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Regarding INDIA

Commercial primary energy consumption in India has grown by about 700% in the last four decades.
The current per capita commercial primary energy consumption in India is about 350 kgoe/ year which
is well below that of developed countries. Driven by the rising population, expanding economy and a
quest for improved quality of life, energy usage in India is expected to rise to around 450 kgoe/ year in
2010.
With a targeted GDP growth rate of 7 to 8 percent, and an estimated energy elasticity of 0.80, the
energy requirements of India are expected to grow at 5.6- 6.4 percent per annum over the next few
years. This implies a four-fold increase in India’s energy requirement over the next 25 years and India
faces significant challenges to meet this.
Coal is the most important & abundant fossil fuel in India and accounts for 55% of India's
energy need. India's industrial heritage was built upon indigenous coal, largely mined in the
eastern and the central regions of the country. Thirty per cent of commercial energy
requirements are met by petroleum products, nearly 7.5 per cent by natural gas and 3.5 per
cent by primary electricity.
India is, however, poorly endowed with oil assets and has to depend on crude imports to meet
a major share of its needs (around 70 percent). A large population of India in the rural areas
depends on traditional sources of energy such as firewood, animal dung and biomass. The
usage of such sources of energy is estimated at around 155 mtoe per annum or approximately
47 percent of total primary energy use.
Coal has been recognized as the most important source of energy for electricity generation in
India. About 75% of the coal in India is consumed in the power sector. In addition, other
industries like steel, cement, fertilizers, chemicals, paper and thousands of medium and small-
scale industries are also dependent on coal for their process and energy requirements. In the
transport sector, though direct consumption of coal by the Railways is almost negligible on
account of phasing out of steam locomotives, the energy requirement for electric traction is
still dependent on coal converted into electric power.
Inspite of various policy initiatives to diversify the fuel mix but considering the limited
reserve potentiality of petroleum & natural gas, eco-conservation restriction on hydel project
and geo-political perception of nuclear power, it is becoming increasingly evident that coal
will continue to occupy centre-stage of India's energy scenario. Indian coal offers a fuel
source to domestic energy market for the next century & beyond. Based on estimates, the
consumption of coal is projected to rise by nearly 40 percent over the next five years and
almost to double by 2020.
Energy Security
Increasing pressure of population and increasing use of energy in agriculture, industry and the
domestic and public sectors is an area of concern. At the same time, the need to meet energy
demand has created huge capital requirements needed for setting up power plants, pipelines,
ports, terminals, railway tracks to move fuel etc.
As India continues to grow at the rate of 7-8 percent, energy security has become a core focus.
To alleviate concerns over energy security, the Government of India has taken multiple steps
in recent years which include encouraging private sector participation, a more holistic
approach towards broad basing its supply base, and improving efficiency in the sector as a
whole. Although India has made a start in this direction, the Government would need to
further its initiatives in three areas:
• The Government would need to increasingly enter into alliances and partnerships with key
nations in Asia, Africa, Latin America, etc. to diversify the energy supply base and improve
long term supply security.
• Currently, different energy segments are viewed independently from a policy and regulatory
perspective. The importance of cross linkages between different energy segments is now
being appreciated and the importance of developing an integrated energy policy to meet the
common objective of energy security is recognized.
• At an operational level, commensurate investment would be required in developing
infrastructure viz. rail, road, port and power transmission which are critical for efficiency in
the energy value chain.
Looking at the subject in totality, the Government has developed a comprehensive planning
framework through the Indian Hydrocarbon Vision 2025 that provides a detailed road map for
Indian hydrocarbon industry to enhance the country’s Energy Security.
The principal objectives of the Indian Hydrocarbon Vision 2025 include:
• Developing the sector as a globally competitive industry, ensure healthy competition and
improve product standards
• Ensure energy security keeping in view strategic and defense issues
• Creating infrastructure to meet the demands for coal, petroleum products and natural gas
• Rationalizing tariff and pricing policy to promote investment
• Putting in place necessary regulatory system
• Exploring new resources of hydrocarbons such as CBM and Gas Hydrates
It is evident that one of the principal focus of the Indian Hydrocarbon Vision is to draw
private investments through structural and pricing adjustments in specific energy sub sectors.
Key Imperatives for India
To meet its large and growing energy needs, there are certain key imperatives for the Indian
energy sector:
• Provide impetus for Private Participation
Private participation in the form of financial, technological and managerial are needed to meet
the challenging growth targets. This would also bring in right competition and efficiencies,
needed in the sector. Recognizing this, the GOI has allowed private participation in Oil and
Gas exploration and production, coal mining (albeit for captive use) and in hydro power and
renewable energy. NELP for oil and gas allows 100 percent foreign equity investment and is
liberal in allowing self-marketing by the investors.
To sustain continued private participation, a number of important steps have to be taken
further.
• Clarity in Policy Framework
There is a need to evolve a clear policy framework for the energy sector. Clarity is required in
matters related to pricing of energy, the target market structure, cross-border investments and
imports and exports of energy products. In India, clarity is beginning to emerge in some of
these areas and debates have been initiated in others.
• Independent Regulatory Mechanism
An independent regulator is required for the energy sector to determine prices in the first
instance and once competition develops to ensure that there is a level playing field for all.
Today there is much inefficiency in energy sector pricing due to the monopolistic market
structure. Prices are either self determined by the monopoly companies or in some cases
inappropriately priced according to import parity prices. There has been adequate debate on
this issue and it appears that sooner than later India will have full fledged regulators for the
energy sector.
• Develop Energy Markets
Well functioning energy markets are important to attract investments and bring efficiency in
the sector. Currently, there is limited market activity (examples are an internet portal based
trading for a limited quantity in case of coal and auctioning in case of gas for limited
quantities). Markets will be facilitated and effective when there are many players and there is
an organized marketplace for energy products.
• Actively pursue cross-border investments in Energy Sector
Energy equity in overseas assets is part of India’s strategy to acquire energy security. This
includes Indian companies such as ONGC, Coal India, GAIL, Reliance etc. acquiring or
seeking to acquire equity through joint ventures in oil and coal rich nations. The Government
is also pursuing strategic alliances with various countries. The recent memorandum of
understanding with China on this issue is an example. As per the Indian minister for
petroleum and natural gas, “We have realized that when we compete in an unhealthy manner
to acquire oil fields in third countries, we only end up driving costs for each other. We have
ended up paying billions of dollars more by trying to outbid each other everywhere. This will
end, as co-operation will precede competition.”
Besides, the Indian Government is also seriously exploring the nuclear option to meet its
energy needs and it is looking at co-operation in this area with the nuclear suppliers’ group
countries.
• Create an enabling infrastructure for Energy Sector growth
Investments in ports, railways, pipelines and power transmission are urgently needed to attract
energy sector investments in the first place and to enable efficient energy choices. Today, the
capacities of these infrastructures are fully stressed and there is much inefficiency.
Recognizing this, the Government has announced policies to involve private participation and
India is witnessing private investment in ports, pipelines and power transmission. Even in
case of railways, the Government has recently announced a policy decision to open container
transportation to private sector on a common-carrier principle using the existing railroads.
• Rationalize taxes and subsidies to allow efficient pricing
The taxes and duties levied on energy products are lopsided leading to inefficient energy
choices. Taxes on petroleum products such as aviation fuel for example are among the highest
in the world while railway passenger tariffs are highly subsidized. Likewise, there are high
subsidies for household cooking fuels such as kerosene and Liquefied Petroleum Gas (LPG)
and even electricity for domestic consumption. The need for cost reflective pricing is being
increasingly recognized as exemplified by the recent Rangarajan Committee Report, the
Roadmap for LPG price rationalization by the Government as well as the recent notification
of the power tariff policy of the Government.
• Provide government support for energy efficiency
The Government needs to create a policy framework that provides incentives for energy
efficiency. This could for example mean providing incentives in urban areas for mass
transport systems, and promoting R&D in energy efficiency. The environment should
encourage energy efficiency companies to come up and operate profitably. Awareness has
been steadily increasing and policy makers are now thinking on how this can be achieved.
In parallel, India is also emerging as a significantly active market in terms of Clean
Development Mechanism (CDM) projects being conceptualized and registered with the
Executive Board (EB). The growing awareness of the CDM benefits would make this an
important area for investments in the Indian energy sector. CDM should also give the
necessary fillip for energy efficiency measures in India.
The Government of India is recognizing the importance of private sector participation, and
independent regulation in the energy sector. The future holds a lot of opportunities for
international and domestic private participation.
To know more about energy supply and demand in India and issues that confront the country,
refer to the sector overviews:
• Power
Power is an essential requirement for all facets of our life and has been recognized as a basic
human need. It is the critical infrastructure on which the socio-economic development of the
country depends. The growth of the economy and its global competitiveness hinges on the
availability of reliable and quality power at competitive rates. The demand of power in India is
enormous and is growing steadily. The vast Indian power market, today offers one of the highest
growth opportunities for private developers.
India is endowed with a wealth of rich natural resources and sources of energy. Resources for
power generation are unevenly dispersed across the country. This can be appropriately and
optimally utilized to make available reliable supply of electricity to each and every household.
Electricity is considered key driver for targeted 8 to 10% economic growth of India.
Electricity supply at globally competitive rates would also make economic activity in the
country competitive in the globalized environment.
As per the Indian Constitution, the power sector is a concurrent subject and is the joint
responsibility of the State and Central Governments. The power sector in India is dominated
by the government. The State and Central Government sectors account for 58% and 32% of
the generation capacity respectively while the private sector accounts for about 10%. The bulk
of the transmission and distribution functions are with State utilities. The private sector has a
small but growing presence in distribution and is making an entry into transmission. Power
Sector which had been funded mainly through budgetary support and external borrowings,
was opened to private sector in 1991.
Growth of Power Sector
Growth of Power Sector infrastructure in India since its Independence has been noteworthy
making India the third largest producer of electricity in Asia. Generating capacity has grown
manifold from 1,362 MW in 1947 to 113,506 MW (as on 30.09.2004). The over all
generation in India has increased from 301 Billion Units (BUs) during 1992- 93 to 558.1 BUs
in 2003- 04.
In its quest for increasing availability of electricity, India has adopted a blend of thermal,
hydel and nuclear sources. Out of these, coal based thermal power plants and in some regions,
hydro power plants have been the mainstay of electricity generation. Oil, natural gas and
nuclear power accounts for a smaller proportion. Of late, emphasis is also being laid on non-
conventional energy sources i.e. solar, wind and tidal.

