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  1. 1. Integrated Energy PolicyReport of the Expert Committee Government of India Planning Commission New Delhi August 2006
  2. 2. Integrated Energy Policyii
  3. 3. We, the Members of the “Expert Committee on Integrated Energy Policy”, hereby submit our Final Report. Kirit S. Parikh Chairman, Expert Committee Member, Planning Commission, Government of India T.L. Sankar Amit Mitra Ex-Principal, Administrative Staff College of India Secretary General, FICCI Leena Srivastava D.S. Rawat Executive Director, TERI Secretary General, ASSOCHAM J.L. Bajaj V. Raghuraman Ex-Chairman, SERC Representative of Confederation of Indian Industry Rangan Banerjee Urjit R. Patel Professor, IIT, Mumbai Executive Director, IDFC Ajit Kapadia Pradeep ChaturvediVice Chairman, Centre for Fuel Studies & Research The Institution of Engineers (India) Subimal Sen R.R. Shah Member, West Bengal Planning Board Member Secretary, Planning Commission R.V. Shahi M.S. Srinivasan Secretary, Ministry of Power Secretary, Ministry of Petroleum & Natural Gas Anil Kakodkar Prodipto Ghosh Secretary, Deptt. of Atomic Energy Secretary, Ministry of Environment & Forests V. Subramanian H.C. Gupta Secretary, Ministry of Non-conventional Energy Secretary, Ministry of Coal Sources Convenor Surya P. Sethi Adviser (Power & Energy), Planning Commission iii
  4. 4. Integrated Energy Policyiv
  5. 5. ,e- ,l- vkgyqokfy;k mik/;{kMONTEK SINGH AHLUWALIA ;kstuk vk;ksx Hkkjr DEPUTY CHAIRMAN PLANNING COMMISSION INDIA Foreword Energy is a vital input into production and this means that if India is to move to the higher growth rate that is now feasible, we must ensure reliable availability of energy, particularly electric power and petroleum products, at internationally competitive prices. We cannot hope to compete effectively in world markets unless these critical energy inputs are available in adequate quantities and at appropriate prices. The present energy scenario is not satisfactory. The power supply position prevailing in the country is characterised by persistent shortages and unreliability and also high prices for industrial consumer. There is also concern about the position regarding petroleum products. We depend to the extent of 70 percent on imported oil, and this naturally raises issues about energy security. These concerns have been exacerbated by recent movements in international oil prices. Electricity is domestically produced but its supply depends upon availability of coal, exploitation of hydro power sources and the scope for expanding nuclear power, and there are constraints affecting each source. Achieving an efficient configuration of the various forms of energy requires consistency in the policies governing each sector and consistency in the pricing of different types of energy. There is also a need for clarity in the direction in which we wish to move in aspects like energy security, research and development, addressing environmental concerns, energy conservation, etc. To address these issues in an integrated manner, the Prime Minister had directed that the Planning Commission should constitute an Expert Committee to undertake a comprehensive review and to make recommendation for policy on this basis. The Expert Committee was constituted under the chairmanship of Dr. Kirit S. Parikh, Member, Planning Commission and has finalised its report after an extensive process of deliberation and consultation with various stakeholders. The draft report was also placed on the web site of the Planning Commission and comments were invited which have been taken into consideration in preparing the final report.;kstuk Hkou] laln ekxZ] ubZ fnYyh&110001 nwjHkk"k % 23096677] 23096688 QSDl % 23096699Yojana Bhawan, Parliament Street, New Delhi-110001 Phones : 23096677, 23096688 Fax : 23096699E-MAIL : v
  6. 6. Integrated Energy Policy ,e- ,l- vkgyqokfy;k mik/;{k MONTEK SINGH AHLUWALIA ;kstuk vk;ksx Hkkjr DEPUTY CHAIRMAN PLANNING COMMISSION INDIA The report of the Expert Committee provides a broad overarching framework for guiding the policies governing the production and use of different forms of energy from various sources. It makes specific recommendations on a very large range of issues. The report is a valuable input into policy making and will help shape our energy policy in the 11th Plan. Early implementation of the recommendations in the report would contribute substantially to putting the economy on a sustainable higher growth path. (Montek S. Ahluwalia) ;kstuk Hkou] laln ekxZ] ubZ fnYyh&110001 nwjHkk"k % 23096677] 23096688 QSDl % 23096699 Yojana Bhawan, Parliament Street, New Delhi-110001 Phones : 23096677, 23096688 Fax : 23096699 E-MAIL : dch@yojana.nic.invi
  7. 7. Preface The energy policies that we have adopted since independence to serve the socio-economicpriority of development have encouraged and sustained many inefficiencies in the use andproduction of energy. We pay one of the highest prices for energy in purchasing power parityterms. This has eroded the competitiveness of many sectors of the economy. The challenge is toensure adequate supply of energy at the least possible cost. Another important challenge is toprovide clean and convenient “lifeline” energy to the poor even when they cannot fully pay forit, as it is critical to their well-being. Therein lies the importance of an effective and comprehensiveenergy policy. In this context, the Prime Minister had directed the Planning Commission, to setup anExpert Committee to prepare an integrated energy policy linked with sustainable developmentthat covers all sources of energy and addresses all aspects of energy use and supply includingenergy security, access and availability, affordability and pricing, as well as efficiency andenvironmental concerns. The committee was constituted on August 12, 2004 and was to submitits report within six months i.e., by February 11, 2005. Given the complexity involved and widerconsultation needed, the term of the committee was extended upto 11th October 2005. The draftreport of the Committee was put on the website of Planning Commission inviting comments. Wereceived a large number of them from individuals, groups and institutions some of whom hadorganised special discussion meetings on the draft report. I thank them all. We have finalised thereport after taking these comments into account. While the finalisation of the report has takensome time, it is worth noting that some of the policy suggestions made in the draft report havebeen in the meanwhile taken up by the Government for implementation. It is my pleasure and also my privilege to thank all the Members of the Committee fortheir many important suggestions and for sparing their valuable time towards the finalisation ofthis report. I am also thankful to the officers and staff of the Power & Energy Division of thePlanning Commission for their contributions in the preparation of this report, particularly ShriSurya Sethi, Convenor of the Committee, for his many ideas, contributions, help in drafting thereport and for ensuring consistency and clarity. S/Shri R.C. Mahajan, M. Satyamurty, R.K. Kaul,I.A. Khan, B. Srinivasan, Dr. A. Mohan, D.N. Prasad, Rajnath Ram and Dr. M. Govinda Rajprovided many inputs and support. I also thank Dr. Vivek Karandikar and Dr. Prasanna Dani of the Observer ResearchFoundation for their help in developing energy supply scenarios. Finally, I want to thank Shri Sanjay Vasnik for diligently, carefully and cheerfully typingmany drafts of the report. (Dr. Kirit S. Parikh) Member (Energy), Planning Commission & Chairman, Expert Committee on Integrated Energy PolicyDated: 09.08.2006 vii
  8. 8. Integrated Energy Policyviii
