact that among the billed energy are farmers and domestic consumers who are subsidised. Carry out GIS mapping of the distribution system to facilitate power audit and improve customer service. Introduce an incentive scheme for staff who may be given a share in the additional revenue collected in their distribution circle.Chapter X. the AT&C losses can be brought down by expeditious privatisation of distribution under a multi-year tariff framework which would take the power sector to a sustainable growth path. The states have been maintaining 107 . To deal with these problems the Accelerated Power Development and Reform Programme (APDRP) was launched to support distribution reforms in the states through investments and incentives for achieving desired outcomes. Apart from APDRP restructuring. However. baseline determine is required. Before privatisation. As is well-known this is largely the outcome of large aggregate technical and commercial losses which consist of T&D losses and losses due to pilferage and billing and collection problems. On the average these losses exceeded 40 percent in the year 2004-05 (CEA 2005). strengthen transmission network and improve distribution systems reflect the financial sickness of SEBs. under which the outstanding dues of SEBs to CPSUs as on 30 September 2001 were securitised and subsequent payments to CPSUs were protected by recourse to the account of the state governments with the Reserve Bank of India. poor preparation of projects as revealed by some independent assessment and lack of incentives for the staff to reduce AT&C losses. State Government and Reserve Bank of India. APDRP needs to be restructured as follows: Introduce automatic meter reading of all distribution transformers to track how much loss occurred in each area served by a transformer and to introduce accountability. The inability to expand generating capacity. Auditing of power flows is critical to establish a baseline before privatisation. Either supply metered power or bifurcate feeders for agricultural pumps. 2. Less than 42 percent of the energy is sold to industrial and commercial consumers (including sales to public water works and railway traction). To the extent these lead to reduction in AT&C losses.

A liberal captive and group captive regime foreseen under Electricity Act. This will pave the way for open access to distribution networks. and (ii) distribution margins for consumers at different voltage levels must be introduced. Inter-state transmission network should be managed by a regulated monopoly. An independent planning body for transmission network is necessary to ensure proper development of training network. Operationalise the flexible and enabling captive regime foreseen under the Electricity Act and provide consumer choice through open access. All power generation projects (with the exception of one time capacity expansion up to 50% of installed capacity of a specific plant) taken up for construction in the Eleventh Plan and beyond should be competitively built on the basis of tariff based bidding under a prescribed price cap. The cost plus regime gives little incentive to be efficient. introduction of time of day pricing at the bulk and the retail level and identification of cross subsidies embedded in the cost of supply in each distribution circle. India’s liberal captive regime would not only derive economic benefits from availability of distributed generation but set competitive wheeling charges to supply power to group captive consumers. States that do not comply should be made ineligible for Central Sector support for its power sector. The cost plus regime which cannot be avoided and the payments are guaranteed by the Government of India (GOI). is guaranteed. Transmission lines critical for inter-state flow of power and system stability should also be managed by the Central body. Moreover the TPA further discourages private power producers as they do not get a similar payments guarantee. and (iii) energy conservation and 108 . Competition should be introduced in building transmission capacity on the basis of wheeling tariffs and in distribution on the basis of distribution margins. Respective Regulators should adapt best international practices that reward utilities for seeking: (i) distributed generation with waste heat recovery where feasible.payment discipline vis-à-vis CPSUs since then. even if it is entirely within a State. but the long-term viability of the arrangement is questionable. The CPSUs get a cost plus deal under which a 14% post tax return on equity 5. Independent and/or fully transparent load dispatch is required at regional and state levels to ensure level playing field among competing common carriers. Regulated caps for: (i) wheeling charges at different transmission voltages. This would require development of normative wheeling and distribution costs at different voltages by respective regulators. Content from carriage in both transmission and distribution must be separated. 2003 be realised on the ground. (ii) demand side management. the internal rate of return on total capital employed should bear a reasonable relationship to the longterm government bond coupon at the time of the approval. Existing projects and future investments that are not competitively bid must comply with CERC’s tariff guidelines.

000 MW or more) National Power Projects that seek to exploit objectives such as standardised (super critical 800 MW units or better) bulk orders to reduce capital costs. Any subsidy given to poor households or farmers should be funded by the State Government through its budget. coastal locations with dedicated facilities for handling domestic coal moved by sea or imported coal. The efficacy of the RGGVY programme needs to achieve a sustainable revenue model. Such notification could assist the emergence of independent rural suppliers of electricity thereby enhancing access for both household and productive uses. MOP should seek global tenders for large-scale (20. organised sector can be encouraged to adopt rural community/communities in their areas of operation. Many remote villages may be provided electricity and energy security through locally available renewable resources. 2003.energy efficiency technology adoption through Negawatt (Watts saved) incentives. Require the State Governments to support RGGVY by notifying rural areas as required by the Electricity Act. internationally comparable conversion/energy efficiencies. improved emission standards etc. For setting up of off-grid generation facilities in rural areas. All Central assistance to state governments for the power sector must be linked exclusively to loss reduction and improved viability or to increasing access. 109 .

Enlarging coal resource base is important to meet coal requirements. Its capacity should be strengthened and exploration for coal should be opened up to others just as exploration for petroleum has been opened up. This is more likely to be an outcome of insufficient exploration of deposits below 300 meters. Coal Sector Policy Coal accounts for over 50% of India’s commercial energy consumption and some 70% of domestic coal production is dedicated to power generation. India must. the coal sector (which remains a Government monopoly) is grossly inefficient by international standards. Explored blocks with proven reserves that do not form a part of Coal India’s production plan till 2015 should be de-blocked for others. In the absence of competition. Most of India’s coal resources. poor project formulation. some 70% of India’s proven reserves lie in blocks assigned to Coal India. The interim captive mining policy has significant hurdles and has not been a success in raising domestic production and increasing the number of domestic producers. and the overburden is used to fill up the mine afterwards. Despite these inefficiencies domestic coal is internationally competitive at mine-mouth. poor accounting and financial management systems. is riddled with excessive manpower.Chapter XI. lack of benchmarking of operations and any independent oversite of its operations. coal that may be below 150 metres becomes much more expensive to mine later. Future needs of Coal India could be met by continuously proving the prognosticated reserves through accelerated exploration. Even domestically there is an absence of a coal market with bulk of the sale taking place under a system of coal linkages based on 110 . Coal India Ltd. When coal is mined in an open cast mine only to the depth of 150 metres. against international standards. are within 300 meter depth. proved. the in-place coal reserves and the lack of control on mining practices that could potentially be sterilising significant parts of these reserves. The scenario with least coal requirement projects 1440 million tonnes of requirement for 2031-32 and some 1000 million tonnes for 2026-27. thus. 3. The Coal Mines (Nationalisation) Amendment Bill 2000 that would have opened up the sector to private investment does not have the requisite political support for passage. Coal India Ltd. The sector has also recorded improvements in productivity but despite these improvements. such as other state sector organisations or captive uses by power. Their drilling capacity is limited. cement and steel sectors. Another concern often voiced for India’s coal sector is inefficient exploitation of 2. Since prices were de-controlled. has targeted a maximum production of 839 million tonnes by 2025 in its ‘Vision 2025’ document. 4. However. India is the third largest coal producer in the world but remains a marginal player in international coal markets. Another positive for the coal sector is its good safety record when compared with international experience. At current levels of production growth the known extractable reserves will be exhausted in less than 40 years. CMPDI should be made an autonomous institute under the Coal Ministry. indicated and inferred. A large part of India’s coal reserves may not be extractable with current mining technologies. Coal exploration is exclusively done by CMPDI (Central Mine Planning & Design Institute Limited) which is an organisation of CIL. low productivity etc. the sector has become profitable primarily as a result of price increases and the rising share of open cast production. 5. lead the way for extracting this energy through in-situ coal gasification in the interest of her energy security.