INSTALLED CAPACITY GROWTH (MW)


Year Thermal Hydro Nuclear Total
March 1992 48,086 19,194 1,785 69,065
March 1993 50,749 19,576 2,005 72,330
March 1994 54,369 20,379 2,005 76,753
March 1995 58,113 20,833 2,225 81,171
March 1996 60,083 20,986 2,225 83,294
March 1997 61,877 21,642 2,225 85,744

Electricity Consumption
The elasticity ratio (elasticity of electricity consumption with respect to GDP) was 3.06 in the
first Plan and peaked at 5.11 during third plan and declined to 1.65 in the Eighties. While
consumption went up by 3.14% for every 1% growth in GDP in the first five-year plan period
(1951- 56), it went up by only 0.97% in the eighth plan period (1992- 97).
The growth in electricity consumption over the past decade has been slower than the GDP’s
growth. This could be due to high growth of the services sector or it could reflect improving
efficiency of electricity use. Moreover, captive generation – which isn’t captured by these
numbers — has also increased. However, as growth in the manufacturing sector picks up, the
demand for power is also expected to increase at a faster rate. Demand will also increase
along with electrification. In order to support a rate of growth of GDP of around 7% per
annum, the rate of growth of power supply needs to be over 10% annually.
Per Capita Consumption of Electricity
Per capita consumption of electricity is expected to rise to over 1000 kilowatt hours per annum (kwh/
annum) in next 10 years (from present level of 580 kwh). Compare this against over 10,000 kwh/
annum in the developed countries!
Plant Load Factor (PLF)
The actual all India PLF of Thermal Utilities during April 03- March 04 was 72.7% as against
the target of 72.0%.
16th Electric Power Survey (EPS) projections
By the year 2012, India’s peak demand would be 157,107 MW with energy requirement of
975 BU.
Unbalanced Growth & Shortages
Along with this quantitative growth, the Indian electricity sector has also achieved qualitative
growth. This is reflected in the advanced technological capabilities and large number of
highly skilled personnel available in the country. While this must be appreciated, it must also
be realized that the growth of the sector has not been balanced. The availability of power has
increased but demand has consistently outstripped supply and substantial energy & peak
shortages of 7.1% & 11.2% prevail in India. Coupled with this is the urban-rural dichotomy in
supply- as per Census 2001, only about 56% of households have access to electricity, with the
rural access being 44% and urban access about 82%. In the case of those who do have
electricity, reliability and quality are matters of great concern. The annual per capita
consumption, at about 580 kWh is among the lowest in the world.
These problems emanate from:
- inadequate power generation capacity
- lack of optimum utilisation of the existing generation capacity
- inadequate inter-regional transmission links
- inadequate and ageing sub-transmission & distribution network leading to power cuts and local
failures/faults
- T&D losses, large scale theft and skewed tariff structure
- slow pace of rural electrification
- inefficient use of electricity by the end consumer
- lack of grid discipline
ENERGY SHORTAGE
Demand Available
Year Shortfall (%)(billion kWh)
(billion kWh) (billion kWh)
1990-91 267.632 246.560 21.072 7.87
1991-92 288.974 266.432 22.542 7.80
1992-93 305.266 279.824 25.442 8.33
1993-94 323.252 299.494 23.758 7.35
1994-95 352.260 327.281 24.979 7.09
1995-96 389.721 354.045 35.676 9.15
1996-97 413.490 365.900 47.590 11.51
2000-01 507.216 467.400 39.816 7.8
2003-04 559.264 519.398 39.866 7.1

PEAKING SHORTAGE (in MW)


Year Demand Available Shortfall (%)
1990-91 44,005 37,171 6,834 15.53
1991-92 48,035 39,027 9,008 18.79
1992-93 52,805 41,984 10,821 20.49
1993-94 54,875 44,830 10,045 18.31
1994-95 57,530 48,066 9,464 16.45
1995-96 60,981 49,836 11,145 18.28
1996-97 63,853 52,376 11,477 17.97
2000-01 74,872 65,628 9,244 12.3
2003-04 84,574 75,066 9,508 11.2