  9. 9. Contents Contents Page No.Members of the Committee iiiForeword vPreface viiOverview xiiiAbbreviations Used xxxiChapter I. The Challenges 11.1 The Energy Scene 11.2 The Issues 131.3 The Vision 141.4 Need for an Integrated Energy Policy 151.5 Approach 16Chapter II. Energy Requirements 182.1 Commercial Energy Needs 182.2 Required Electricity Generation 192.3 India’s Oil Demand 222.4 India’s Coal Demand for Non-Power Use 232.5 India’s Non-Power Natural Gas Demand 232.6 Total Primary Commercial Energy Requirement 262.7 Non-Commercial Energy Requirement 282.8 Total Primary Energy Requirement 312.9 Summing Up 31Chapter III. Supply Options 333.1 India’s Energy Reserves 333.2 Supply Scenarios 403.3 Implications of the Results of the Scenarios 41 3.3.1 Aggregate Energy Needs and Imports Dependence 45 3.3.2 Energy Supply Options 45 3.3.3 Energy Efficiency and Demand Side Management 48 3.3.4 Carbon Emissions 50 3.3.5 Implications for Investment Needs 50 3.3.6 The Main Actions Recommended 513.4 Energy Independence in an Energy Scarce World 51Chapter IV. Energy Security 544.1 What is Energy Security? 544.2 The Nature of the Problem 55 ix
  10. 10. Integrated Energy Policy 4.3 Policy Options for Energy Security 57 4.3.1 Reduce Energy Requirements 57 4.3.2 Substitute Imported Energy by Domestic Alternatives 58 4.3.3 Diversify Supply Sources 60 4.3.4 Expand Resource Base and Develop Alternative Energy Sources 61 4.3.5 Increase Ability to Withstand Supply Shocks 64 4.3.6 Increase Ability to Import Energy and Face Market Risks 65 4.3.7 Increase Redundancy to Deal with Technical Risk 65 4.4 Energy Security for the Poor 66 4.5 Policies and Initiatives for Energy Security 66 Chapter V. Energy Policy Options/Initiatives 68 5.1 The Emerging Backdrop 68 5.2 Policies Covering Energy Markets, Pricing, Regulation, Taxation, Subsidies, 71 Externalities and Institutions Chapter VI. Policy for Energy Efficiency and Demand Side Management 81 6.1 Large Potential for Saving Energy 81 Chapter VII. Policy for Renewable and Non-Conventional Energy Sources 89 Chapter VIII. Household Energy Security: Electricity and Clean Fuels for All 99 8.1 Electricity 100 8.2 Cooking Energy 101 8.3 Subsidy through Debit Cards/Smart Cards 102 Chapter IX. Energy R&D 103 Chapter X. Power Sector Policy 109 Chapter XI. Coal Sector Policy 115 Chapter XII. Oil and Gas Sector Policy 123 Chapter XIII. Energy-Environment Linkages 129 13.1 Energy Supply Side: Environment Concerns 129 13.1.1 Exploration, Production and Transformation of Fossil Fuels 129 13.1.2 Environmental Impacts of Nuclear Power 130 13.1.3 Environmental Impacts of Large-Scale Hydropower 130 13.1.4 Environmental Impacts of Renewable Energy 131 13.2 Environmental Dimensions of Demand Side Impacts 131 13.3 Understanding the Determinants of Air Quality 131 13.3.1 Levels and Trend Analysis of Urban air quality in five major Indian cities 132 13.4 Long-term Sustainability of India’s Energy Use 132 13.4.1 Local and Regional Impacts 132 13.4.2 India’s Approach to Climate Change 135x
  11. 11. ContentsConcluding Comment 137Annexures 138Annexure-I Order Constituting the Committee 138Annexure-II Gist of Earlier Energy Policy Committees/Groups 141Annexure-III Calorific Values, Units and Conversion Factors 147List of TablesTable 1.1 Selected Energy Indicators for 2003 1Table 1.2 Household Energy Consumption in India (July 1999 – June 2000) 8Table 1.3 Growth of Motorised Transport Vehicles 10Table 2.1 Energy Use Elasticity w.r.t. GDP 18Table 2.2 Elasticities Used for Projections 19Table 2.3 Energy Use Elasticity w.r.t. GDP from Cross-Country Data of 2003 19Table 2.4 Projections for Total Primary Commercial Energy Requirements 20Table 2.5 Projections for Electricity Requirement 20Table 2.6 Projections for Electricity Requirement by MOP 21Table 2.7 Sources of Electricity Generation – One Possible Scenario 22Table 2.8 Demand Scenario for Petroleum Products - India 24Table 2.9 Demand Projection of Coal by Various Agencies in Mt 25Table 2.10 Demand Scenario for Natural Gas - India 27Table 2.11 Commercial Fuel Requirements for Non-Power Use in Physical Units 28Table 2.12 Projected Primary Commercial Energy Requirements (One Possible Scenario) 28Table 2.13 The Demand Scenario of Various Energy Items for Household 29 Consumption in IndiaTable 2.14 The Impact of Electrification on the Demand Scenario of Various Energy 30 Items for Household ConsumptionTable 2.15 Total Primary Energy Requirement (Mtoe) 31Table 2.16 Per Capita Energy Requirements in Selected Countries (2003) 32Table 3.1 India’s Hydrocarbon Reserves 33Table 3.2 Reserves/Production of Crude Oil & Natural Gas 35Table 3.3 The Approximate Potential Available From Nuclear Energy 36Table 3.4 Possible Development of Nuclear Power Installed Capacity in MW 37Table 3.5 Renewable Energy Resources 37Table 3.6 Some Energy Supply Scenarios for 8% GDP Growth 41Table 3.7 Scenario Summaries for 8% GDP Growth — Fuel Mix in Year 2031-32 44Table 3.8 Ranges of Commercial Energy Requirement, Domestic Production and 45 Imports for 8 percent Growth for year 2031-32Table 3.9 Generation Capacities and Load Factors in Scenario 11 46Table 3.10 Primary Energy Supply Sources (2003-04) 52Table 4.1 Sources of India’s Oil Imports – 2004-05 59Table 7.1 Capital Costs and the Typical Cost of Generated Electricity from 90 the Renewable OptionsTable 7.2 International Feed-in Tariffs 91 xi
  12. 12. Integrated Energy Policy Table 13.1 Environmental Impacts Associated with Energy Transformation 129 Based on Fossil Fuels Table 13.2 Supply Side, Local and Regional Environmental Impacts 130 Table 13.3 India Approved CDM Projects 135 List of Figures Figure 1.1 Total Primary Energy Supply (TOE) Per Capita (2003) vs. GDP Per Capita 2 (PPP US$2000) Figure 1.2 Kilo Watt hours of Electricity Consumption Per Capita (2003) vs. 3 GDP Per Capita (PPP US$2000) Figure 1.3 Human Development Index (HDI) vs. Electricity Consumption 3 Per Capita in 2002 Figure 1.4 Peak Power and Energy Shortages in States/UTs. 2004-05 4 Figure 1.5 Distribution of Households by Primary Source of Energy Used 6 for Cooking- India Figure 1.6 Pattern of Household Energy Consumption Figure 1.6(a) Monthly Per Capita Household Consumption 8 Pattern Urban India, 2000 Figure 1.6(b) Monthly Per Capita Household Consumption 8 Pattern Rural India, 2000 Figure 1.7 Domestic Consumption and Production of Crude Oil 9 Figure 1.8 Growth of Transport Vehicles and Two Wheelers 10 Figure 2.1 Projected Electricity Generation Growth (BkWh) 21 Figure 2.2 Plan-wise Projected Installed Capacity Addition (MW) 21 Figure 2.3 Percentage Share of Commercial Primary Energy Resources—2003-04 29 and 2031-32 Figure 2.4 Percentage of Households Using LPG 30 Figure 3.1 Fuel Mix Comparison in Year 2031-32 42 Figure 3.2 Coal Dominant Scenario 1 - Fuel Mix Year-Wise 42 Figure 3.3 Forced Hydro, Nuclear and Gas Scenario 5 - Fuel Mix Year-Wise 43 Figure 3.4 Forced Renewables Scenario 11 - Fuel Mix Year Wise 43 Figure 3.5 CO2 From Energy Use in Alternative Scenarios in Year 2031-32 50 Figure 4.1 India’s Growing Share in Global Energy Consumption (Higher Projections) 56 Figure 4.2 World Oil Prices 56 Figure 6.1 Reduction in the Energy Consumption of Refrigerators Sold in the 87 United States of America Figure 7.1 Renewable Energy Options 89 Figure 13.1 Air Pollution in Residential Areas 133 Figure 13.2 Air Pollution in Industrial Areas 134 List of Boxes Box 1.1 The Burden of Traditional Fuels in Rural India 7 Box 6.1 Bureau of Energy Efficiency (BEE) 82 Box 6.2 Initial Cost and Life Cycle Cost 86 Box 11.1 Delivered Cost of Domestic and Imported Thermal Coal 119xii
  13. 13. Overview Overview India faces formidable challenges in Considering the shocks and disruptions thatmeeting its energy needs and in providing can be reasonably expected, assured supply ofadequate energy of desired quality in various such energy and technologies at all times isforms in a sustainable manner and at essential to providing energy security for all.competitive prices. India needs to sustain an Meeting this vision requires that India pursues8% to 10% economic growth rate, over the all available fuel options and forms of energy,next 25 years, if it is to eradicate poverty and both conventional and its human development goals. To deliver Further, India must seek to expand its energya sustained growth rate of 8% through 2031-32 resource base and seek new and emergingand to meet the lifeline energy needs of all energy sources. Finally, and most importantly,citizens, India needs, at the very least, to increase India must pursue technologies that maximiseits primary energy supply by 3 to 4 times and, energy efficiency, demand side managementits electricity generation capacity/supply by 5 and conservation. Coal shall remain India’sto 6 times of their 2003-04 levels. With 2003- most important energy source till 2031-32 and04 as the base, India’s commercial energy supply possibly beyond. Thus, India must seek cleanwould need to grow from 5.2% to 6.1% per coal combustion technologies and, given theannum while its total primary energy supply growing demand for coal, also pursue new coalwould need to grow at 4.3% to 5.1% annually. extraction technologies such as in-situBy 2031-32 power generation capacity must gasification to tap its vast coal reserves that areincrease to nearly 8,00,000 MW from the difficult to extract economically usingcurrent capacity of around 1,60,000 MW conventional technologies.inclusive of all captive plants. Similarlyrequirement of coal, the dominant fuel in The approach of the Committee isIndia’s energy mix will need to expand to over directed to realising a cost-effective energy2 billion tonnes/annum based on domestic system. For this the following are needed:quality of coal. Meeting the energy challenge isof fundamental importance to India’s economic (i) Wherever possible, energy marketsgrowth imperatives and its efforts to raise its should be competitive. However,level of human development. competition alone has been shown to have its limitations in a number of The broad vision behind the energy areas of the energy sector andpolicy is to reliably meet the demand for independent regulation becomes evenenergy services of all sectors at competitive more critical in such instances.prices. Further, lifeline energy needs of all (ii) Pricing and resource allocations thathouseholds must be met even if that entails are determined by market forces underdirected subsidies to vulnerable households. an effective and credible regulatoryThe demand must be met through safe, clean oversight.and convenient forms of energy at the least- (iii) Transparent and targeted subsidies.cost in a technically efficient, economicallyviable and environmentally sustainable manner. (iv) Improved efficiencies across the energy chain. xiii
  14. 14. Integrated Energy Policy (v) Policies that reflect externalities of commercial energy consumption and energy consumption. about 78% of domestic coal production (vi) Policies that rely on incentives/ is dedicated to power generation. This disincentives to regulate market and dominance of coal in India’s energy consumer behaviour. mix is not likely to change till 2031-32. Since prices were de-controlled, the (vii) Policies that are implementable. sector has become profitable primarily (viii) Management reforms that create as a result of price increases and the accountability and incentives for rising share of open cast production. efficiency. India would need to augment domestic production and encourage thermal coal A competitive market without any imports to meet its energy needs. The entry barriers is theoretically the most efficient Committee has concluded that along way to realise optimal fuel and technology the western and southern coasts of choices for extraction, conversion, India imported coal is more cost transportation, distribution and end use of competitive compared to domestic coal energy. The tax structure and regulation across and further, imported coal is far more energy sub-sectors should be consistent and cost competitive compared to imported institutional arrangements should provide a gas at these coastal locations. Such a level playing field to all players. Social objectives cost advantage of imported coal over should ideally be met through direct transfers. imported gas is likely to continue for Environmental externalities should be treated some time in the future. Thus: uniformly and internalised. A consistent Domestic coal production should application of “polluter pays” principle may be be stepped up by allotting coal made to attain environmental objectives at blocks to central and state public least-cost where prescribed environmental sector units and captive mines of norms are either not applied consistently or notified end users. Coal blocks held not being adhered to. An energy market with by Coal India Limited (CIL) that the above features would minimise market cannot be brought into production distortions and maximise efficiency gains. An by 2016-17, either directly or integrated energy policy is needed to ensure through joint ventures, should be that energy costs and availability do not made available to other eligible constrain India’s economic growth and candidates for development and for competitiveness. bringing into production by 2011- 12. While the medium to long-term At the same time the needed challenges of ensuring competitive energy infrastructure must be created to markets are formidable, the immediate facilitate thermal coal imports. This problems of acute power shortages, adequate will facilitate coastal power supply of good coal, gas shortages, and concerns generation capacity based on of States rich in coal and hydro resources imported thermal coal. Imports of require immediate policy action. Our thermal coal will also put recommendations address immediate as well as competitive pressure on the the medium to long-term issues. domestic coal industry to be more efficient. Key, high priority recommendations are summarised below: A system of pricing coal on its gross calorific value must replace (i) Ensuring Adequate Supply of Coal the current system of pricing coal with Consistent Quality: Coal on the basis of broad bands of its accounts for over 50% of India’s useful heat value.xiv
  15. 15. Overview Coal companies must be asked to allowing the state or its residents an conform to international practice opportunity to invest in such projects of preparing coal prior to its sale. on equal terms and appropriately Washed coal must become the revising the royalty rate etc. are possible norm and use of unwashed coal solutions to removing hurdles in should become the exception. exploiting these domestic sources of The current system of coal linkages primary energy. The NDC must take should be replaced by long-term up this issue immediately in respect of coal supply agreements with strict coal and hydro resources. Over the penalties for not meeting contracted longer term, a National Policy on supplies, quality and offtake Domestic Natural Resources should be commitments. formulated and enacted through the Parliament. Coal must be brought under independent regulation to improve (iii) Ensuring Availability of Gas for exploitation and allocation of Power Generation: There is a total available resources, and to regulate generation capacity of 12,604 MW based e-auctions and coal prices and to on gas and liquid fuels. Bulk of it is enable a competitive coal market base loaded under combined cycle to take shape. operation. However, gas supplies have been restricted and the overall By the end of 2007-08 the quantity utilisation remains at only 54.5%. A of coal sold through e-auction must significant part of this capacity was reach 20% of domestic production. realised under the earlier liquid fuel Ideally, the Coal Mines policy while the rest has been built (Nationalisation) Act, 1973, should based on unenforceable fuel supply be amended to facilitate: (a) private agreements that would have been participation in coal mining for unbankable in any other environment. purposes other than those specified While requiring that no new gas in the Act and (b) offering of future capacity be built without firm and coal blocks to potential bankable gas supply agreements, effort entrepreneurs. A consensus should should be made to allocate available be built on the need to reform this domestic gas supplies to the fertiliser, Act. petrochemicals, transport and power(ii) Addressing Concern of Resource Rich sectors at prices that are regulated to States: Both coal and hydro resources yield a fair return to domestic gas are concentrated in a few states. producers. Such a practice should be Increasingly states are becoming more enforced till a better demand-supply assertive in demanding higher share of balance emerges and domestic gas benefits that their local energy resources production achieves some of the provide to the country as a whole. potential that is often cited. A more Even though these are national competitive market can then function. resources and should not be rendered (iv) Power Sector Reforms: These must uncompetitive because of such focus on controlling the aggregate demands, it is conceivable that technical and commercial losses of the mechanisms can be put in place that state transmission and distribution result in resource rich states reaping utilities. This is essential to creating a more equitable benefits. Allowing financially robust power sector in each resource rich States a share in the profits state. Only financially healthy state of the enterprise tapping such local power distribution utilities can sustain resources through what is called a the growing generation and “carried equity interest” and further transmission of Central Power Sector xv