ensure that the price discovery through e-auctions is free of distortions. The present shortage of thermal coal and the projected requirement of coal suggest the need to develop import of coal. Tamilnadu and Western UP & Delhi. Kerala. inadequate port capacity and the need to trans-ship imported coal on domestic rail/road linkages to consumption points. 6. The following policy initiatives are suggested in support of such reforms: Policies not requiring legislative amendments: Institute an independent regulatory body to regulate upstream allotment and exploitation of available coal blocks to yield coal. Simple deshaling. To encourage coastal power plants based on imported coal tariff based bidding under a tariff cap (perhaps average cost of thermal power in the state) should be invited. 8. Goa.available rail capacity. the sector is in serious need for market based reforms. Karnataka. Gujarat. monitor the functioning of the proposed e-auctions. develop a mechanism for adequate quantities of coal imports under long-term contracts to bridge the gap between supply and demand thereby assuring that the eauctions and consequent price discovery does not take place in a supply constrained market and create the environment for a competitive coal market to operate initially for all non-power consumers. The import of coal would also put a competitive pressure on domestic coal industry to be efficient. the monopoly producer. Full washing could reduce the ash content further. Haryana. coal bed methane. Only a small fraction of thermal coal is actually “washed” in India. Once the market matures. ensure supply of coal to the power sector under commercially driven long-term fuel supply agreements (FSA’s). Pit-head prices of coal are set by Coal India. The reason is the absence of coastal power plants. another Government monopoly. Rajasthan. One of the hurdles to washing in the prevailing unique practice of pricing coal. Railways. all large consumers (including power) could become part of a competitive coal market with purchases through both long-term FSAs and e-auctions. No significant import of thermal coal is evident despite the fact that long-term import contracts would make imported coal competitive against domestic coal at coastal locations in the above states. Unlike the rest of the world coal is sold in India without any “preparation” or “dressing”. It is stressed that once a competitive market develops the role of Regulator in determining the prices would become one of merely ensuring a free & 111 . based on Useful Heat Value (UHV) with wide bands instead of the more precise Gross Calorific Value (GCV) basis followed in rest of the world. thereby saving transport costs and resulting in more efficient power plant design and operation. regulate trading margins. In light of the foregoing. mine mouth methane and for in-situ coal gasification. cross subsidises passenger traffic with coal freight thereby making delivered price of coal 3-4 times the pit-head price of coal in states such as Punjab. The proposed Regulatory Body would as an interim measure approve coal price hikes. 7. facilitate the development of formulae/indices for resetting coal prices under long-term fuel supply agreements. Payment security under TPA may be provided to such plants even if they are private plants. Maharashtra. improved mining procedures and sizing of coal could bring down the average ash content of Indian coal to around 35% from the current level of over 40%.

Pending the passage of the Coal Mines (Nationalisation) Amendment Bill 2000. Public Sector companies and for captive use by recognised end users (power. Restructure CIL. a long-term player in the highly liquid international market for coal that realises long-term trades under well-tested indices such as the Japan coal import index. Allottees of captive blocks should be required to work the block within a specified time limit failing which allotment should be cancelled and/or a preagreed penalty imposed. One possibility could be to spinning off the profitable coal companies as independent and competing entities and leaving CIL with only the responsibility of reviving the loss making ECL and BCCL with a mix of budgetary support and market borrowings. with the third largest reserves of coal in the world. Allow groupcaptive mines for small end-users. Gradually reduce cross subsidy surcharges imposed on freight traffic to benefit passenger fares. 112 . river/canal movement and coal slurry through pipeline where feasible. The T. These competing entities could compete for developing blocks in the territories of other subsidiaries. A key responsibility of the Regulator would be to make India. This is expected to make coal movements more optimal and responsive to market forces. Rationalise rail freight rates for coal transport. increase the number of players in coal mining through avenues available under the existing legislation that permits mining by State Governments.transparent market for coal.L. Increase the flexibility in the development of currently allotted blocks by de-linking development of the mine from the investment in the intended end–use project through an innovative use of bank guarantees and permitting captive block holders to sell incidental coal surpluses during development and operation of the block to CIL. The proposed Regulatory body must facilitate replacement of current coal linkages for power plants with fuel supply agreements. As a step towards abolishing coal linkages completely. Seek alternate means for moving coal through coastal shipping. Regulator must ensure that the coal companies fall in line with the international practice that requires coal companies to “prepare” and “dress” coal prior to sale. these linkages could be made tradable in the first instance. steel and cement). Set a target for the Ministry of Coal to achieve at least 100 million tonnes of captive production by 2012. Blocks attotted to CIL and which it does not plan to work during the next 10 years should be taken away and should be bid out to others in a competitive manner for which CIL may also bid. Charge the Regulatory Body with the responsibility for changing the grading of non-coking coal from the existing useful heat value (UHV) calculated using empirical formula (based on excessively wide bands) to the international practice of grading coal-based on gross calorific value (GCV). Sankar’s Committee under Ministry of Coal is expected to study the restructuring of CIL in much greater detail. This is expected to encourage efficient use of coal and promote use of washed coal.

Grounding coal projects is often delayed due to environmental regulations and delays in getting approval for the project’s Environmental Management Plans (EMP). 20% of the total coal available should be sold through e-auction. 113 . A reserve of compensatory afforestation built in advance should be accepted against specific project wise commitments also to reduce such delays. 1970 to facilitate offloading of certain activities in coal mining for improved economics of operations. 1973 to facilitate (a) private participation in coal mining for purposes other than those specified and (b) offering of future coal blocks to potential entrepreneurs through competitive bidding. Coal India should. For eauctions to be successful. This may be achieved by supplementing domestic supplies through imports based on long-term supply contracts. Simplification of procedures. ensure availability of coal to meet the total demand. directly or otherwise. Improved Governance is essential for dealing with malpractices and corruption in the coal industry. Raise the domestic level of trading and marketing of coal by removing it from the list of essential commodities. preparation of comprehensive EMPs and demonstration of environmental responsibility on the ground can help reduce such delays.Extend infrastructure status to the coal industry. Amend the provisions of Contract Labour (Regulation & Abolition) Act. Policies requiring legislative amendments: Amend Section 3 of the Coal Mines (Nationalisation) Act. It is common knowledge that there is a significant black market for coal obtained through pilferage and illegal mining of abandoned mines worked by local inhabitants. there is loss of precious lives resulting from unsafe mining practices. Apart from the loss of royalty to the State. more importantly. Lower duties on capital goods imported for coalmines to make them uniform with duties on imports for other energy sub-sectors.

The current upstream regulation provided by DGHC is neither independent nor comprehensive in a technical sense with respect to optimal development of the hydro-carbon resources. The pricing mechanism of petroleum products on import parity basis needs to be replaced by a trade parity basis for products for which the country is a net exporter/importer over a specified time period should have export/import parity prices. Further the pricing mechanism of petroleum products and natural gas should be made transparent to generate consumer’s confidence. Such competition without the discipline of the bottom line is likely to be wasteful. Of course the oil market dominated by such a large company needs to be independently regulated. There is no real competition in the sector other than in some peripheral products such as lubricants. the prevailing pricing and taxation policies and the market structure provide significant protection to the private refineries. the GOI continues to control the pricing of automotive fuels. 3. 4. 5. In fact. devoid of any competition and independent oversite of either the upstream or the downstream activities. The result is that India’s refining capacity exceeds the demand by 20% already. Despite the presence of a large domestic private player in refining and the likely emergence of other private players in this field there is no effective competition. large part of domestic natural gas and PDS kerosene. Oil and Gas Sector Policy The petroleum and gas sector is. Despite the dismantling of the Administered Price Mechanism. For this purpose we need a large public sector oil company of some size that could provide financial strength needed to compete internationally.Chapter XII. On the upstream side again. The price of oil is galloping in the world market. The public sector units in the oil sector compete against each other in the downstream market. There is also a desire to acquire oil properties abroad to increase a sense of security. competition among all players fostered. For a product for which the country is self-sufficient. and entry barriers removed. once again. large gas finds have been reported but uncertainty prevails with respect to its precise availability. Downstream regulation is proposed to be introduced but the current draft is deficient in certain key provisions relating to price regulation and development of common carrier principles in pipelines and associated facilities. The following policy initiatives are suggested for addressing some of the issues expressed above. Private participation in marketing of petroleum products is not likely to become significant unless pricing is made free. While exploration has not resulted in any significant new oil find. An alternative is to 114 . should have a price in between the two. 2. Competition can be meaningful only with private participation. the dominance of the Public Sector continues although in recent rounds of bidding under NELP domestic private sector and state sector participation and to a more limited extent foreign participation has emerged. LPG. This becomes critical under the current backdrop of high and rising crude and product prices in the international market. India’s known oil and gas reserves will be exhausted in 20-25 years at current production levels.

distribution and retailing of oil and gas. international best practices should be followed in acquisition of required technologies and pooling of development risks so as to maximally exploit a reserve in a timely fashion. The mechanism for subsidised supply of kerosene and LPG needs to be revised so as to make it transparent and directed only to the targeted beneficiaries. etc. Similarly. Regulators must ensure level terms for foreign operators willing to bring technology and investment to recover oil/gas from currently abandoned and/or marginal fields with the right of first refusal to acquire any/all of the production on competitive terms.have full price competition at the refinery gate and the retail level may be permitted. Exceptions to such competition may be permitted and economically valid policies that limit competition or allocate scarce and non-tradable commodities such as natural gas may be made in National interest. for all petroleum products. under level terms. Further. at all levels. in refining. 115 . The Regulatory body must ensure full price competition. The upstream Regulator must adopt best international practices governing the declaration of hydrocarbon finds and claims relating to in-place reserves discovered. subsidies. For this purpose. industry structure. This is explained further in Chapter V under pricing. The Regulator must review prevailing regulations that have limited competition from both foreign and domestic private players in the downstream sectors. regulation. the possibility of introducing a coupon based and debit card based subsidy may be explored. This is critical to India’s energy security concerns. transportation. MOP & NG could bid out available subsidies for LPG and kerosene against access to targeted beneficiaries by inviting bids for the lowest price at which these will be supplied or for minimum subsidy with which these will be supplied at specified prices. The Regulator must ensure that all non-dedicated transportation and distribution assets in the oil and gas sector provide services and/or access to right-of-way under common carrier principles applicable to natural monopolies. States may choose to subsidise prices in remote areas. there is a need to implement a comprehensive reform package including pricing. Differential pricing in different markets may be permitted to reflect cost of supply. A key responsibility of the Regulator would be to enforce universal service obligations by marketing companies active in a region and universal access to PDS kerosene and LPG by the intended beneficiaries of subsidies on these cooking/lighting fuels. the subsidies on these products be charged directly to the budget. Institute an independent regulatory body to regulate upstream allotment and exploitation of available oil and gas reserves and provide downstream regulation that primarily ensures competition. Instead of piecemeal approach to reform in the petroleum & natural gas sector.

SO2 degradation. and integrate environmental impacts of activities in the energy sector.1. and requirements for the disposal of fly ash generated in thermal power plants is a major concern. road and sea also cause considerable environmental damage. nuclear energy. On the other hand. These effects can occur at the household. and CO either in transformation activities (to petroleum products or power and heat combustion) or in end uses pose a major threat to ecological and manmade resources. For example. intensity. NOx. land Drilling accidents.1: Environmental Impacts Associated with Energy Transformation based on Fossil Fuels Stage of fuel cycle All stages/all fuels Exploration/Mining Processing/Refining Transport/distribution Conversion/electricity generation Natural gas Oil Coal CO2. Pipeline accidents. throughout the chain from their exploration/ mining. adverse impact of petroleum exploration on natural ecosystems could be minimised. loss of biodiversity due to loss of. Such as some of the adverse environmental impacts of open cast mining may be contained. SO2.Chapter XIII. however. NOx Refinery accidents. Coal mining and exploration and production of oil and gas (both on and off shore) have a wide range of adverse environmental impacts. it is important to identify. or severe disturbance to habitat. India with its size. Mining injuries. The next stage of transportation of coal and petroleum products by rail. Due to the poor quality of Indian coal.1. reduce the environmental impacts. regional. N2O. CO. Environmental concerns are associated with all forms of energy. measure. Ash disposal. and human health. SO2. The environmental impacts of various energy options are of growing concern owing to increasing scale and spread. Production and Transformation of Fossil Fuels 2. partial trace metals. CO2.1 Energy Supply Side: Environment Concerns 13. transportation. SO2. may be irreversible. Some of these impacts may be reversible. and generation to the end-use. Reactive organic gases. Refinery accidents. CH4. renewables. Hydrocarbons. SO2 CO2 explosion Fly ash SO2. in particular. Table 13. SO2 Sludge 116 . Liquefied natural gas spills. including fossil fuels. by using latest exploration and drilling technologies. SPM waste disposal waste disposal SO2 Pipeline accidents. value. Advanced technologies and better management practices may. and spatial extent of the environmental impacts varies across different energy forms. the precise nature. and thermal pollution Drilling accidents. CO. for meeting its poverty alleviation goals. Energy-Environment Linkages In order to achieve sustainability of the energy chain. sludge sludge. Some of the environmental impacts associated with energy based on fossil fuels are summarised in the Table 13. oil SPM. national or global level. NOx. SO2. in addition. local. NOx. while many are irreversible. Pollutants associated with the combustion of fossil fuels SPM.1 Exploration. needs to use and to develop optimally all forms of energy sources. diversity and the current pace of growth. 13. However. NOx.