• Oil & Gas


The Indian Petroleum industry is one of the oldest in the world, with oil being struck at Makum near
Margherita in Assam in 1867 nine years after Col. Drake's discovery in Titusville. References to rock-
oil as 'shilajatu' are found in the Vedas. Early evidences of oil seeps were recorded along the
banks of the Nampong river in upper Assam, in the 1820s by British army men and
geologists. First Indian oil well at Digboi in 1889. Refining, transportation, followed with the
discovery at Digboi. It is amazing how the oil was transported in elephant drawn carts across
the jungles and then through the waterways to as far as the Malabar coast. Seismic surveys
were carried out in the 19th century in jungles of Assam using elephant logistics.
After independence, India didn't loose much time in initiating geological and seismic surveys in search
of oil in the Indian basins. After discoveries in the western sector in Gujarat, the prevailing attitude of
non-cooperation by multinationals, necessitated the establishment of Koyali refinery in the 60s. One
after the other major refinieries were set up and infrastructure for distribution of the products expanded
at a great pace.
Unique challenges of reaching essential fuel, be it kerosene or LPG to far-flung, logistically
challenging terrains across the vast geography of India was addresssed with amazing
resilience. India's forays into offshore in the 1970's at Aliabet were also very early for a
fledgling industry of a developing country. The bold initiative taken with faith in indigenous
capabilities in an entirely new and technologies challenging area is a tribute to the Indian oil
technologists of the day. But the faith was not misplaced as the oilmen did the country proud
by bringing the Mumbai high to production in a then world record time of 26 months from the
day of discovery.
The industry has come a long way since then. The giant offshore structures, the ultramodern
environment friendly refineries, the high-tech pipeline transportation facilities may appear
dazzling. For nearly fifty years after independence, the oil sector in India, has seen the growth
of giant national oil companies in a sheltered environment. A process of transition of the
sector has begun since the mid nineties, from a state of complete protection to the phase of
open competition. The move was inevitable if India had to attract funds and technology from
abroad into our petroleum sector.
The sector in recent years has been characterized by rising consumption of oil products, declining
crude production and low reserve accretion. India remains one of the least-explored countries in the
world, with a well density among the lowest in the world. With demand for 100 million tonne, India is
the fourth largest oil consumption zone in Asia, even though on a per capita basis the consumption is
a mere 0.1 tonne, the lowest in the region- This makes the prospects of the Indian Oil industry even
more exciting.
The years since independence have, however, seen the rapid growth of the upstream and
downstream oil sectors. There has been optimal use of resources for exploration activities and
increasing refining capacity as well as the creation of a vast marketing infrastructure and a
pool of highly trained and skilled manpower. Indigeneous crude production has risen to 35
million tonnes per year, an addition of fourteen refineries, an installed capacity of 69 million
tonnes per year and a network of 5000 km of pipelines.
But with the consumption of hydrocarbons said to increase manifold in the coming decades
(155mmtpa by the end of the 10th plan) the liberalisation, deregulation and reforms in the
petroleum sector is essential for the health and overall growth of our economy.
'With more than a billion people, a structural demographic shift resulting in exploding
consumption expenditure, full deregulation of a 100 m tonne market growing at twice world
averages, India represents one of the most exciting oil markets in the world today' - CLSA
Asia Pacific
As the Indian Economy breaks the shackles of a hindu rate of growth to grow at a pace of 8%
and above, the single biggest beneficiary should be the oil & energy sector. Oil and energy are
most happening sectors of the Indian economy today. PSU Oil Companies were in the
limelight over the past two years for a variety of reasons- first, the companies, then the huge
surge in profits, and recently, the drama over sale of government's stake through public offer.
Consider the following:
Automobile sale have been surging every year. Car sales are up by nearly 30%, heavy &
medium commercial vehicle sales have climbed an even more steep 40%, consumption of
diesel and LPG are on a steep rise.
That should be pretty good news for the industry, which is counting on surging sales and
economic boom to absorb the huge refining capacity that has built up in the country. The
interesting story is that oil products consumption has started picking up in line with the
economic boom, though with a certain lag.
Going forward, we should see much larger pick- up in sales of oil products in line with the
GDP growth rate, feel analysts.
High consumption has meant high profit margins for oil companies, particularly refining
majors like Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation
(BPCL), Indian Oil Corporation (IOC) and a host of other smaller refining companies.
Refining margins are now ruling at their highest levels over the past decade. According to
analysts tracking the sector, refining margins are now at $8 per barrel, one of the highest
levels in many years. And these margins have stayed high despite a rise in prices of crude oil.
For integrated refining & marketing companies, like HPCL, BPCL and IOC, the gains are
even more substantial and their numbers may look very impressive.
However, sentiment for the sector would be significantly impacted by the performance of the
biggest oil company in the country- ONGC .The company is by far the biggest player in the
oil exploration & production sector and has a presence in the refining sector through its arm-
MRPL. As crude prices have held firm in the global markets over the past months, the
company should show good performance for the year. The company should benefit from a
surge in demand in this region.
According to CLSA. "While Asia (excluding, Middle East) accounts for only 10% of oil
production, it accounts for as much as 25% of oil consumption and refining capacity. Oil
consumption in Asia is returning, driven mainly by a surge in Chinese demand over the
shorter term. With most Asian economies on track for a solid recovery, we would expect
demand growth to top 3-4% in the next few years leading to a quick recovery. With Asia
forming 45% of global incremental demand between 2000 and 2010, we expect Asian
refining margins to remain at higher than global averages"
Exploration
India remains one of the least explored regions in the world with a well density of 20 per 10000km2. Of
the 26 sedimentary basins, only 6 have been explored so far. The Oil and Natural Gas Corporation
(ONGC) and the Oil India Limited (OIL)- the two upstream public sector oil companies- in 1981/82 had
taken their search to previously unexplored areas. Number of wells drilled as well as the meterage
increased . However current reserve accretion continues to be low.
NELP
The government in order to increase exploration activity, approved the New Exploration Licensing
Policy (NELP) in March 1997 which would level the playing field in the upstrem sector between private
and public sector companies in all fiscal, financial and contractual matters.
Salient features of the NELP
1) There will be no mandatory state participation through ONGC/OIL nor will there be any carried
interest of the government.
2) The two public sector upstream companies would compete for petroleum exploration licences,
instead of the existing system of granting of licences on nomination basis. The public sector
companies will also be able to avail of the fiscal and contract benefits available to private companies.
3) Open availibility of exploration acerage to provide a continuous window of opportunity to
companies. The acerages will be demarcated on grid system and pending preperation of the grid,
blocks will be carved out for offer.
4) Freedom to the contractors for the marketing of crude oil and gas in the domestic market.
5) Royalty payments at the rate of 12.5% for the onland areas and 10%for the offshore. Half the
royalty of the offshore area will be credited to a hydrocarbon development fund to fund and promote
exploration related study and activity.
6) To enourage exploration in deepwater and frontier areas royalty will be charged at half the
prevailing rate for normal offshore area, for deep water areas beyond 400m bathymetry for the first
seven years after commencement of commercial production.
7) Prompt action by the Ministry of Petroleum and Natural Gas to sign the PSC's for exploration
blocks.
The government to attract private investment in the upstream sector has conducted regular rounds of
bidding.
Powered by the India Hydrocarbons Vision- 2025 report, which gave priority to a huge push
in exploration efforts, the government has moved into overdrive. As many as 94 blocks have
been given out for exploration under the New Exploration and licensing Policy since April
2000 against just 22 blocks in the preceding 10 years. While ONGC holds 57. 2 per cent of
the total area licensed by the government for oil exploration, Reliance Industries and Oil India
Ltd have grabbed licences covering around 26. 6 percent respectively.
Refining
The total installed refining capacity of the 15 refineries in the country at the end of march 1998 was
69.140 million tonnes per annum and the total is expected to go up to 131 mtpa by the year 2001/02.
The expected increase in refining capacity should be sufficient to meet the growth in petroleum
product demand (112 mtpa by the end of the ninth plan) with minimum level of imports.
The Sub-group on refining has suggested certain financial incentives for the efficient functioning of the
refining sector and enhancing private sector participation during the Ninth five year plan period. In
order to increase capacity utilisation of the existing refineries, 11 new crude pipelines have been
proposed by the Sub-group.
In addition, there is an urgent need to reduce fuel loss in refineries, which reached a level of 7.1% in
1985/86 and declining marginally to 6.1% in 1996/97. To reduce energy consumption, projects
amounting to Rs 7200 million have been identified, which on implementation, will achieve a saving of
186000 tonnes per annum (tpa).