  16. 16. Integrated Energy Policy PSUs and State Power Sector Utilities network for a fee and thus can be (SPSUs) and provide the needed realised even before AT&C losses comfort on payment security to attract are reduced. private investment in the power sector To achieve these objectives, the at internationally competitive tariffs. Committee feels that it is essential Our recommendations: to separate the cost of the pure To control AT&C losses, the wires business (carriage) from the Committee recommends that the energy business (content) in both existing Accelerated Power transmission and distribution at Development and Reform different voltages. The Electricity Programme (APDRP) be Act 2003 recognises such separation restructured to ensure energy flow for the transmission sub-segment. auditing at the distribution Separation of content from carriage transformer level through in the distribution sub-segment, automated meter reading, a however, is considered only as a Geographical Information System means to the provision of open (GIS) mapping of the network and access. The wires business within consumers and the separation of the distribution sub-segment is also feeders for agricultural pumps. a natural monopoly and must be Investment in developing a regulated. Further, introduction of Management Information System Availability Based Tariffs (ABT) for (MIS) that can support a full energy the intra-state sales and the audit for each distribution upgrading of State Load Despatch transformer is essential for Centres to the technological level reduction in AT&C losses. This of Regional Load Despatch Centres will also fix accountability and should be realised. provide a baseline which is an Open access is resisted by essential prerequisite to incumbents as they fear that all the management reform and/or high value paying customers would privatisation. The revised APDRP go away and they would be left will provide incentives to State with small and subsidised Electricity Boards (SEBs) that are agricultural and domestic linked to performance outcomes customers. Since these customers and will also include incentives to have strong political constituencies, staff for reduction in AT&C losses. it may be difficult to raise their The Committee also recommends tariffs when needed and the that the liberal captive and group incumbent utilities would not captive regime foreseen under the remain viable for long. These Electricity Act 2003 be realised on concerns can be taken care of if the the ground. India’s liberal captive cross-subsidy surcharge, wheeling regime will not only derive charge and back-up charge are set economic benefits from the properly. However, if these are set availability of distributed generation too high, open access could be but will also set competitive effectively thwarted. These charges wheeling charges to supply power need to be periodically revised and to group captive consumers. This independently regulated. will pave the way for open access A robust and efficient inter-state to distribution networks. It will and intra-state transmission system also facilitate private generation that with adequate surplus capacity that limits its interface with the host is capable of transferring power utility to the use of the distribution from surplus regions to deficitxvi
  17. 17. Overview regions is a must for ensuring utilities should be strongly opposed optimal operation of the system. in the interest of strengthening fair Rehabilitation of existing thermal competition which alone will bring stations could raise capacity at least- down prices in the long-run. cost in the short-run. Similarly Similarly differential payment rehabilitation of hydro stations security structures for Central could yield much needed peak Power Sector PSUs and the private capacity at negligible cost. Both sector should be abolished. these steps must be taken up Consumer prices for electricity are urgently. currently set by State Electricity(v) Reduction in Cost of Power: In terms Regulatory Commissions on cost of purchasing power parity, power plus basis. Regulators should set tariffs in India for industry, commerce multi-year tariffs and differentiate and large households are among the them by time of day. highest in the world. It is important to Government should seed the capital reduce the cost of power to increase markets to develop market-based both the competitiveness of the Indian instruments that effectively extend economy and also to increase consumer the tenure of debt available to welfare. A number of measures are power projects to, perhaps, 20 suggested for this. years. This will reduce the capacity The Government Policy should charge in the earlier years and ensure that all generation and spread it more evenly over the life transmission projects should be of the project. competitively built on the basis of Unit sizes should be standardised tariff-based bidding. Public Sector and global tenders invited for a Undertakings shall also be number of units to get substantial encouraged to participate in such bulk discount. bids even though the tariff policy Distribution should be bid out on allows them a 5 year window the basis of a distribution margin wherein projects undertaken by the or paid for by a regulated public sector need not be bid distribution charge determined on competitively. a cost plus basis including a profit In cases where tariff continues to mark up similar to that paid for be determined on the basis of costs generation as suggested above. and norms, regulators may either (vi) Rationalisation of Fuel Prices: adopt a return on equity approach Relative prices play the most important or return on capital approach, role in choice of technology, fuel and whichever is considered better in energy form. They are thus the most the interest of consumers. In vital aspect of an Integrated Energy deciding the level of return Policy that promotes efficient fuel provided, the regulator should inter- choices and facilitates appropriate alia take into account the return substitution. In a competitive set up, available on long-term government the marginal use value of different fuels, bonds and reasonable risk which are substitutes, should be equal premiums associated with equity at a given place and time so that the investments. prices of different fuels at different The current practice of state places do not differ by more than the regulators not allowing state public cost of transporting the fuels. The sector power utilities the same resulting inter-fuel choices will then be returns as the central public sector economically efficient. Further: xvii
