Energy security in India: Study of international collaborations since 1990s

Introduction

India has witnessed impressive and sustainable economic growth since economic reforms of
1991. Since 1991, our country has experienced a considerable reduction in poverty and vast
improvements in the living standard of the people. India now an economy with a powerful
private sector and a burgeoning middle class, faces growing challenges to maintain its economic
growth.

In the first quarter of 2012, the Indian economy grew by 5.3%, the lowest in almost a decade.
With surging trade and budget deficits, and a depreciating currency, widespread concern exists
over whether India could see the return of a “1991-like crisis” (FT, 2012). To revive the vibrancy
of its economy, a well-functioning and a financially-sound energy sector is critical to allow India
to sustain further economic growth and reduce negative impacts on its public finance. This will
require an accelerated transition to an energy sector based on market economy.

According to World Energy Outlook, 2017, India’s primary energy demand is expected to grow
from 570 million tons of oil equivalent (Mtoe) to over 1200 Mtoe by 2030. Moreover, its
declining oil reserves, uncertainty over its future oil supply, fluctuations in global oil prices and
the growing concerns over climate change have further increased its apprehensions with regard
to energy security.

To understand the dynamics of the energy policy framework governing India’s energy sector, it
is essential to comprehend the policy objectives and context in which they are placed.

Three main energy policy objectives are pursued by the Indian government:

First, access to energy is the foremost goal in India’s energy policymaking, as nearly one-quarter
of the population lacks access to electricity. This implies ensuring the supply of adequate and
reliable energy to the Indian population amid growing energy demand, bolstered by economic
growth.

Second, energy security is driven by increasing dependence on imported fuels, which is crucial
to meet India’s huge energy demand. Increased import dependence also exposes the country to
greater geopolitical risks and international price volatility. Finally, India is dedicated to the
mitigation of climate change, although overcoming energy poverty and ensuring economic and
social development remains a top priority.

India’s impressive economic performance in recent years, after decades of lack luster growth and
underdevelopment, owes a great deal to the economic reforms launched at the beginning of the
1990s. After independence, India pursued import-substitution policies and restricted international
trade. The role of the central government was strengthened through regulation and by a wave of
nationalizations in the late 1960s and 1970s, causing the public sector’s share of GDP to increase
steadily.
Rapid growth in international trade has underpinned investment and output growth in industry
and services. A gradual reduction in trade barriers following the 1991 reforms gave a substantial
stimulus to trade. The economy-wide average tariff fell from 87% in 1990 to 22% in 2005, but it
is still high compared to China (12%) and Indonesia (7%).

The value of exports (in year-2006 dollars) rose from $25 billion in 1990 to in 2005, compared
with 64% in China. India currently contributes some 1% to global trade.

According to the World Trade Organization, the share of fuel imports (including mainly crude
oil but also mineral fuels and feed stocks, lubricants and related materials) in India’s total
imports increased to 37% in 2005, up from 29% in 1990, largely the result of an increase in oil
prices. Fuel exports have also risen, from less than 3% in 1990 to 12% of total exports in 2005.
Exports will rise further if oil-refinery plans go ahead. Expansion of refineries in India accounted
for almost a quarter of the total increase in world refining from 1996 to 2006. India’s trade
balance went into deficit in 2003 and the deficit is likely to increase in the near term. However,
India’s large foreign exchange reserves, which now exceed $200 billion and its low levels of
external debt, provide a cushion against any external crisis.

The disappointingly low rates of growth led to pressure on the government to change course. In
response to a balance of-payments crisis, a major program of economic reforms was adopted in
1991. Industrial and import licensing were progressively abandoned and many public
monopolies ended, including those in industry, aviation and telecommunications. Foreign direct
investment is now allowed in many sectors. The reforms removed many obstacles to growth and
began the process of reintegrating India into the global economy. All national governments since
reforms commenced have pursued a similar economic agenda, regardless of political orientation.
The commitment of the state governments to reform has varied: it has been strong in Andhra
Pradesh and Karnataka, for example, but more tentative in Bihar and Uttar Pradesh.

Notwithstanding the accomplishments of the past fifteen years, much remains to be done. The
fiscal deficit and debt to GDP ratios are still high. Economic reforms have largely bypassed the
agriculture sector, bringing few changes to the lives of the rural poor. The level of education
needs to rise to prepare the growing labour force for employment in the industry and services
sectors. Financial sector reforms have to be more aggressive. A major challenge for the Indian
government is to ensure that all members of society enjoy the benefits of economic expansion
through development policies that create a virtuous circle of growth in investment and income,
and increase support for social welfare.