Despite significant technological development and advanced management practices. decommissioning of nuclear plants entails the disposal of radioactive wastes. which. SOx.2 summarises the supply side environmental impacts of the major forms of conventional energy options: Table 13. processing (accidents). 4. However. Local and Regional Environmental Impacts Impact/ Option Thermal power (inc. and loss of livelihood. if they lead to failure of the dam structure. Mining) Transmission & pipelines SO2. transport (accidents. including change in the resource base of traditional culture. nuclear power is associated primarily with risks of radioactive release. Methane emissions. Fauna impacts Y Y Y Y Y Forest loss Y Y Y Y Y Involuntary resettlement Y Y Y Y Y 117 . risk of proliferation). despite these risks. uncertainties surrounding the safety and economics of radioactive waste disposal and decommissioning remain unsatisfactorily resolved. Environmental impacts identifiable at various stages of the nuclear fuel cycle are: mining (accidents.1.2 Environmental Impacts of Nuclear Power 3. Table 13. emissions and waste disposal are dominant in the context of energy from fossil fuels. 13. in particular. inundation and displacement of traditional communities from their ancestral domains. In addition. low and high level radioactive wastes). and electricity generation (risk of catastrophic accidents.3 Environmental Impacts of Large-Scale Hydropower The major impacts of large hydro projects are rather site specific. Mining) Hydro-power Nuclear Power (inc.2: Supply Side. release of radon gas and radioactive dust from uranium mines and mills). In such cases. may also be emitted in large quantities if insufficient care is taken to remove vegetative matter susceptible to anaerobic microbial processes from the submerged area. nuclear energy has posed the least risks in terms of mortality per billion megawatt hours of generation.1. CO2. a major greenhouse gas. Mining) Petroleum (inc. radioactive seepage from waste and land degradation. rehabilitation efforts can address only a part of the social costs experienced. global data suggests that of all conventional energy options. Submergence of large areas may also increase the risk of seismic events. 5. loss of pristine natural forests and its associated unique biodiversity occurs due to submergence. NOx. While SPM. NOx TSPs Y N N Y N Solid Waste Y N Y N N Liquid effluent Y N Y Y N Thermal impact on receiving waters Y N Y Y N Flora. Other adverse impacts include the spread of water-borne disease. may be catastrophic for downstream populations. Additionally.13. Such displacement inflicts high social cost. such as schistosomiasis.

environmental effects.13. acid deposition. wind energy may cause noise. the potential environmental impacts of such projects include impacts on soil and water resources in addition to increasing competition for land-use. contributing over 90% of the total. Bio-mass based systems. 13.2 Environmental Dimensions of Demand Side Impacts 7. Nevertheless. Unsustainable use of bio-mass leads to depletion of forests. Small hydro projects may also help conserve water supplies. indicators. (c) has effluents of CO and particulates that can be measured. 8. Since net carbon emissions correspond only to net deforestation. nuclear and large hydropower. in the country. promote cultivation of energy crops on wastelands. Use of chemicals in the manufacture of solar panels and use of lead acid batteries cause several adverse environmental impacts. Large arrays of solar photovoltaic panels put considerable demand on land and impair aesthetics. one can begin with an impact matrix that classifies each fuel by key end-use. The main environmental benefits of renewable that they avoid air pollution emissions from fossil fuels and catastrophic risks associated with nuclear plants. (b) has negative impacts on respiratory health. and help arrest land degradation.1. the economy. diesel fuel is (a) commonly consumed in trucks and buses. Petrol-driven vehicles are the major source of CO emissions contributing over 85% of the total. The final use of energy may also impose severe environmental costs. For example. Indoor air pollution due to the domestic consumption of both traditional and commercial fuels is likely the second largest source of burden of disease. sustainable harvested bio-mass fuels do not lead to climate change. Industrial and vehicular emissions have assumed serious proportions in urban areas. and/or ecosystems. 118 . To go beyond this simple level of matrix analysis requires an assessment of the causes of energy related environmental concerns. renewable energy sources may also cause environmental degradation of different kinds. information on the physical amounts of pollution from each source that users are exposed to: and quantification of impacts according to indicators for human health. local and regional levels. particularly among women and children. and (d) generates environmental impacts at the community. Improper use of energy in the agricultural sector has resulted in the depletion of groundwater in several parts of the country. and level of impact. lead contamination and related health ailments. and despoil the aesthetics of landscapes. While bio-energy is generally considered carbon neutral over the vegetation life cycle. while diesel-driven vehicles are the major source of NOx. To understand the demand side energy-environment interactions.4 Environmental Impacts of Renewable Energy 6. Energy from renewable sources is generally viewed as involving lower environmental impacts than that based on fossil fuels. result in bird mortalities.

13. wind velocity. Kolkata. A number of factors during energy transformation (power generation and use of petroleum products in transportation) affect air quality. with the most stringent standards set for “sensitive” areas. The World Bank. RSPM.1.4 provide SPM. the exhaust gases from burning coal and oil contain particulates (SPM). the national ambient air quality standards have differed by landuse. and the level of nitrogen oxides are about 60 percent compared to plants using coal. 13. These factors include: (1) Composition and characteristics of emission sources including: • • • Absolute emission levels Height of emissions Location of emissions (2) Meteorological parameters – such as rainfall. Typically. Historically.3. Mumbai. The knowledge of the direction and size of all these factors and their interaction is important for developing an effective mitigation strategy. June 2005. 13.3. thermal inversion etc. 13. operating practices.1 Annual Average SPM Concentrations 700 600 500 ug/m3 400 300 200 100 0 1993 1994 Delhi 1995 Kolkata 1996 1997 1998 1999 2000 Chennai 2001 2002 Mumbai Hyderabad * Source: For a Breath of Fresh Air.1 Levels and Trend Analysis of Urban air quality in the five major Indian cities 10.* Figure 13. followed by “residential.2. SO2 and NO2 concentrations for Delhi. 119 . Gas fired plants produce negligible quantities of total particulates.3 Understanding the Determinants of Air Quality 9. sulphur oxides (SOx). nitrogen oxides (NOx). and volatile organic compounds (VOCs). Figures 13.13. and the most lenient standards set for “industrial” areas. Hyderabad and Chennai from 1993 to 2002. rural. The concentrations of these pollutants in the exhaust gases is a function of the firing configuration. and other areas”. and fuel composition.

2 Annual Average RSPM Concentration 300 250 200 ug/m3 150 100 50 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Delhi Kolkata Mumbai Hyderabad Chennai Figure 13.Figure 13.3 Annual Average SO2 Concentration 50 45 40 35 30 25 20 15 10 5 0 1993 1994 Delhi 1995 Kolkata 1996 1997 1998 1999 2000 Chennai 2001 2002 ug/m3 Mumbai Hyderabad 120 .

121 . and national level is important.1 Local and Regional Impacts 13. and particulate pollution remains a cause of concern.4 Annual Average NO2 Concentration 100 75 ug/m3 50 25 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Delhi Kolkata Mumbai Hyderabad Chennai Note: 1. NO2 concentrations were also low. The challenge is to thus use conventional energy resources in a manner. 13.Figure 13. The lower dotted line shows the national annual ambient standards for residential. 12. Figures for SPM and RSPM levels also include other activities such as construction.4 Long-term Sustainability of India’s Energy Use 13. which cost-effectively maintains environmental quality. Overall. 11. This would be relatively easily implementable for organised establishments. annual average SO2 concentrations were low during the same period and in compliance with the national annual average standards of 60 microgram per meter cube for residential areas. However. The air quality data takes into consideration various energy transformation activities in these cities. except in Delhi and Kolkata. in several cities. In order that future growth is sustainable. rural and other areas. high levels of natural air-borne dust may have contributed to the exceedance of SPM/RSPM standards. However. with our growing energy requirements and consumption levels of fossil fuels. Environmental taxes and subsidies based on a consistent application of polluter pays principle or user pays principle can go a long way in preserving environmental quality.4. 2. these two gas pollutants do not seem to be a major problem. The upper dotted line shows the national annual ambient standards for industrial areas. etc. it needs to be resource-efficient and environmentally accountable. In addition. the problem of local and regional air pollution should be an important concern of energy policy. The question of long-term sustainability of India’s energy sector in relation to environmental impacts at local. all the five cities were not in compliance with the national annual average air quality standards for particulate matter during the ten-year period 1993–2002. In contrast to particulate matter. regional. by comparison with SPM. For the most part.

In cases where such taxes and subsidies are not easy to administer and transaction costs are high, alternative policies such as setting emission and energy consumption standards on equipments may be followed. Some specific policies are discussed in the Chapter on Energy Efficiency. Environmental impact assessment of power plants, dams, mines, infrastructure, construction etc., are already required. Environmental conditionalities and ameliorative actions should be specified to maintain desired level of environmental quality. 13.4.2 India’s Approach to Climate Change 14. Climate change, resulting from anthropogenic emissions of a suite of gases (called “greenhouse gases” or GHGs) due to fossil fuel use, certain agricultural and industrial activities, and deforestation, leading to their increasing concentrations in the atmosphere, has the potential, over the next few generations, to significantly alter global climate. This would result in large changes in ecosystems, leading to possibly catastrophic disruptions of livelihoods, economic activity, living conditions, and human health. On the other hand, abatement of GHGs, would involve significant economic costs. 15. While climate change is a global environmental issue, different countries bear different levels of responsibility for increase in atmospheric GHGs concentrations. Further, the adverse impacts of climate change will fall disproportionately on those who have the least responsibility for causing the problem, in particular, developing countries, including India. 16. Though India is a signatory to the United Nations Framework Convention on Climate Change (UNFCC), she is not required to contain its GHG emissions. India’s policies for sustainable development, by way of promotion of energy efficiency, renewable energy, changing the fuel mix to cleaner sources, energy pricing, pollution abatement, afforestation, mass transport, besides differentially higher growth rates of less energy intensive services sectors as compared to manufacturing, results in a relatively GHG benign growth path. 17. India’s GHG emissions in 1994 level were 1228 million-ton (Mt) CO2 equivalent, which is below 3% of global GHG emissions.* In per-capita terms, it is 23 percent of the global average, and 4 percent of USA, 8 percent of Germany, 9 percent of UK and 10 percent of Japan per-capita emissions in 1994. In terms of the GHG intensity of the economy in Purchasing Power Parity terms, India emitted a little above 0.4 tonne CO2 equivalent per 1000 US dollars in 2002, which is significantly lower than those of the USA and the global average. In terms of primary energy use, India’s share of renewable energy (being a non-GHG emitting energy form) at 36 percent is far higher than industrialised countries can hope to reach in many decades. Since GHGs emissions are directly linked to economic activity, India’s economic growth will necessarily involve increase in GHGs emissions from the current extremely low levels. Any constraints on the emissions of GHGs by India, whether direct, by way of emissions targets, or indirect, will reduce growth rates, and impair pollution abatement efforts.
*

Source: India’s Initial National Communication to the UN Framework Convention on Climate Change (UNFCCC), 2004.

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18. Anthropogenic climate change, significant responsibility for which clearly does not lie with India or other developing countries, may, on the other hand, have severe adverse impacts on India’s precipitation patterns, ecosystems, agricultural potential, forests, water resources, coastal and marine resources, besides increase in range of several disease vectors. Large-scale resources would clearly be required for adaptation measures for climate change impacts, if catastrophic human misery were to be avoided.

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CONCLUDING COMMENT
India faces an enormous challenge in meeting its energy requirement over the coming 25 years to support a growth rate of 8 percent. This challenge can be met with a coherent approach which develops all her energy resources. The main areas, action for which detailed policy recommendations are made as follows:

Promoting Coal imports. Accelerating power sector reforms. Cutting cost of power. Rationalisation of fuel prices to mimic free market prices that promote efficient fuel choice and substitution. Promoting energy efficiency and conservation. Augmenting energy resources and supply. Encouraging renewables and local solutions. Enhancing energy security. Promoting and focusing Energy R&D. Promoting energy security through entitlements for the poor, gender equity and empowerment. Creating an enabling environment and regulatory oversight for competitive efficiency.

With the recommendations of the Committee, India can meet her energy requirements in an efficient, cost effective way and be on a path of sustainable energy security.