  18. 18. Integrated Energy Policy Prices of different fuels should not GOI continues to control the be set independently of each other. pricing of automotive fuels, LPG, As a general rule, all commercial large part of domestic natural gas primary energy sources must be and PDS kerosene. There is no real priced at trade parity prices at the competition in the sector other point of sale, namely the Free-on- than in some peripheral products Board (FOB) price for products for such as lubricants, despite the which the country is a net exporter presence of a large domestic private and Cost, Insurance and Freight player in refining and the likely (CIF) price for which it is a net emergence of other private players importer. The price of a product in this field. In fact, the prevailing for which the country is self- pricing and taxation policies and sufficient in a competitive market the market structure provide with many suppliers and buyers significant protection to the private would fluctuate between the two refineries. The result is that India’s depending upon the ease of import/ refining capacity exceeds the export and reliability of supplies. demand by 18% already. There is In a situation with a monopoly an urgent need to have an supplier with exportable surplus at independent regulator for both import parity price, the price would upstream and downstream sectors. be in between the two depending The notification of the Petroleum on the price elasticity of domestic & Natural Gas Regulatory Board demand. This principle is extremely Act, 2006, is thus welcome. relevant for the petroleum sector In the petroleum sector, full price wherein bulk of the crude oil is competition at the refinery gate imported and India has become a and the retail level would lead to net exporter of petroleum products. trade parity prices as described To cushion domestic prices against above. Thus instead of short-term volatility of prices on administering prices, full price the international market (FOB or competition should be introduced. CIF) domestic prices can be set on Coal prices should ideally be left the basis of median prices over the to the market and trading of coal, previous month or a three month nationally and internationally, period. should be free. Only a competitive The petroleum and natural gas free market can do an efficient job sector is, once again, devoid of any of price determination. A competition and independent competitive market requires that oversight of either upstream or there are multiple producers and downstream activities. On the that there are no entry barriers to upstream side, Directorate General new producers or to importers. Hydrocarbons (DGH), an arm of Pending the creation of such a the Ministry, oversees allocation competitive market, independent and exploitation of oil & gas regulation of coal prices becomes reserves and enforces profit sharing essential. with exploration & production Apart from CIL’s virtual monopoly companies. The current in coal supply, coal prices cannot arrangement needs to be be determined in a competitive strengthened and made market open to all users as long as independent. On the downstream the largest coal consuming sector, side, despite the dismantling of the i.e. power, has coal cost as a pass Administered Price Mechanism, the through. However, since otherxviii
  19. 19. Overviewusers of coal are numerous and Calorific Value (GCV) andconsume substantial quantities of other quality parameters.coal, a strategy for competitive price Natural Gas is not an easily tradablediscovery is possible. We commodity. Making gas tradablerecommend as follows: requires significant investments in• High quality coking and non- pipelines or, alternatively, in coking coal which are liquefaction, cryogenic shipping & exportable may be sold at regasification. Comparing local gas export parity prices as prices to spot LNG prices in the determined by import price international market is grossly at the nearest port minus misleading. Again, linking gas prices 15%. This practise is to crude price movements is also currently being adopted for misleading. Long-term supply supply of good quality coking contracts such as those in Europe coal to the steel industry. are more representative of natural• 20% of the production may gas prices. Natural gas price can be be sold through e-auction. determined through competition Quantities to be sold through among different producers where e-auction from different multiple sources and a competitive mines must be determined supply-demand balance exist. As annually with a monthly long as there is shortage of gas in mine-wise schedule to be the country and the two major independently monitored and users of gas, namely fertiliser and enforced by a coal regulator. power, work in a regulated cost plus environment, a competitive• Remaining coal should be market determined price would be sold under long-term Fuel highly distorted. Such distortions Supply and Transport would get further amplified by the Agreements (FSTAs). prevailing regime of fertiliser Regulated utilities should be subsidies & power sector subsidies allowed upto 100% of their and cross subsidies. In such a certified requirements situation price of domestic gas and through FSTAs. Other bulk its allocation should be consumers could be allowed independently regulated on a cost partial FSTAs based on coal plus basis including reasonable availability. Any shortfalls returns. should be met through e- auction supplies or imports. Another option could be to price gas on a net-back basis. If gas• Pithead price of coal under becomes a key component in FSTAs should be revised India’s energy mix, it is pointed annually by a coal regulator out that beyond the level of gas on a basis that inter-alia takes consumption in the fertiliser, into account prices obtained petrochemical, automotive and through e-auction, FOB price domestic sectors, gas must compete of imported coal (both with coal as the key alternative for adjusted for quality) and power generation. This implies that production cost, inclusive of the cost of generating peak or base return based on efficiency electricity using gas cannot exceed standards. the cost of peak or base electricity• Coal prices may be made from coal, the cheapest alternative. fully variable based on Gross A competitive coal market is thus xix
  20. 20. Integrated Energy Policy important for setting a proper price applied consistently or not being of natural gas on a net-back basis. adhered to. An alternative for a gas producers (vii) Energy Efficiency and Demand Side is to export gas, in which case the Management: Lowering the energy domestic gas price could be the net intensity of GDP growth through realisation of the domestic natural higher energy efficiency is important gas producer after investing and for meeting India’s energy challenge getting a return on the investment and ensuring its energy security. The needed to make the natural gas energy intensity of India’s growth has tradable across borders in either a been falling and is about half of what trans-border pipeline or through it used to be in the early seventies. liquefaction and shipping facilities. Currently, we consume 0.16 kg of oil For the foreseeable future, domestic equivalent (kgoe) per dollar of GDP gas supplies to both the fertiliser expressed in purchasing power parity and the power sector, that together terms. India’s energy intensity is lower account for about 80% of the than the 0.23 kgoe of China, 0.22 kgoe current gas usage, would need to of the US and a World average of 0.21 be allocated based on availability kgoe. India’s energy intensity is even and charged at regulated price that marginally lower than that of Germany reflects cost of production and a & OECD at 0.17 kgoe. However, reasonable profit. Denmark at 0.13 kgoe, UK at 0.14 Central and State taxes on kgoe and Brazil & Japan at 0.15 kgoe commercial energy supplies need are ahead of India. These figures and to be rationalised to yield optimal many sectoral studies confirm that there fuel choices and investment is room to improve and energy decisions. Relative prices of fuels intensity can be brought down can be distorted if taxes and significantly in India with current subsidies are not equivalent across commercially available technologies. fuels. This equivalence should be Lowering energy intensity through in effective calorie terms. In other higher efficiency is equivalent to words they should be such that creating a virtual source of untapped producer and consumer choices as domestic energy. It may be noted that to which fuel