India can be a shining example to solve energy crisis by
gandhian approach
Bhamy V. Shenoy
Can we afford to wait for the new technology to save us from the catastrophic energy crisis of the future? The tyranny of legacy investment in energy infrastructure has already sealed our fate. Sustainable living should not remain as a simple slogan. It should be the main deciding factor influencing India's developmental and energy policies.
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India can be a shining example to solve energy crisis by gandhian approach
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he world has been experiencing energy crisis since 1973 when the first oil crisis resulted in the quadrupling of the oil price. However when the oil prices collapsed in 1986, energy crisis went off the international agenda. The environmental crisis started to draw greater attention. The phenomenon of greenhouse gases resulting mostly from the increasing use of fossil fuels (coal, oil and gas) has now been accepted by majority of scientists as a cause for global warming and climate change. This has put a different emphasis on the energy crisis. Developing renewable energy sources to reduce dependance on fossil fuels became the new mantra. The recent crude oil price increase during 2004-2008, when oil prices reached a high of $147 per barrel again reminded the world of the forgotten energy crisis. For us in India and especially for the poor, energy crisis is not a new experience. We have been suffering from it even before the independence. While petrol lines were shocking instances for the US in 1973, kerosene lines to secure meagre quota of subsidized product has ever been a daily scene both in rural and urban areas in India. Need for Different Development Mantra
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A developing country like India with more than a billion strong population and fast expanding economy can play a critical role by showing a new paradigm of development to manage with less energy. It is a development based on India's much celebrated civilizational message of "simple living and high thinking". It is a message demonstrated by Mahatma Gandhi not just in words but in actual deeds. To find solution to the energy crisis, we should question the very basic premise of the need for ever increasing gross domestic product to achieve the nirvana of development. This concept of development requiring mindless consumption of unsustainable natural resources is the root cause of the current energy crisis. It is immaterial whether we believe in the veracity of such dire predictions of population explosion of Malthus or Limits to Growth of Club of Rome or the end of cheap oil era of peak-oil theoreticians or the bottomless-well energy forecasts of ever optimistic technologists. Unfortunately, despite all the advantages - like, maintaining a rural based economy, being not addicted to oil, having potential to transform to knowledge-economy from agricultural economy skipping industrial economy, and inheriting the values from more than 5000 years old civilization - Indian political system is influenced more by the invisible hand of Adam Smith's Wealth of Nations than by Mahatma Gandhi's "My Experiments with Truth". World Energy Crisis Versus India's Energy Crisis Many developing countries are confronted with a crippledmulti-dimensional energy crisis. They are subject to vagaries of global oil market and high volatility of oil price. Energy security is a major factor stifling the economic growth, frequently igniting political crisis, problems with governance and civil unrest.
India is not an exception to this. The good news for India is that while the country is one of the fastest growing economies in the world, its energy consumption has not been outstripping economic growth. This is because of two reasons. Much of India's growth has been spurred by knowledge based IT sector and servicedriven industries. Also India's economic growth has not succeeded in solving the energy crisis of its poor population. Significant portion of the poor are continuing to depend on non commercial energy sources like fire wood and agricultural waste while rich and the middle class are getting "addicted" to hydro carbon based energy sources.