The increase in greenhouse gas emissions and the resulting climatic changes, which occur globally,
have understandably caused world-wide concern. According to an assesment by the
Intergovernmental Panel on Climate Change, the rise in the average temperature by the end of the
next century i.e., 2100 will be between 1 degree to 3.5 degrees C. This has serious implications for the
entire ecosystem of the world. This fact has led to a series of initiatiaves at international levels to
develop eco-friendly alternatives that would meet the needs of the present generation without
compromising the abilities of the future generations.
The developed nations have contributed a greater share of the emissions of carbondioxide,
leading to global warming. But the current trends in the developing nations are very alarming
and, if unchecked, developing countries will contribute half of the annual greenhouse gases.
This calls for urgent measures for minimising, if not replacing, the reliance on fossil fuels to
meet the increasing energy requirements. It is for this reason that the non-conventional
renewable sources of energy have caught the attention of many.
Renewables in India
The oil shocks of 1970s led to spiraling crude oil prices in the world market which prompted
planners to view energy security as an issue of national strategic importance. Energy security
has an important bearing on achieving national economic development goals and improving
the quality of life of the people. India’s dependence on crude oil will continue for most part of
the 21st century but the continued dependence on crude oil is loaded against it with inherent
price volatility linked to finite global reserves. In addition, global warming, caused largely by
greenhouse gas emissions from fossil fuel energy generating systems, is also a major concern.
India needs to develop alternate fuels considering the aforesaid two concerns.
The search for alternative fuels that would ensure sustainable development on the one hand
and energy security on the other began in the 1970s itself. Consequently, new and renewable
sources of energy have emerged as an option. India has a policy framework in place to tap the
potential for renewable energy such as solar, wind, biomass, small hydro, irrespective of
capacity. The Indian scientific establishment has been working on the development of various
renewable energy technologies/ systems. In 1981, the Government of India established a
Commission for Additional Sources of Energy (CASE) in the Department of Science and
Technology, on the lines of the Space and Atomic Energy Commissions. The mandate of
CASE is to promote R&D activities in this area. In 1982, CASE was incorporated in the
newly created Department of Non- Conventional Energy Sources (DNES), which in 1992
became the Ministry of Non- Conventional Energy Sources (MNES). The name was
subsequently changed to Ministry of New & Renewable Energy Sources (MNRE) in 2006.
MNRE supports the implementation of a large broad- spectrum of programs covering the
entire range of new and renewable energies. The program broadly seeks to, inter- alia,
supplement conventional fossil fuel- based power; reach renewable energy, including
electricity to remote rural areas for a variety of applications like water pumping for irrigation
and drinking water purposes, drying farm produce, improved chulhas and biogas plants,
energy recovery from the urban, municipal and industrial wastes. In addition, exploitation of
hydrogen energy, geothermal energy, tidal energy and biofuels for power generation and
automotive applications is also planned.
The Electricity Act 2003 contains several provisions to promote the accelerated development
of power generation from non- conventional sources. The Electricity Act 2003 provides that
co- generation and generation of electricity for renewable sources would be promoted by the
SERCs by providing suitable measures for connectivity with grid and sale of electricity to any
person and also by specifying, for purchase of electricity for such sources, a %age of the total
consumption of electricity in the area of a distribution licensee.
Projections made in the Integrated Energy Policy Report (IEPR) reveal that to achieve its development
goals, India would need to rely increasingly on imported oil, gas and coal in the medium-term (2032).
In this backdrop, the role of new and renewable energy assumes added significance, whether it
replaces coal or oil.
In this regard, IEPR recognizes ‘the need to maximally develop domestic supply options as
well as the need to diversify energy sources ...’ although renewables are likely to account for
only around 5-6 per cent of the primary commercial energy-mix by 2032. It is an imperative
of the development process that this energy in the longer term will substantially increase its
share in the fuel-mix.
Increasing the share of new and renewable energy in the fuel-mix is in the India’s long-term interest.
Although, the development process may warrant selection of least-cost energy options, strategic and
environmental concerns may, on the other hand, demand a greater share for new and renewable
energy even though this option might appear somewhat costlier in the medium-term.
Power from Renewables
Efforts are being made to reduce the capital cost of projects based on non- conventional and
renewable sources of energy, reduce cost of energy by promoting competition within such
projects and at the same time, taking adequate promotional measures for development of
technologies and a sustained growth of these sources. The efforts to increase the share of
renewables in the total power generation capacity of India have yielded results. The share has
been continually rising. Renewables contribute about 10856 MW as on September 30, 2007,
which represents 7.7% of the total installed capacity. The power generation capacity
established so far has largely come about through private investments.
Of this, 6315 MW is the share of wind power placing India at 4th rank world-wide, 1905 MW
of small-hydro power and 1152 MW of bio-power. About 5923 MW capacity has been added
during the first 4 years and 10 months of the 10th Plan (upto 31.1.2007) against a target of
3075 MW for the 10th Plan. Accordingly the share of renewables in 10th Plan power
generating capacity addition is 20 per cent, i.e., double the initial aim of 10 per cent. Capacity
addition during 2006-07 (upto 31.1.2007) has been 1191MW: wind power-933 MW; bio-
power-199 MW; small hydro power -69 MW. As per currents trends, renewable power
capacity addition during the year should reach 2000 MW.
New and Renewable Sources of Energy- Potential and Achievement as on January 01, 2007
No. Sources / Systems Estimated Cumulative
Potential Achievements