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Department of Atomic Energy Secretary. New Delhi. 5. The composition of the Expert Committee is as under: 1. ex-Chairman. 19. 3. 12th August 2004 ORDER SUBJECT: SETTING UP OF AN EXPERT COMMITTEE TO FORMULATE ENERGY POLICY In pursuance of the decision taken by Prime Minister and Deputy Chairman. Urjit R. Vice Chairman. ASSOCHAM Director General. West Bengal Planning Board Shri T. it has been decided to set up an Expert Committee to formulate Energy Policy. 15. Leena Srivastava. Sansad Marg. Sethi. CII Shri Surya P. IIT. Planning Commission-Chairman Shri Jagmohan Bajaj. Vadodara Dr. 14. 7. 8. Administrative Staff College.L. Ministry of Petroleum and Natural Gas Secretary. 6. 17. Ministry of Non-Conventional Energy Sources Secretary. 13. Subimal Sen. Patel. 12.M-11011/1/2004-EPU (P&E) Government of India Planning Commission Yojana Bhavan. 9. efficiency and environment. Centre for Fuel Studies & Research. 21. 18. Chief Policy Officer. 2. Hyderabad Dr. access and availability.ANNEXURE-I No. Representative of the Institution of Engineers (India) Sh. NCAER Mr. Shankar. Member. Parikh. SERC. FICCI Secretary General. Executive Director. Dr. 20. Ajit Kapadia. TERI Secretary. Planning Commission to set up an Expert Committee to prepare an integrated energy policy linked with sustainable development that covers all sources of energy and addresses all aspects including energy security. 16. IDFC Sh. Adviser (Power & Energy): Convenor 125 . Kirit S. Ministry of Coal Secretary. Ministry of Power Secretary. Rangan Banerjee. affordability and pricing. 2. Bombay Shri Pradeep Chaturvedi. Gajendra Haldia. Ministry of Environment & Forests Secretary. UP Prof. Member. 10 11. Planning Commission Secretary General. 4.

options contract. legal and regulatory policies required to ensure competitive energy markets and effective implementation of suggested policies especially in an environment where public-private partnership is being encouraged? How to ensure that exploration for oil. gas. etc. energy conservation.3.? How to ensure uninterrupted supply of quality power to both urban and rural consumers on demand? 126 ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) . The Terms of Reference of the Expert Committee would be to address the following: i) How to meet demand for energy of all sectors and energy needs of vulnerable sections in all parts of the country at the least cost considering different fuels and forms of energy such as coal. hydro electricity. acquisition of equity hydrocarbons abroad. appropriate choice of fuel. promote conservation and at the same time provide incentives to producers to produce adequate energy to meet the demand without imposing an unsustainable subsidy burden on the system? How to ensure energy security against physical as well as financial risks (shocks) with the desired degree of confidence level at minimum cost using alternatives such as physical and financial stocks. promotion of clean coal technology. in providing energy security? What is the role and importance of regional and international cooperation in promoting energy security? What is the relative role of public and private investments in the development of each energy source or what is the scope for publicprivate partnerships to ensure adequate supply? What are the institutional. electricity and various non-conventional energy sources? How to ensure that energy input costs in India are internationally competitive? What policy including pricing policy would lead to efficient use of energy. nuclear power. restoration of mine sites. use of renewable resources. coal and hydrocarbons takes place at the required level? What policies are needed to promote development and use of energy technologies? How to accelerate the development of new and renewable sources of energy? How to ensure environmental sustainability of the energy sector through emission and effluent control. oil.

In case of private members TA/DA will be borne by the Planning Commission as admissible to the Class I officers of the Government of India. Sd/(T. encourage active participation of the State Governments in the areas of concern of the Group.Meena) Director(Admn.I dated 15. Secretary to Prime Minister Joint Secretary to Prime Minister Sh. Advisers/Advisers. 5. The Expert Group will have the powers to co-opt/associate professionals/domain experts into the Group.xiii) How to ensure supply of clean household energy in rural areas to improve the quality of life of women and reduce the burden of indoor air pollution on them? How to provide needed subsidies in non-distorting ways? xiv) 4. 7.07. 7. No. 2. Jarnail Singh with reference to his U. The Expert Group will submit its report to the Planning Commission within six months from the date of its constitution.O. 3. 4. Planning Commission Cabinet Secretary Secretary to the President of India Pr. 8. 6. Deputy Chairman.R. however. The expenditure of the members on TA/DA in connection with the meetings of the Expert Group will be borne by the Ministry/Department/State Government to which the members belong. 5.210/31/C/25/04-ES. The Expert Group will also have the powers to set up Sub Groups/Steering Committees of officials/non officials to finalise its views on specific issues. Planning Commission Minister of State (Planning) Members. The Expert Group will be serviced by the Planning Commission. 6. Planning Commission 127 . The Expert Group should.2004 Pr.) To All Members of the Expert Group Copy to: 1.

fiscal and otherwise. The board may initiate or undertake any analysis relevant for the review or revision of the fuel policy. and the measures and agencies. industry. The review may be taken at least once in three years and the planning horizon extended at each time to 15 years. there is a need for periodic review of the energy policy. Estimate perspective of demand by sectors (in particular the transport. Coal Sector Coal should be considered as the primary source of energy in the country for the next few decades and the energy policy of the country should be designed on this basic premise. to promote the optimum efficiency in use of fuel. General If the energy plans and policies are to be operationally meaningful. The terms of reference of committee were as follows: (a) Undertake a survey of fuel resources and the regional pattern of their distribution. A brief on the constitutions. 128 . terms of reference and the gist of recommendations is given below: (I) The Fuel Policy Committee (1974) The Fuel Policy Committee was appointed by the Ministry of Petroleum and Chemicals. which would help the best use of available resources. (ii) 1.ANNEXURE-II Gist of earlier Energy Policy Committees/Groups The two main committees set-up on energy policy were the Fuel Policy Committee in 1974 and Working Group on Energy Policy in 1979. 2. Study the efficiency in the use of fuel and recommend: (i) (ii) (iii) the outline of a national fuel policy for the next fifteen years. a pattern of consumption and measures. (b) (c) (d) Recommendations (i) 1. Study the present trends in exploitation and use of fuels. Government of India on 12th October. power generation industry and domestic fuel) and by regions. To set-up an Energy Board consisting of the ministers of concerned energy related ministries supported by a suitably structured Secretariat to assist this board. 1970.

the required grade of coal. The exploration activities particularly in the offshore areas and selected onshore areas should be speeded up. 3. Adequate attention should be paid to rail transport planning in regard to development of additional line capacity. The need for developing an efficient and adequate transport system. 5. Oil exploration in India should be given priority attention. 2. and Improving the security of supplies in crude and oil products required from sources outside the country. The selection of optimal technology of coal mining should be made on economic grounds using appropriate weightages for machine utilisation under Indian conditions and for the availability of abundant labour force. 7. 129 . studies should be initiated immediately for the optimal use and maintenance of machines and for training coal mines workers in the use and maintenance of equipments. With a view to providing an insurance against short-run breakdown in the supply of crude to the country. R&D work should be continued on techno economic aspects of coal gasification and specific possibilities should be investigated for using poor quality coal for gasification. 6. All attempts should be made to take advantage of the complementarities of the resource endowments of India and the oil exporting countries and meaningful bilateral arrangements including participation in crude production in other countries may be entered into. 4. It should be designed with the specific objectives of (a) (b) (c) Reducing the quantity of oil products to be imported. 3. Railways constitute the most economic way of moving coal for most of the consuming classes and consumer locations in India. There is urgent need to augment the capabilities of ONGC by providing them with more modern equipments. 4. Oil Sector India’s oil policy should be based on an understanding of the international oil situation. which would ensure the flow of coal from the points of availability to the demand centers.around of wagons as well as augmentation of the wagons fleet. if necessary. there is a need for building up stock of crude within the country. by changing the source of coal supply from time to time or by blending different grade of coals to make up for the required grades. Reducing the total foreign exchange expenditure. For increasing productivity of coal mines.2. The coal industry should accept the responsibility to supply on a long-term basis. (iii) 1. yard capacity and signalling and communication which would facilitate speedier turn.