The concept of development that demands mindless consumption of unsustainable natural resources is the root cause for the current energy crisis India's energy consumption has increased from 415 million tons of oil equivalent (mtoe) in 1998 to 565 mtoe in 2007 at the rate of 3.5% per year. This is considerably less than the GNP growth of 6.7% per year. This impressive energy and GNP relationship does not reveal the disturbing trends in India's energy sector. For developed countries when they were at the so called economic take off point, energy/GNP ratio was more than 1.0. The poor in India accounting for more than 70% are continuing to depend mostly on the non commercial bio mass and agricultural waste when the rich in India is increasing the consumption of commercial energy sources. The Planning Commission of India, in its 2006 Integrated Energy Policy Report (IERP) has forecasted India's energy demand to be around 1536 to 1887 mtoe by 2030 depending upon GDP growth, success of energy conservation efforts, movement in oil prices, expansion of nuclear and renewable energy sources, implementation of energy policies by the government etc. The Planning Commission blindly followed the example of the industrialized countries in developing the energy plan. EIA and IEA not Predicting Energy Transition from Fossil Fuel Dependance The recent world energy outlook for 2030 published by International Energy Agency (IEA) in 2009 and Energy Information Agency (EIA) of the US government in 2010 are forecasting world energy consumption to increase by about 40%. Both these reports also forecast that the world would be needing about an additional 20 million barrels of oil per day by 2030. While reference case crude oil price for 2030 is $115/barrel in the case of IEA, it is $125/barrel (in 2008$) in the case of EIA. Oil price prediction made by EIA for 2025 in 2005 was only $35/b (in 2003$) in contrast. Despite considerably higher oil price forecast, both are not optimistic about the contribution of renewable energy sources like wind, solar, etc which is unlikely to be not more than 5% by 2030.
As mentioned earlier, India in many respects is just beginning its journey on the path of the 'development'. We have a rare opportunity to set a different development paradigm. Influenced by Chinese impressive 'development', expert recommendations from international institutions like the World Bank, and general craze for ever expanding consumer material wants, India has also adapted the unsustainable 'development' model. India should have devoted more time and its enormous talents in developing a viable energy strategy. Instead, the government is trying to manage the current energy crisis impacted by high prices. Indian Government was Fiddling While Oil Companies were Bleeding Instead of discouraging the consumption of petroleum products during the relentless crude oil price increase between 2003 and 2008, India reduced taxes on petroleum products besides subsidizing them. This resulted in under recoveries of Rs 299,000 crores for the oil marketing company. India was one of the few countries to adapt such a misguided pricing strategy by reducing prices!
In just four years between 2006 and 2010, the Indian government has had three high-level committees to recommend how petroleum product prices should be determined. All three gave similar recommendations: the government should liberalize petroleum product prices to be set by market forces and they should reform fuel-price subsidies and use other, more effective policies to improve the welfare of the poor.
India can be a shining example to solve energy crisis by gandhian approach
In 1973, after the huge price shock it was predicted that the world will start making a transition from oil to renewables. Now we are in 2010 and we do not see any such transition taking place even during the next 20 years based on these two forecasts. There is customary discussion on how the base case will impact global warming and what should be done to limit it. But the dismal conclusion is that both these studies do not expect any dramatic change in future energy scenario. Shares of different fossil versus non fossil fuels will remain more or less the same as today. This is because the developed countries have made huge investment in the fossil fuel based energy infrastructure and initiating any change is politically suicidal. Developing countries too blindly follow their development path. For example, in its race to compete with the developed countries, China has already invested enormously in such infrastructure. It is already buying more cars than the US and the world is admiring it for its achievement!
The public sector oil marketing companies were losing money by crores every day while private companies closed down their petrol stations. This resulted in reducing the government budget available to improve critical sectors such as health, education and infrastructure. These are strategic sectors to reduce poverty. In a totally nontransparent and adhoc manner the government forced the government-owned upstream companies, ONGC and Oil India, to subsidise public sector oil marketing companies.
The first committee was commissioned in 2006, as international crude oil prices were climbing up, and oil companies were losing money because of the price controls. The government asked Dr. C. Rangarajan, former Chairman of the Economic Advisory Council to the Prime Minister, to look at the pricing and taxation of petroleum product prices. The committee warned that if the government failed to liberalize prices, oil-marketing companies would become non-viable. In 2008, as crude oil prices continued to increase, and the financial situation of oil companies worsened, a second high-level committee was organized under the chairmanship of Shri B. K. Chaturvedi, a former member of the Planning Commission. It suggested very strongly that there should be no subsidies on kerosene and liquified petroleum gas (LPG), and that the poor could be more effectively helped through a smart card or coupon system. In 2009, the government instituted a third committee. It was headed by Dr. