Is India’s Vicious Cycle of Crises Well-Oiled?

India's economic growth could come up against two major roadblocks: energy and infrastructure. Oil prices are flirting with the $100 mark, prompting questions on India’s long-term energy plans. The International Energy Agency has projected that China and India will account for 45 per cent of the increase in demand for oil between now and 2030.

Transport will lead the demand surge. The supply-demand gap is set to worsen for a number of reasons. Proven reserves are estimated to last another 40 years at current rates of demand but the economic and political costs of extraction will increase.

India imports 70 per cent of its oil. This situation is unlikely to change, since we do not have the reserves to manage the projected increase in demand. To bridge the demand-supply gap, India should address the problem from both ends. Inefficient consumption of fuel by power generating units and automobiles must be penalised. Power transmission and distribution losses are a staggering 40 per cent, which translates into high energy costs. Reduce them seriously.

On the supply side, gas is a viable alternative. Besides domestic onshore and offshore fields, it can be imported from Iran, Tajikistan, Myanmar and Bangladesh. Gas can run electricity plants and be a cleaner option to coal. But given India’s needs, other energy sources must be examined. India’s overall R&D spend is about 0.7 per cent of its gross domestic product, of which the energy component is negligible. This needs to change. Wind, geothermal and solar energy are promising options.

Biomass can go a long way in meeting rural India’s energy requirements. Biofuels should also be explored to the extent that they do not compromise food security. Nuclear energy can make a difference about two decades from now, if the US-India nuclear deal is operationalised.

India plans to add about 80,000 MW of generation capacity over the next five years, but is actually proceeding at a much slower pace. It has added just 3,700 MW in the first seven months of the current fiscal year. Only 21,000 MW of generation capacity was added in the Tenth Plan period (2002-07), against a target of about 41,000 MW. The government plans to invest $250 billion in power infrastructure in the next five years. It should make every dollar invested and every unit of power generated count, if it is to reconcile its pursuit of growth with energy supply and demand.

With the growing population, can India support its people with the current amount of energy they have?