I. Power From Renewables


A. Grid-interactive renewable power
1. Bio Power (Agro residues) 16,8811 MWe 510.00 MW
2. Wind Power 45,1952 MWe 6315.00 MW
3. Small Hydro Power (up to 25 MW) 15,0003 MWe 1905.00 MW
4. Cogeneration-bagasse 5,0004 MWe 602.00 MW
5. Waste to Energy 2,7005 MWe 40.95 MW
Sub Total (in MW) (A) 84,7766 MWe 9372.95 MW
B. Distributed renewable power
6. Solar Power - 2.92 MW
7 Biomass Power / Cogen.(non-bagasse) - 34.30 MW
8. Biomass Gasifier - 75.85 MW
9. Waste-to- Energy - 11.03 MW
Sub Total (B) - 124.10 MW
Total ( A + B ) - 9497.05 MW
II. Remote Village Electrification - 2501 villages +
830 hamlets
III. Decentralised Energy Systems
10. Family Type Biogas Plants 120 lakh 38.90 lakh

11. Solar Photovoltaic Programme 20 MW/sq.km.


i. Solar Street Lighting System - 54659 nos.
ii. Home Lighting System - 301603 nos.
iii. Solar Lantern - 463058 nos.
iv. Solar Power Plants - 1859.80 kWp
12. Solar Thermal Programme -
i. Solar Water Heating Systems - 1.66 million sq.m.
collector area
ii. Solar Cookers - 6.03 lakh
13. Wind Pumps - 1141 nos.
14. Aero-generator /Hybrid Systems - 572 kW
15. Solar Photovoltaic Pumps - 7068 nos.
IV. Other Programmes
16. Energy Parks - 493 nos.
17. Akshay Urja Shops - 104 nos.
18. Battery Operated Vehicle - 255 nos.
MWe = Megawatt equivalent; MW = Megawatt; kW = kilowatt; kWp = kilowatt peak; sq. m. = square
meter