and which technology a unit of energy saved by a user is to use are not affected by the taxes greater than a unit produced, as it saves and subsidies. Socio-economic on production losses as well as benefits such as employment transport, transmission and distribution generation and positive impact on losses. Thus a “Negawatt”, produced energy security may support by a reduction of energy need has differential taxes on alternate fuels. more value than a Megawatt generated. Environmental taxes and subsidies, The Committee feels that with an however, are levied precisely to aggressive pursuit of energy efficiency affect choices. Differential taxes can and conservation, it is possible to reduce be justified here if they India’s energy intensity by up to 25% appropriately reflect environmental from current levels. externalities. A consistent Efficiency can be increased in energy application of the “polluter pays” extraction, conversion, transportation, principle or “consumer-pays” as well as in consumption. Further, the principle should be made to attain same level of output or service can be environmental objectives at least- obtained by alternate means requiring cost where prescribed less energy. The major areas where environmental norms are either notxx
  21. 21. Overviewefficiency in energy use can make a • Establish benchmarks ofsubstantial impact are mining, energy consumption for allelectricity generation, electricity energy intensive sectors.transmission, electricity distribution, • Disseminate information,water pumping, industrial production support training and rewardprocesses, haulage, mass transport, best practices with nationalbuilding design, construction, heating, level honours in energyventilation, air conditioning, lighting efficiency and energyand household appliances. As the Indian conservation.economy opens up to international Increase the gross efficiency incompetition, it will have to become power generation from the currentmore energy efficient. This is well average of 30.5% to 34%. All newdemonstrated by India’s steel and plants should adopt technologiescement industry. However, the that improve their gross efficiencyCommittee recommends the following from the prevailing 36% to at leastpolicies for raising energy efficiency. 38-40%.Some of these policies can beimplemented through voluntary targets Require a least-cost planningundertaken by industry associations as approach to provide a level playingopposed to external dictates and field, to Negawatts and Megawattsenforcement. so that regulators permit the same return on the investment needed Merge Petroleum Conservation to save a watt as to supply an Research Association (PCRA) with additional watt. Bureau of Energy Efficiency (BEE). The merged entity should be an Promote minimum life cycle cost autonomous statutory body under purchase instead of minimum initial the Energy Conservation Act, be cost procurement by the independent of all the energy government and the public sector. ministries and be funded by the Promote urban mass transport, Central Government. It must: energy efficient vehicles and freight • Force the pace of movement by railways through improvement in energy scheduled freight trains with efficiency of energy using guaranteed, safe and timely appliances, equipment and deliveries. Enforce minimum fuel vehicles, and create “golden efficiency standards for all vehicles. carrot” incentives in the form Institute specialisations in energy of substantial rewards to the efficiency/conservation in technical firm which first colleges and commence certification commercialises equipment of such experts. that exceeds a prescribed (viii) Augmenting of Resources for energy efficiency target. Increased Energy Security: India’s • Enforce truthful labelling on energy resources can be augmented by equipment, and impose major exploration to find more coal, oil and financial penalties if the gas, or by recovering a higher equipment fails to deliver percentage of the in-place reserves. stated efficiencies. In extreme Developing the thorium cycle for cases, resort to black listing nuclear power and exploiting non- of errant suppliers on conventional energy, especially solar consumer information web power, offer possibilities for India’s sites and in government energy independence beyond 2050. procurement. xxi
  22. 22. Integrated Energy Policy At a growth rate of 5% in domestic in the primary energy mix comes out production, currently extractable coal lower because of the way oil resources will be exhausted in about 45 equivalence of hydro electricity is years. However, only about 45% of calculated. A hydroelectric plant the potential coal bearing area has converts a unit of primary energy in currently been covered by regional the form of potential energy to almost surveys. It is also felt that both regional one unit of electricity. The fossil fuel as well as detailed drilling can be made route or the nuclear route needs almost more comprehensive. Several possible 3 units of a primary energy source to options are recommended: produce the same unit of electricity. Covering all coal bearing areas with Thus while hydro’s share in primary comprehensive regional and detailed energy mix is lower than that of drilling could make a significant nuclear, the kWh produced from hydro difference to the estimated life of is higher. Similarly, even if a 20-fold India’s coal reserves. increase takes place in India’s nuclear power capacity by 2031-32, the India’s extractable coal resources contribution of nuclear energy to could be augmented through in- India’s energy mix is also, at best, situ coal gasification which makes expected to be 4.0-6.4%. If the recent use of those coal deposits which agreement with the US translates into are at greater depth and cannot be a removal of sanctions by the nuclear extracted economically by suppliers’ group, possibilities of imports conventional methods. of nuclear fuels as well as power plants Extracting coal bed methane before should be actively considered so that and during mining could augment nuclear development takes place at a the country’s energy resources. faster pace. Enhanced oil recovery and Nuclear energy theoretically offers incremental oil recovery India the most potent means to long- technologies could improve the term energy security. India has to proportion of in-place reserves that succeed in realising the three-stage could be economically recovered development process described in the from abandoned/depleted fields. main report and thereby tap its vast Isolated deposits of all hydro thorium resource to become truly carbons including coal may be energy independent beyond 2050. tapped economically through sub Continuing support to the three-stage leases to the private sector. development of India’s nuclear potential (ix) Using Energy Abroad: In case India is essential. can access cheap natural gas overseas Though its contribution to energy under long-term (25-30 years) requirement is limited, hydro arrangements, it should consider setting electricity’s flexibility and suitability up captive fertiliser and/or gas to meet peak demand makes it valuable. liquefaction facilities in such countries. Moreover, the development of This would essentially augment energy hydropower, especially storage schemes, availability for India. are critical for India as our per capita (x) Role of Nuclear and Hydro Power: water storage is the lowest among other Even if India succeeds in exploiting its comparable countries. Creating such full hydro potential of 1,50,000 MW, storages is critical to India’s water the contribution of hydro energy to security, flood control and drought the energy mix will only be around control. The environmental concerns 1.9-2.2%. It is clarified that hydro share and the problem of resettlement and rehabilitation of project affected peoplexxii