Power Sector Efforts should be made to develop a more optimal load structure: (a) (b) (c) By setting up of more pumped storage schemes. large quantities of it should be earmarked for the high value products like lubes. The price of HSDO and kerosene should continue to be kept at par with each other. Fuel oil being a valuable raw material for the production of high cost petroleum products which have good export potential or can serve as import substitute. The schemes for setting up of regional grids and regional load dispatch centres should be vigorously pursued. Long distance movement of commodities by road should be discouraged while simultaneously increasing the capability of rail transport. In the overall interest of the economy and environmental considerations. By general pricing of the industrial tariff and agricultural tariff to provide incentive for use of more electricity during off peak hours. 130 . In the overall national interest and the available limited resources. Depending on the local conditions. 2. methanol and other chemicals based on natural gas will have to be given preference over the use of natural gas as a mere fuel. The production of fertilisers. (iv) 1. A proper pricing policy for the power supplies to the agricultural loads so as to encourage the consumers to use the optimal size of pumpsets and for drawing supplies during the system off peak hours. bitumen. 9. to avoid diversion of kerosene for use in transport sector. Domestic sector To take up programmes of afforestation with quick growing wood species to increase the availability of fire wood. however. To coordinate the road and rail transport in an optimal manner in order to manage the HSDO demand. While planning for the refining capacity. 6. petroleum coke and wax. construction of power stations at load centres can be considered on merits as a special case.5. 5. By shifting production of electricity intensive industries from peak to off peak periods. 7. 3. 8. the setting up of captive power stations should not be encouraged. the extent of secondary process to be established and a feedstock choice in the fertiliser industry. the product mix required in each refinery. there should be a careful examination of the refinery locations. (v) 1. more and more power stations should be located at pit-heads. 4.

(II) The Working Group on Energy Policy (1979) was constituted by an order of the Planning Commission on 6th December. 6. Research and development in the areas relating to combined gas turbine – steam turbine plants should be intensified for increasing the overall efficiency of coal utilisation in thermal power plants. to develop a perspective for the next five to fifteen years and to recommend appropriate policy measures for optimal utilisation of available energy resources including non-conventional sources of energy”. fuel cell technology. developing low cost solar water heater etc. pollution abatement etc. 3. The terms of reference of the Working Group were set out as follows: 131 . Costs and prices The price fixed for any fuel-coal. 2. 2. 4. The problem of substitution of non commercial fuels with the commercial fuels in the domestic sector has to be considered with due regard to the overall economic implications of the use of different fuels in this sector and the pricing and distribution policy should be based on a full understanding of the social cost of the use of different fuels. Fast Breeder Reactor etc. The Working Group on Energy Policy (1979) 3. 1977. 5. Development of battery powered vehicles. To intensify the popularisation of ‘gobar gas plants’ in view of the social benefits of the nutrient production. Technology A National Fuel Efficiency service may be instituted to ensure improvement in energy efficiency in the industries. The electricity tariff should be designed so as to discriminate between the use of power during the peak periods and during the off peak periods. A long-term programme for development of coal to oil should be drawn up. is enabled to earn a return of al least 10% on the investment made in the industry. R&D on solar energy in India may be concentrated on the development of thin-film technology. oil or electricity should be such that the particular fuel industry. There should be a serious examination of the need to continue. as a whole. (vi) 1. 3. R&D work on coal gasification and pipeline transport of coal gas should be undertaken. the import parity formula for pricing of petroleum products and to evaluate other possible methods of fixing prices which will best subserve the national interest. with a view to “carry out a comprehensive review of the present situation in the light of recent developments both within the country and outside. (vii) 1.2.

To recommend measures for optimum use of available energy resources. and to prescribe the standards of efficiency to be achieved by energy users or equipment manufacturers. . Larger investment should be made in secondary processing like Hydrocrackers. 3. There is a need to synchronise investment in coal production and coal transportation by railways with due flexibility so that transport would not be a constraint to the use of coal. To survey the present and perspective supplies of energy. and mechanisation in agriculture etc.(a) (b) (c) (d) To estimate the perspective energy demand in the different sectors of the economy and regions of the country by 1982-83 and a decade thereafter.. catalytic crackers or delayed coking equipment. It would be prudent to plan a pattern of growth of the economy. location policies. Recommendations General 1. urban growth. A reappraisal of our economic development strategies. Coal Policy 1. fifteen years and the longer term conservation policy. especially those elements of the strategy which have a direct link to energy consumption like technology choice. In doing so the changes in the share of open cast and underground mines and the optimal technology that could be used in such mines would also deserve careful consideration. 2. There is a need to develop a well-defined policy towards mechanisation of coal mines taking into account the need to increase production very quickly and with due consideration for employment and training implications. which is less dependent on oil. The techno-economics of converting gas into liquid fuels for use in the transport sector should be examined. 2. All efforts should be made to reduce the demand of oil to levels even below what is forecast in the Optimum Level Forecast (OLF). Planning and construction of coal mines should proceed on a steady basis without linking specific mines to specific consumers. and To outline the national energy policy for the next five years. Demand Management should form the most important element of oil policy in the future. which would convert the heavy end products to middle distillates. with reference to the new awareness of the energy supply and demand in future needs to be addressed. Examination of the technological processes and the achievable levels of efficiency for each industry or equipment. 3. 132 2. Oil Sector Policies 1.