Renewable Sources Of Energy


The renewable sources of energy are as follows
Wind Energy
Small Hydro Power
Solar Energy
Biogas Energy and Cogeneration
Biomass Gassification
Energy from Urban and Industrial Waste
Ocean Energy
New Renewable Energy Technologies
Besides Solar, Wind, Biomass, there are quite a few other eco-friendly and renewable sources
from which one can tap energy for varied applications. Some of them are stated below.
Chemical Sources Of Energy
Hydrogen Energy
Geothermal Energy
Alternate Fuels for Surface Transportation
Wind Power
Amongst the different renewable energy sources, wind energy is making a significant
contribution to the grid power installed capacity of India, and is emerging as a competitive
option. India’s wind power potential has been assessed at 45,000 MW for sites having wind
power density (wpd) greater than 200 W/m2 at 50 m hub-height, assuming land availability in
potential area @ 1 per cent and requirement of wind farms @ 12 ha/MW. Further, preliminary
surveys do not at this juncture suggest a sizeable grid-interactive off-shore wind power
potential.
The cumulative installed capacity of grid-interactive wind power projects up to 31.3.2006 was
5382 MW. During 2006-07 888 MW have been installed up to January 01, 2007 and as per
trends it is likely that a total of 1700 MW would be added during the year. With this, the
capacity addition of wind power during the 10th Plan would be 5415 MW. Tamil Nadu is
maintaining its lead in wind installations, accounting for over 50% of total capacity in India.
Public sector undertakings, public utilities and corporate houses have been invited to invest in
commercial wind power projects to partly meet their power requirements. Wind turbines of 1,
1.25, 1.5 and 1.65 MW are being installed across India in large numbers. Asia’s largest wind
turbine generator of 2 MW capacity has been installed at Chettikulam in Tirunelveli Dist
Tamil Nadu. Muppandal in Tamil Nadu continues to have one of the largest concentration of
wind farms in India.
Supporting this effort is the world’s largest wind resource assessment program. Wind Energy
program of MNRE aims at utilizing wind energy for water pumping, battery charging and
power generation. The program supports wind resource assessment, research & development,
field testing, demonstration of different technologies, strengthening of manufacturing base
etc. The program comprises Small Wind Energy & Hybrid Systems program and Wind Power
program.
Wind Resource potential
Assuming 1% of land availability for wind power generation, India has a potential of 45,000
MW on- shore. The technical potential has been estimated at about 13,000 MW, assuming
grid penetration of about 20%. Master Plans have been prepared for 97 potential sites taking
into account the zone of influence around each mast. 211 wind monitoring stations in 13
states and Union Territories having a mean annual wind power density greater than or equal to
200 W/m2 at 50 m height above ground level have been identified for wind power
development. It is also proposed to prepare a Wind Atlas for India, which will give the overall
potential in various States and identify high windy areas and specific sites for setting up wind
power projects.
The Wind Resource Assessment Program is being implemented in India through the Centre
for Wind Energy Technology (C-WET), an autonomous institution of the Ministry. Around
1,150 wind monitoring/mapping stations were set up in 25 States and Union Territories, out of
which 50 wind monitoring stations are in operation with the remaining stations having been
closed after collection and analysis of data.
Small Wind Energy and Hybrid Systems
Small Wind Energy Systems such as water pumping windmills, aero- generators and wind-
solar hybrid systems harness wind power potential for meeting mechanical and electrical
power requirement in decentralised mode. These systems are useful for deployment in several
rural and remote areas of India, which are unelectrified or have intermittent electric supply.
The Ministry is implementing a program on small wind energy and hybrid systems, with the
main objectives of (i) field testing, demonstrating, and strengthening the manufacturing base
of water pumping windmills, aero- generators / hybrid systems, and (ii) undertaking research
& development for improvement of designs and efficiency of these systems. The promotional
scheme for these systems has been modified during the year restricting system capacity and
sites eligible for subsidy.
An aggregate capacity of 484.58 kW of such systems has been installed under the scheme, of
which 88.4 kW has been installed during April-December 2006. Such systems in the unit
capacity range of 1-10 kW have been mostly installed in Maharashtra, Goa, Karnataka and
West Bengal.
State- Wise & Year- Wise Wind Power Installed Capacity (as on January 01, 2007)
(in MW)
State Cumulative Installed Capacity (MW)
Andhra Pradesh 121.60
Gujarat 401.40
Karnataka 745.60
Kerala 2.00
Madhya Pradesh 54.90
Maharashtra 1283.70
Rajasthan 440.80
Tamil Nadu 3216.10
West Bengal 1.10
Others 3.20
Total 6270.40
State- Wise/ Year- Wise Generation from Wind Power Projects
Promotional Policies
Both fiscal incentives and promotional measures initiated by MNRE have helped the
accelerated development of wind power development in India. The package of incentives
available for wind energy projects included tax concessions such as 80 per cent accelerated
depreciation, tax holiday for power generation projects, loans from IREDA, customs and
excise duty relief, liberalised foreign investmet procedures, etc.
Preferential tariffs are being reviewed by the State Electricity Regulatory Commissions
(ERCs). Three States- Andhra Pradesh, Madhya Pradesh and Maharashtra have announced
promotional policies through their respective ERCs. The Maharashtra Electricity Regulatory
Commission (MERC) has passed its order for making purchase of electricity generated from
renewable sources obligatory for all utilities in Maharashtra. This Renewable Purchase
Obligation (RPO) shall be applicable from financial year 2004- 05. The operational details of
mechanism are being worked out. Karnataka Electricity Regulatory Commission has directed
that each distribution licencee shall purchase a minimum quantum of 5% and maximum
quantum of 10% electricity annually from renewable sources expressed as a percentage of its
total consumption.
Among the various renewable sources of energy, small hydro is significant in the form of
decentralised power generation, even in hilly regions where the terrain is difficult for
promotion of other energy sources. All projects between 3 MW and 25 MW are considered as
Small Hydro Projects. Small Hydro Power (SHP) project essentially harness energy from
flowing or falling water from rivers, rivulets, artificially created storage dams or canal drops.
The small hydro power (SHP) sector (upto 25 MW station capacity) is moving towards
attaining commercial status in India. SHP projects are increasingly becoming economically
viable. It has been recognized that SHP can play a role in improving the energy position in
some parts of India and in particular in remote and inaccessible areas. The gestation period
and capital investments are getting reduced in SHP projects. While small water streams are
being tapped in the hilly areas, canal drops are being exploited for generation of power in the
plain areas.
Potential
The potential of small hydro power projects is estimated at 15,000 MWe, not all of which
might be technically feasible and economically viable. Technically feasible potential of
identified sites, which are around 4400 in number, is placed at around 10,500 MWe.
A database has been created for most potential sites by collecting information from various
sources and the State Governments. The Ministry is in the process of augmenting renewable
energy resource database and bringing it on a GIS platform. Survey of India, Indian
Meteorological Department and the National Remote Sensing Agency have provided digitized
data including topographical maps, land use maps, time series data on precipitation, rainfall
etc. Hydrological modeling for the Beas basin in Himachal Pradesh is being done using this
data to identify potential hydro sites, including estimated discharge data and power potential.
State Wise Details of Identified SHP Sites upto 25 MW Capacity
State/ UT Identified Number Total Capacity (in
of Sites MW)
Andhra Pradesh 286 254.63
Arunachal Pradesh 492 1059.03
Assam 46 118.00
Bihar 92 194.02
Chhattisgarh 47 57.90
Goa 3 2.60
Gujarat 290 156.83
Haryana 22 30.05
Himachal Pradesh 323 1624.78
Jammu & Kashmir 201 1207.27
Jharkhand 89 170.05
Karnataka 230 652.61
Kerala 198 466.85
Madya Pradesh 85 336.33
Maharashtra 234 599.47
Manipur 96 105.63
Meghalaya 98 181.50
Mizoram 88 190.32
Nagaland 86 181.39
Orissa 161 156.76
Punjab 78 65.26
Rajasthan 49 27.26
Sikkim 68 202.75
Tamil Nadu 147 338.92
Tripura 8 9.85
Uttar Pradesh 211 267.06
Uttaranchal 354 1478.24
West Bengal 145 182.62
A & N Island 6 6.40
Total 4,233 10,324.37
Capacity Installed
The cumulative installed capacity of grid interactive small hydro power projects up to
31.3.2006 is 1826 MW. During 2006-07, 79 MW have been installed up to January 01, 2007
and as per trends it is likely that a total of 120 MW would be added during the year. With this,
the capacity addition during the 10th Plan is likely to be 510 MW. Apart from this, projects
aggregating 394 MW are under implementation.
Progress
Till January 01, 2005, 514 SHP projects with an aggregate installed capacity of 1693 MW
have been installed. At the end of the 9th Plan the total installed capacity of SHP projects upto
25 MW station capacity was 1438.89 MW. A capacity of 80.39 MW was added during 2002-
03. SHP projects with a total capacity of 84.04 MW were commissioned during the year
2003- 04, taking the total installed capacity to 1603 MW from 496 projects. In 2004- 05, 90
MW capacity from 18 projects was commissioned till December 2004.
Incentives
A package of incentives which includes fiscal concessions such as concessional custom duty,
income tax exemption on projects for power generation for 10 years, etc. are available to
small hydro power projects. The State Electricity Regulatory Commissions (SERC) in Andhra
Pradesh, Himachal Pradesh, Karnataka, Maharashtra, Manipur and Punjab have announced
preferential tariff.
New SHP projects both in the public and private sectors are eligible for subsidy. Subsidy is
also provided for renovation and modernization of existing as well as languishing SHP
projects, only in the public sector. In the case of private sector projects, subsidy is released
after successful commissioning and commencement of commercial generation from the
project, to the Financial Institution (FI) for offsetting it against the term loan provided to the
developer.
State Wise Details of SHP Projects (upto 25 MW) Setup & Under Implementation (as on
January 01, 2007)
State Projects’ Set up Projects Ongoing
Nos. Capacity Nos. Capacity
(in MW) (in MW)
Andhra
57 178.81 9 13.90
Pradesh
Arunachal
64 44.30 48 41.27
Pradesh
Assam 3 2.11 7 26.00
Bihar 7 50.40 7 9.50
Chhattisgarh 5 18.00 1 1.0
Goa 1 0.05 - -
Gujarat 2 7.00 - -
Haryana 5 62.70 - -
Himachal
57 132.73 6 28.10
Pradesh
J&K 32 111.49 5 5.56
Jharkhand 6 4.05 8 34.85
Karnataka 63 383.63 9 23.99
Kerala 16 98.62 5 43.75
Madhya
8 41.16 3 24.20
Pradesh
Maharashtra 28 208.58 4 24.25
Manipur 8 5.45 3 2.75
Meghalaya 3 30.71 9 3.28
Mizoram 16 14.76 3 15.50
Nagaland 9 20.67 5 12.20
Orissa 6 7.30 7 40.92
Punjab 29 122.55 1 2.00
Rajasthan 10 23.85 - -
Sikkim 14 38.61 4 12.20
Tamil Nadu 12 77.70 2 7.90
Tripura 3 16.01 - -
Uttar Pradesh 9 25.10 - -
Uttarakhand 76 75.45 37 23.01
West Bengal 23 98.40 5 3.80
A&N Islands 1 5.25 - -
Total 573 1,905.44 188 393.93