  23. 23. Overview (PAPs) can and must be satisfactorily Even when a capital subsidy is handled. The PAPs should benefit from needed, it should be linked to the project as much as other outcomes. For example, capital beneficiaries. This can be accomplished, subsidy could also be given in the for example, as follows: form of a Tradable Tax Rebate Require compulsory land Certificate (TTRC) that could be consolidation and impose a based on actual energy generated. betterment levy in kind of (say) 5 The rebate claim would become percent of land on the command payable depending upon the area farmers. Use this land to amount of electricity/energy resettle and compensate all PAPs. certified as having been actually supplied.(xi) Role of Renewables: From a longer- term perspective and keeping in mind Power Regulators must create the need to maximally develop domestic alternative incentive structures such supply options as well as the need to as mandated feed-in-laws or diversify energy sources, renewables differential tariffs to encourage remain important to India’s energy utilities to integrate wind, small sector. It would not be out of place to hydro, cogeneration etc. into their mention that solar power could be an systems. important player in India attaining An annual renewable energy report energy independence in the long run. should be published providing With a concerted push and a 40-fold details of actual performance of increase in their contribution to different renewable technologies at primary energy, renewables may the state and national levels. This account for only 5 to 6% of India’s should include actual energy energy mix by 2031-32. While this supplied from different renewable figure appears small, the distributed options, availability, actual costs, nature of renewables can provide many operating and maintenance socio-economic benefits. problems etc. It should also report Subsidies for renewables may be on social benefits, employment justified on several grounds. A created, and women’s participation renewable energy source may be and empowerment. environmentally friendly. It may be Policies for promoting specific locally available thereby making it alternatives are suggested in the possible to supply energy earlier than main text. These include fuel wood in a centralised system. Grid connected plantations, bio-gas plants, wood renewables could improve the quality gasifier based power plants, solar of supply and provide system benefits thermal, solar water heaters, solar by generating energy at the ends of the photovoltaics, bio-diesel and grid where otherwise supply would ethanol. have been lax. Further, renewables may It is also recommended that the provide employment and livelihood to Indian Renewable Energy the poor. However, the subsidies should Development Agency Ltd (IREDA) be given for a well-defined period or be converted into a national upto a well-defined limit. refinancing institution on the lines The Committee recommends that of NABARD/National Housing for promoting renewables, Bank (NHB) for the renewable incentives should be linked to energy sector. IREDA’s own equity outcomes (energy generated) and base can be expanded by the not just outlays (capacity installed). financial institutions of the country xxiii
  24. 24. Integrated Energy Policy instead of continuing the current increase in energy price. Even when system of GOI support. the country has adequate energy (xii) Ensuring Energy Security: India’s resources, technical failures may disrupt energy security, at its broadest level, is the supply of energy to some people. primarily about ensuring the Generators could fail, transmission lines continuous availability of commercial may trip or oil pipelines may spring a energy at competitive prices to support leak. One needs to provide security its economic growth and meet the against such technical risks. Risks can lifeline energy needs of its households be reduced by lowering the requirement with safe, clean and convenient forms of energy by increasing efficiency in of energy even if that entails directed production and use; by substituting subsidies. Reducing energy imported fuels with domestic fuels; by requirements and increasing efficiency diversifying fuel choices (gas, ethanol, are two very important measures to orimulsion tar sands etc.) and supply increase energy security. However, it sources; and by expanding the domestic is also necessary to recognise that India’s energy resource base. Risks can also be growing dependence on energy imports dealt with by increasing the ability to exposes its energy needs to external withstand supply shocks through price shocks. Hence, domestic energy creation of strategic reserves, the ability resources must be expanded. For India to import energy and face market risk it is not a question of choosing among by building hard currency reserves and alternate domestic energy resources but by providing redundancy to address exploiting all available domestic energy technical risks. We recommend as resources to the maximum as long as follows: they are competitive. Maintain a reserve, equivalent to The Committee, however, felt that 90 days of oil imports for strategic- obtaining equity oil, coal and gas abroad cum-buffer stock purposes and/or do not represent adequate strategies for buy options for emergency supplies enhancing energy security beyond from neighbouring large storages diversifying supply sources. In contrast, such as those available in Singapore. pipelines for importing gas do enhance The buffer stocks could be used to security of supply if the supplying address short-term price volatility. country makes a major investment in Operating the strategic/buffer the pipeline. The most critical elements reserves in cooperation with other of our energy security, however, remain countries who maintain such the measures suggested herein to reserves could also increase their increase efficiency, reduce requirements effectiveness. and augment the domestic energy Since 80 percent of global resource base. hydrocarbon reserves are controlled Ensuring energy security requires by national oil companies dealing with various risks. The threat controlled by respective to energy security arises not just from governments, oil diplomacy supply risks and the uncertainty of establishing bilateral economic, availability of imported energy, but social and cultural ties can reduce also from possible disruptions or supply risk. shortfalls in domestic production. (xiii) Boosting Energy Related R&D: India Supply risks from domestic sources, will find it increasingly harder to such as from a strike in CIL or the import its required quantities of Railways, also need to be addressed. commercial energy as her share of the Even if there is no disruption of supply, incremental world supply of fossil fuels there can be the market risk of a sudden could rise from a low of 13% in thexxiv
  25. 25. Overview most energy efficient scenario to a high as of today provides less than 3 of 21% in the coal dominant scenario percent of our total electrical energy by 2031-32. This assumes that the supply, is miniscule compared to world’s supply of fossil fuels grows by what industry and governments only 2% per annum till 2031-32. spend in developed countries. In Research and Development (R&D) in the latter, firms generally spend the energy sector is critical to augment more than 2 percent of their our energy resources, to meet our long- turnover for R&D. The total term energy needs and to promote expenditure on R&D in 2004-05 energy efficiency. Such R&D would was Rs.610 crores* for Atomic go a long way in raising our energy Energy and Rs.70 crores for security and delivering energy Ministry of Power, Coal and Non- independence over the long-term. R&D Conventional Energy Sources. Even requires sustained and continued at one-tenth of the rate at which support over a long period of time. firms in developed countries spend Energy related R&D has not been on R&D, i.e. 0.2% of the turnover allotted the resources that it needs. of all energy firms whose turnover India needs to substantially augment exceeds Rs.100 crores a year, we the resources made available for energy end up with Rs.1000 to Rs.1200 related R&D and to allocate these crores per year which will increase strategically. To take an innovative idea overtime. We should be spending to its commercial application involves much more than