Guiding Principle

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OBJECTIVES

It will offer a platform to facilitate academic and policy discourse about the possible future pathways for the Indian energy sector and enable prioritizing some potential policy interventions for deeper analysis.

It will help users understand the wide realm of possible energy pathways available to the country from highly pessimistic to highly optimistic scenarios.

For each scenario in this range of possibilities, it will provide indicative numbers for demand and supply, and potential implications on issues such as import dependence, cost and land requirement.

It should be noted that the IESS, 2047 platform does not ‘recommend’ or ‘prefer’ any one scenario or pathway over the others. It merely provides the user a way to understand the realm of possible scenarios and their implications.

THE GUIDING PRINCIPLE : ENERGY SECURITY

GuidingAgainst the background of large import dependence, and difficulties in making structural shifts within the energy consumption pattern of India to check import dependence, the Indian economy has been facing great hardships on the energy front. India imports more than three-fourths of its oil demand, and has also become a large coal importer. Nearly 25% of its coal demand is now being met by imports. The large import dependence, and the inability of the policy planners to reverse this trend, has impacted the growth of Indian economy. The adverse effects include depleting foreign exchange reserves to support the large energy import bill, price shocks as a result of volatility in global energy markets, and large subsidy bill in cushioning the impact of high price of energy. Other problems associated with dependence on imports include pressure on the exchange rates, and global geo-political developments threatening the energy security of India.

India’s import bill for crude has been rising steadily and was $ 160 billion in the year 2012-13. Even though India has large coal deposits, due to domestic production being unable to meet the demand, India is now importing more and more coal (including coking coal for industries) to meet the needs of thermal power generation. It is importing nearly 25% of its total coal needs and this proportion is expected to rise in the future.

With a large share of the energy demand of India being met by imports, domestic prices of not only energy, but the entire value chain, get impacted by volatile international prices which are highly dependent on non-economic factors, including geo-political ones. As the country struggles to meet the challenges of economic development and raising income levels, it has had to cushion the impact of energy prices whenever prices have seen sudden spikes.

India has a long history of subsidizing certain energy sources as well as downstream products like fertilizer, etc., but unexpected prices take a heavy toll on the fiscal situation of the Government. Therefore, the term ‘energy security’ has a large connotation for the country including economic stability and ensuring well-being of the people of the country. If the energy security consideration were to be expanded to include assurance of supply to meet energy demand, the task appears even more onerous.

All the above reasons make it vital for India’s economic planners to strategize India’s energy sector, and help in enhancing energy security of the country. This calls for a multi-pronged strategy both in the area of energy demand and supply, along with multiple facets of energy policy including pricing, regulation, distribution and an overseas strategy to obtain secure energy supplies at stable prices. Energy efficiency is a common denominator across the sectors, and the Government has long back declared its intention to reduce energy intensity by 20 - 25% over 2005 by 2020. Similarly, development of renewable and nuclear energy sectors, are also important elements of India’s energy strategy. However, energy efficiency and renewable energy require large upfront funding with a robust policy support to ensure adequate returns over long periods of time. Technology is also a vital input, particularly in the area of energy efficiency. Therefore, India’s energy strategy would necessarily comprise of action on both demand and supply sides with due consideration to policy, finance and technology.

India imported 35% of its natural gas consumption in the year 2012-13, and even this demand is expected to be met increasingly by imports.