With the steeply increasing costs of power generation. Cost and Prices in the Energy Sector 1. The planning of thermal power stations based on middlings should proceed in step with planning of coal washeries. 3. 2. monitoring and adjusting energy prices in a mutually comparable manner should be setup. The energy prices must at least reflect long run marginal costs and allow for a reasonable return. it may be possible to reduce losses still further. The idea of washing non-coking coal should be pursued cautiously and resorted to only where its techno-economic benefits are clearly established. Pilot installations should be set-up as early as possible for Micro-hydel stations to be constructed in rural areas on irrigation canals. 4. A study should be made to install community type bio-gas plants and the utilisation of gas from such plants for households. Detailed State-wise and region-wise power planning studies should be undertaken. A comprehensive survey of all the energy needs in a village community should be carried out. 3. Power Sector Policies 1. Research and Development in the Energy Sector: (a) Oil Sector 133 . which could be executed in a phased and systematic manner. than investing in additional capacity and if this is done.4. 2. It is essential that a long-term transmission plan be prepared for each region. A tariff schedule for electricity that distinguishes between peak and off-peak consumption on a diurnal and seasonal basis may be put in place. The relative prices of different fuels should encourage the required inter-fuel substitutions. pumping and industrial applications should be explored. 2. Rural Energy Policy 1. Power planning in the future should be based on the concept of an optimal mix of thermal/nuclear and hydro stations in which the hydro stations should take the Peak and the thermal stations provide the base load. it might become more remunerative to invest in System improvements that might reduce losses in T& D. There are also possibilities of using the rejects and middling as raw material for manufacturing domestic fuels similar to soft coke. A suitable institutional framework for regulating.

R & D efforts aimed at enhancing our exploration capability. 2. 3. Power Sector R&D efforts are recommended in the following areas: 1. load flow. (d) (e) Other Energy Technology Areas 1. etc. Nuclear Energy R&D work for development of Fast Breeder Test Reactor (FBTR) being constructed at Kalpakkam should be expedited. Wind energy & bio-mass) that appropriately harness these sources of energy. fluidised bed combustion) & other technologies should be reviewed and intensified so that these technologies are adequately developed for use in both industrial and power sector. maximisation of yield from oil reservoirs and efficient utilisation in all the consuming sectors need to be encouraged. power system planning etc. may be intensified.1. Development work for fabrication of reactors based U233 with Thorium needs to be carried out. short circuits etc. methods of increasing the photosynthetic efficiency and development of cost-effective processes utilising bio-degradable materials for producing fuels-gaseous as well as liquids with high priority. 134 2. 2. R&D effort should be intensified for development of alternative technologies (Solar energy. Research on coal beneficiation for achieving better coal recovery from washeries. (b) 1.. 4. Coal sector Pursue R & D activities in the areas of gasification and liquefaction of coal and their economics under Indian conditions. (c) 1. 2. Reliability of Power Systems Optimisation of System Economics Software development for problems in power system operation. In this context develop Secondary and Tertiary recovery technologies to maximise yield from oil reservoirs. . utilisation of rejects. Research on bio-mass should be directed towards identification of fast growing species. The potential of Hydrogen as a substitute for liquid fuel for the transport sector should be examined. R & D efforts in the field of coal combustion (e. 5. Research in the problems of Integrated operation of Power Systems Improvement in Power System protection techniques.g. Improvement in the methodology of load estimating and forecasting. 2. 6. 3.

Household sector Setting up of standards of fuel efficiency for manufacture of lighting and cooking appliances and introduction of more efficient chulhas at subsidised rates on a large-scale.3. particularly with respect to the use of depleteable sources of energy and electricity. will have to be expeditiously undertaken. (f) (a) 1. Further. coastal shipping etc. Calcutta and Madras deserves serious consideration. Biogas plants capable of using more of agricultural waste are to be developed. wind. Co-generation holds prospects of large energy savings in the industrial sector. (c) 1. can be used should be encouraged. and mini hydro wherever available. as it improves the overall thermal efficiency. Industry sector In many of the industries the specific energy consumption is inversely proportional to the level of capacity utilisation. Such possibilities in existing industries should be identified and pursued. biogas. R&D to establish the feasibility of integrated systems based on solar. for new industries the energy implications of the technology chosen need to be studied to select the least energy intensive option. (d) 1. Delhi. Therefore. especially those connecting Bombay.. Efforts must be made to maximise the use of agricultural waste as fuel directly by burning or by conversion into liquid/gas fuels by microbial conversion. . (b) 1. Similarly in the case of diesel tractors also there is a need to prescribe fuelefficiency standards. 135 2. Accelerated pace of electrification of the high density traffic trunk routes. Improve the design of the animal drawn water lift and agricultural implements which would increase the useful energy delivered by animal driven appliances/implements. 2. the utilisation factor should be improved with special reference to conservation of energy. Agriculture Standards of fuel efficiency have to be prescribed for electrical and diesel pumps and the manufacturers persuaded to adopt a time bound approach of increasing the efficiency of pumps to the level suggested in the report. 2. 2. Sectoral Policies/Prescriptions Transport The coordination of rail and road traffic and the extent to which other less intensive modes like inland waterways.

38 0.3147 Cu.02 0.00378 Cu.03 40. 6. 10.45 MTOE 0. 7. Feet-NG 35. 2.73 0.026 1 1.29 0.0283 Cu. M P P 0. 13.111 1. 0.33 8.1364 0. Feet 0.61 Barrels 7.16 Kilolitres 1.86 264.172 US Gallons.0038 B Cu.41 MTOE 0.805 1 0.159 0.8581 0.028 0. 4. M-NG 1 0.68 0.3 1 39. M B Cu.086 MTOE 0. 3.14 BTU.2 48. 9.6x106 Joules 0.0045 Cu.96832 BTU.ANNEXURE-III Calorific Value of Various Fuels Sl.025 0.261 MTOE 0.833 Imperial Gallon.M 264. Feet 0.98 5.2898 1 0. 4186.8 Joules 3412.028 1.4 52. 1.0238 MMTLNG 0. Feet 7.12 US Gallons 307.M 1. Feet MTOE MMT-LNG Trillion BTU Million Barrels of Oil MTOE 0.21 MTOE Crude Oil Tonnes (Metric Kilolitres Barrels US Gallons Tonnes (Metric) 1 0.2009 US Gallon. 8. Name of Fuel Biogas Kerosene Firewood Cow-dung Cakes Coal Charcoal Soft coke Oil LPG Furnace Oil Coal gas Natural gas Electricity Unit M3 Kg Kg Kg Kg Kg Kg Kg Kg Kg M3 M3 kWh P P P P P P Calorific Value (Kilo-calories) 4713 10638 4500 2100 4100 6930 6292 10000 11300 9041 4004 9000 860 Conversion Factors Kilo Calorie Kilowatt Hour BTU US Gallon Imperial Gallon Cubic Metres Cubic Feet 1 BkWh Hydro or Wind Electricity 1 BkWh Nuclear Electricity 1 MMT of Coal 1 MMT of Fuelwood 1 MMT of Dung Cake 3.9 0. 12.14 .17 1 136 Natural Gas B Cu. 0.969 Imperial Gallons.7 0. 6. 11. 35.0 1 5. No.8 Million Barrels of Oil 6. 3.021 0. 1. 0. 5. 219.1605 Cu.0032 B Cu.17 42 1 Trillion BTU 36 1.23 0.165 1 0.33 6.2288 Imperial Gallons.252 Kilo Cal.18 7.055 Kilo Joules 0.4805 US Gallons.134 Cu.

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