AN OTHER ARTICLE
Studies indicate that as a country develops, less incremental electricity is required to keep up
the growth momentum. With a trillion-dollar economy, India needs to improve installed
capacity from 130,000 MW to 210,000 MW over the next five years to sustain the 8% growth
rate of GDP, an annual addition of 14,000 MW.
However, what gives us heart is the fact that a lot of the estimated 78,000 MW to be added in
the 11th plan period (2007-2012) are actually projects of the 10th plan (2002-2007) that were
delayed. Projects totaling 48,000 MW are already under construction. And of the remaining
30,000 MW capacity, the preliminary work of scouting for land has been undertaken for
25,000 MW. Of these, the nuclear, hydroelectric and the coal-based projects seem to be on
schedule but the gas-based projects (5% of the additional generation capacity) would depend
on efficient fuel pricing.
All these efforts require funding to the tune of US$70 billion for transmission and distribution
and an almost equivalent amount for generation. As some of these are a spillover from the
earlier plan, funding for them has been tied up already. We expect a greater participation of
the private sector, as India’s growth potential and energy efficiency warrants infusion of
capital.
The impact of greater funding into power will itself spur the growth in the economy, not just
by de-bottlenecking but also through demand for cement (31 million metric tons), steel (16
million metric tons), aluminum and all kinds of itty-bitty pieces that will be used in the
installation of these power plants. Not to forget the infrastructure and logistics investments
that will be required to ensure round-the-clock functioning of the plants.

Having started on the path of transforming the Indian economy, the investment in power is
not just essential but is also the most logical path going forward. India yet has miles to go, but
the direction looks clear and strong.
The snags (and they can be critical) are the policy blocks that can derail the entire process.
Appropriate power pricing, equipment supply shortages and manpower constraints are the
biggest stumbling blocks. Only immediate clarity on these issues can help investment
decisions fructify into the glorious future India is capable of.
-
"The Trouble With India: Crumbling roads, jammed airports, and power blackouts
could hobble growth." Here are some interesting points from the article:

1. "India has underinvested in infrastructure for 60 years, and we're behind what we need by
10 to 12 years," says T.V. Mohandas Pai, director of human resources for Infosys.

2. Government officials were shocked last year when Intel chose Vietnam over India as the
site for a new chip assembly plant. Although Intel declined to comment, industry insiders say
the reason was largely the lack of reliable power and water in India.

3. Jagdish N. Bhagwati, a professor at Columbia University, figures GDP growth would run 2
percentage points higher if the country had decent roads, railways, and power.

4. Up to 40% of farm produce is lost because it rots in the fields or spoils en route to
consumers, which contributes to rising prices for staples such as lentils and onions.

5. Because of its authoritarian government, China gets faster results. "If you have to build a
road in China, just a handful of people need to make a decision," says Daniel Vasella, chief
executive of pharmaceutical giant Novartis. "If you want to build a road in India, it'll take 10
years of discussion before you get a decision."

6. Then there's rampant corruption. Nearly all sectors of officialdom are riddled with graft,
from neighborhood cops to district bureaucrats to state ministers. Indian truckers pay about $5
billion a year in bribes. Corruption delays infrastructure projects and raises costs for those that
move ahead.

7. Despite the infrastructure challenges, companies still see a lot of opportunities to help them
meet those challenges, which explains why so many multinationals are flocking to India. Take
hotel construction: In a country with only 25,000 tourist-class hotel rooms (compared with
more than 140,000 in Las Vegas alone), companies including Hilton, Wyndham, and Ramada
have plans for 75,000 rooms on their drawing boards.

8. In 2005, India passed a groundbreaking law permitting public officials to use public-private
partnerships for infrastructre improvements - the first project to take advantage of the new law
is the $430 million international airport scheduled to open next year in Bangalore. The facility
is designed to handle 11.5 million passengers per year—nearly double the capacity of the
overburdened existing airport. It will be owned by a private company, which will turn it over
to the Karnataka state government after 60 years.