Literature review

Arvind Panagariya in his book India- ‘The Emerging Giant’ has included all the factors related to
the economic reforms and India's emerging role in global politics and India's energy needs for
consistent growth in long term. He further writes that in each of post-independence India’s four
main phases of growth, economic policies were central to the outcomes achieved with respect to
growth and poverty alleviation. In Phase I (1951–64), the building of political, judicial, and
economic institutions—combined with the relatively free rein given to entrepreneurs, trade, and
foreign capital—led to acceleration in growth (from below 1% during the first half of the 20th
century to 4.1%). In Phase II (1965–88), the government dramatically tightened its grip on
entrepreneurial activity and foreign trade and investment. Rather than accelerate, as happened in
South Korea, growth decelerated during this period (to 3.2%). The first two phases taken
together saw no change in the proportion of the population living below the poverty line. In
Phase III (1981–87), piecemeal liberalization and fiscal expansion helped raise the growth rate to
4.8%. It was, however, the systematic and systemic liberalization occurring in Phase IV (1988–
2006) that set India on the path to sustained rapid growth (6.5% during the fourth phase overall
and 9% during 2003–07). In addition, poverty declined significantly in the third and fourth
phases.

As Ashok Sharma writes the world’s demand for energy grew by 95 percent in the last 30 years.
It is projected to grow by 33 percent during the next 15 years and by 45 percent in the next 20
years. Most of that growth will be accounted for by huge increases in demand from India and
China. Much has been written about the future energy needs of China, the world’s second-largest
energy market after the United States. His article looks into India’s energy resources and needs,
particularly in terms of oil and gas. It explores the measures that India is taking to meet the
looming energy crisis and to assure the security of supply by diversification. He examines
India’s current approach to renewable energy, including nuclear, and concludes with some policy
suggestions. Within his article, he finds out that the competition between China and India which
arise in last decade of the 20th century led this both countries into a chain of the finding of new
collaborations abroad to accomplish their energy needs.

As per Bhupendra Kumar Singh the eradication of poverty and prosperity depend upon the
economic development of a nation which in turn is dependent on an adequate and continuous
supply of energy sources. Hence, energy is the lifeline of economic development. The rise of
South Asia in general and India in particular as a force on the economic scene is now widely
acknowledged. India’s growing population and expanding economy with the shift in focus from
agriculture to the manufacturing and services sectors have led to an increase in energy intensity
which has resulted in an unprecedented demand for energy sources. Though India is diverse in its
energy endowments and requirements, its need for clean and stable supplies of energy at
sustainable prices will rise in tandem with its development graph. According to projections,
India’s primary energy demand is expected to grow from 570 million tons of oil equivalent
(mtoe) to over 1200 mtoe by 2030. Moreover, its declining oil reserves, uncertainty over its
future oil supply, fluctuations in global oil prices and the growing concerns over climate change
have further increased its apprehensions with regard to energy security.

According to Krishnan Rekha one of the world’s fastest-growing economies, India is also home
to 30 % of the world’s ‘‘energy poor’’. The result is rapidly rising energy demand that will have
to be met in the face of considerable development challenges, including the need to ensure
economic growth and poverty reduction while at the same time dealing with environmental
impacts such as carbon emissions. The multi-dimensional nature of its energy challenge has
spurred the country to go beyond earlier strategies focused on securing energy imports. It now
seeks to also take advantage of the complementarities offered by renewable energy, improved
energy efficiency and other sustainable energy options. About 40 % of the commercial energy
consumed in India is imported. Dependence on imported oil is of particular significance given
the volatility in the international oil market. Further, with the production of domestic crude oil
remaining stagnant over the past 15 years, its dependence on imported oil has been on the rise.
Currently, India imports about 75 % of its oil, of which nearly three-fourths is sourced from
West Asia. Notably, West Asian countries (particularly Saudi Arabia, Iran and Iraq) are seeing
increases in their share of India’s oil imports.

C. Raja Mohan emphasize on several factors for India’s International collaboration for energy
security which was only with the launch of economic reforms at the turn of the 1990s, that India
began to concern itself with commercial diplomacy. As it looked out to the world in search of
external investments and markets, selling India as a ‘big emerging market’ became one of the
priorities for the Foreign Office. The Indian missions that once had seen their primary purpose as
political reporting were now showing ever greater interest in economic diplomacy. (For a
discussion of the emergence of economic diplomacy in India’s foreign policy, see Dixit 2003.)
The acceleration of India’s economic growth rates since the mid 1990s saw the slow but certain
emergence of a new debate on energy-related issues in India’s national security discourse. The
annual reports of the Defense Ministry were the first to highlight the importance of energy
security. The public discourse, too, began to respond to the new concerns (for example, Raja
Mohan 1997). Eventually energy security also began to figure in the concerns of major political
parties and leaders. Jaswant Singh, who later held the charge for many of India’s ministries
during the BJP’s rule (1998–2004) – finance, planning commission, defense and external affairs
– was among the first political leaders to highlight the importance of energy politics in India’s
national security calculus (Singh 1999).