this on R&D. many steps. Basic research leading to a Much of R&D can be considered a fundamental breakthrough may open public good. It is thus better up possibilities of applications. R&D is financed by the Government. needed to develop conceptual Initially an allocation of Rs.1000 breakthroughs and prove their crores should be made for energy feasibility. This needs to be followed R&D excluding atomic energy. To up by a working, laboratory scale begin with, individuals, academic model. Projects that shows economic research institutions, consulting potential could then be scaled up as firms, private and public sector pilot projects, while keeping in mind enterprise, should all compete for cost reductions that could be achieved this fund. Firms may also be through better engineering and mass encouraged to enhance their production. Demonstrations of such expenditure on R&D through tax projects, economic assessments and incentives. further R&D to make the new • The resources devoted to technology acceptable and attractive to research in different areas customers could follow, before finally depend on the economic leading to commercialisation and importance of that particular diffusion. Some key policy initiatives area, the availability of relevant to energy related R&D are technology and the likelihood detailed below: of success. The latter changes A National Energy Fund (NEF) with time as new should be set-up to finance energy developments in science and R&D. Our expenditure on R&D technology take place and excepting for atomic energy, which uncertainties reduce. R&D* Only about 15% of this amount or about Rs.90 crores, was for R&D on nuclear power. The rest of the expenditure is for R&D on non-electricity applications of Radiation Technology and Fundamental Research. xxv
  26. 26. Integrated Energy Policy priorities have to be based hybrid cars, super batteries, on a dynamic strategic vision nuclear technologies related which is frequently updated. to thorium and fusion, gas Of critical importance is hydrates, and hydrogen research and analysis for the production, storage, transport energy policy to outline and distribution. technology road maps. The • The NEF could provide NEF should encourage and R&D funding in support of fund such studies on a regular applications, innovative new basis in a number of ideas, fundamental research institutions and should also etc. to researchers in different commission them from institutions, universities, experienced and qualified organisations and even individuals. individuals working • The NEF should support independently. energy policy modelling • A number of academic activities in a number of institutions should be institutions on a long-term developed as centres of basis. The different modellers excellence in energy research. should be brought together (xiv) Household Energy Security - periodically in a forum to Electricity and Clean Fuels for All: address specific policy issues. One of the toughest challenges is to • A number of technology provide electricity and clean fuels to missions should be mounted all, particularly rural populations given for developing near- their poor paying capacity, the limited commercial technologies and availability of local resources for clean rolling out new technologies cooking energy, and the size of the in a time bound manner. country and its population. The These include coal considerable effort spent on gathering technologies (where India biomass and cow-dung and then should focus) for efficiency preparing them for use is not priced improvement; in-situ into the cost of such energy. These gasification; IGCC and fuels create smoke and indoor air carbon sequestration; solar pollution, are inconvenient to use, and technologies covering solar- adversely affect the health of people, thermal and photovoltaics; particularly women and children. Yet, bio-fuels such as bio-diesel given the fact that women and girls and ethanol; bio-mass carry most of the burden of the plantation and wood drudgery and also bear the brunt of gasification, and community indoor air pollution, the urgency to based bio-gas plants. meet the challenge should be high. • Coordinated research and Such steps are needed for our broader development in all stages of need to achieve universal primary the innovation chain to reach education for girls, promote gender a targeted goal (such as that equality and empower women. Easy in place in the departments availability of a certain amount of clean of atomic energy and space energy that is required to maintain life research) should be used to should be considered as a basic develop more efficient necessity. Energy security at the industrial plant, machinery & individual level implies ensuring supply processes, efficient appliances, of such a lifeline energy need. Indiaxxvi
  27. 27. Overviewcannot be energy secure if her people the poverty line may not seek suchremain without secure supply of energy connectivity on their own.for lifeline needs. Ensuring this would To make RGGVY sustainable, arequire targeted subsidies as many business plan with a viable revenuehouseholds would be unable to pay for model needs to be elaborated. A clearsafe, clean and convenient commercial pricing and subsidy policy and theenergy to meet lifeline needs. This means of targeting the subsidy need torequires: be announced soon. Local bodies, Electrification of All Households: The panchayati raj institutions, NGOs or government has announced its even local entrepreneurs can take the commitment to ensure this by 2009- franchise to run the local network. 10. Women’s self-help groups can also be Provision of Cooking Energy: We empowered to do so. may set a goal to provide clean The consumer pays about 40% of the cooking energy such as LPG, NG, import parity price for kerosene sold biogas or kerosene to all within 10 through the Public Distribution System years. It may be noted that the (PDS). The balance 60% of the price is requirement of cooking energy does being funded largely by oil sector PSUs not increase indefinitely with and to a small extent by the income. Thus the total amount of Government through the budget. LPG required to provide cooking However, subsidies do not reach the energy to 1.5 billion persons is intended beneficiaries due to poor around 55 Mtoe. targeting. The real issue is to improve Other Sources: We may provide fuel targeting within the subsidy programme wood plantations within one well and ensure that those falling kilometre of all habitations. Those outside the subsidy net pay the full who do not have access or cannot cost of supply. Additionally, a well- afford even subsidised clean fuels, targeted subsidy regime may only rely on gathering wood. marginally raise the current subsidy Neighbourhood plantations can burden. ease their burden and the time The best way for providing subsidy taken to gather and transport wood. for electricity and cleaner fuels,The Rajiv Gandhi Grameen kerosene or LPG, is to entitleVidyutikaran Yojana (RGGVY) was targeted households to 30 units oflaunched to achieve electrification of electricity per month and LPG,all households. By 2009-2010 the kerosene or bio-gas purchased fromRGGVY aims to electrify the 1,25,000 a local community size plantvillages, still without electricity; to equivalent to 6 kg of LPG perconnect all the estimated 2.34 crore un- month. A system of debit cardselectrified households below the may be introduced to deliver suchpoverty line with a 90% subsidy on a subsidy. The entitlements canconnecting costs; and finally, to only be used for purchase of theseaugment the backbone network in all products. With modern ICT, debitthe electrified 4.62 lakh villages. The card readers operated on battery5.46 crore households above the and feeding data using mobilepoverty line which are currently technology, can work in rural areasunelectrified, are expected to get of the country as well.electricity connection on their own In addition to the above subsidy, otherwithout any subsidy. Going by current actions are also needed that createexperience, all these households above energy secure villages. We suggest: xxvii