Interest in energy security began to acquire a new salience from the late 1990s amidst the
dramatic rise in the volumes of India’s hydrocarbon imports, the recognition that self-reliance is
not an option in the energy sector, and an increasing awareness of China’s dynamic energy
diplomacy that buttressed the ‘go out’ strategy. His chapter had not addressed the structure of
India’s energy consumption, the imbalance between internal resources and external dependence,
and the future of energy choices for India, as those subjects are dealt with adequately elsewhere
in his volume. C. R. Mohan simply concludes that India’s dependence on external energy and
other resources will dramatically increase in the coming decades. Rather than focus on specific
details, particular regions, or specific powers, he seek to explore the larger conceptual challenges
that Indian foreign policy must confront in ensuring energy security for the nation. I would go
with the definition that energy security is the successful assurance of reliable supplies of energy
and related technologies at reasonable prices.

He argues in his article that the pursuit of energy security will demand a reorientation of Indian
foreign policy and diplomacy on a wide front. Energy security is not merely an additional
demand on Indian foreign policy; the scale and scope of India’s energy security requirements
require a fundamental change in the principles that seem to have guided India’s foreign policy
for decades. He lay out a few broad challenges for Indian foreign policy in the context of its
quest for energy security.
By reviewing all this literature it is clear-cut that the several studies have been done on the
issues of India’s foreign policy and energy security, India’s energy security and national politics
including economic reforms have been analyzed in previous literature but a gross study
including all these factors are lacking in the academic research work. So the purpose of this
literature is to analyze all these factors in one study.

Hypothesis/ Research question:

 How had the changes in nature of global politics in the post-1990 world shaped India’s
energy policy and measures to handle energy security threats and challenges?
 In what ways the economic reforms and economic growth has shaped the energy security
policy of India?
 How the introduction of new growth measures (Human development indicators) has the
proper impression on energy policy of India in post-1990s?
 How have the changes in internal/national politics of India influenced the energy
security?
 How has the role of India in global politics as an emerging superpower created challenges
and opportunities for the energy policy and reshaping energy security?

Objectives:

The aim of this work is to undercover and analyze the hidden factors responsible for the
changing nature of energy security policy of India in post-1990. This work will help to find the
link between the changing global politics; especially the impression of post-cold war world,
internal politics of India, economic reforms in India and its new energy needs to meet the
demands of development of 1.3 billion people.

Significance:

This research work will provide an insight to understand the several factors (global and local)
which had shaped the present energy policy of India and deal with the energy security
challenges. This will also provide a foresight for formulating a well organized energy policy for
meeting the demands of future – a pre-requisite for sustainable development.

Methodology:

Historical research design will be used for this study. As this work is primarily related to the
evaluation of past incidents and circumstances the use of historical research design will be
helpful for analyzing secondary sources. This design will be helpful in following ways:

 The historical research design is unobtrusive; the act of research does not affect the
results of the study.
 The historical approach is well suited for trend analysis.
  Historical records can add important contextual background required to more fully
understand and interpret a research problem.
 There is often no possibility of researcher-subject interaction that could affect the
findings.
 Historical sources can be used over and over to study different research problems or to
replicate a previous study.

Data collection:

This work needs to collect, verify, and synthesize evidence from the past to establish facts that
defend or refute a hypothesis. It uses secondary sources and a variety of primary documentary
evidence, such as, diaries, official records, reports, archives, and non-textual information [maps,
pictures, audio and visual recordings].

Tentative Chapterisation:

Chapter 1- Introduction

This chapter will develop the historical background and introduce with fluctuation in India’s
energy security, energy policy, needs and demands in terms of energy consumption while
providing an explicit link between the several socio-economic development factors and
economic growth since the 1990s.

In this section, the relevant literature will be reviewed to look for the gap and relevance in
completed/ongoing research on the proposed topic. This section will also mention the
appropriate theoretical framework related to the energy security issues and challenges in India
with special reference to international collaboration.

Chapter 2- Energy security and Political changes in India

In this section, after providing a proper literature review and historical background, a detailed
analysis of the impact of internal national politics of India on the energy policy and energy
security will be framed. This chapter will discuss how the change in regimes across the decades
since the 1990s in India has shaped the energy security. This part will also include the impact of
nation-wide political/social movements on the energy policy reform and energy security.

Chapter 3 – Economic Reforms and energy security in India

This chapter will develop an explicit idea about the energy security of India by formulating an
inter-link between the economic growth after the 1991-92 economic reform and India’s need of
energy for its growing economy to sustain in long terms. This chapter will also focus on other
economic growth factors which have an impact on the energy efficiency of India.
Chapter 4 – Global politics and India’s energy security

In this part, the change in the global political system in the post-cold war world will be of
primary focus. This section will analyze India’s foreign relation to the changing multi-polar
world. This part will also discuss India’s collaborations with superpowers and energy-rich
countries in depth. The key focus of this chapter is to interlink the several factors responsible for
India’s new partnership for energy security.

Chapter 5 – New development indicators and energy security

This chapter will develop an insight on the link between the development and energy security
through the lens of human security and human development. This part will also cover the
contemporary challenges to energy security like environmental issues, food security, climate
change etc.

Chapter 6 – Conclusion

This final section will present the defense of hypothesis by providing appropriate arguments and
proposition for its validity. In this part, a clear view of cause and effect of India’s international
collaboration for the energy security will be discussed in depth.
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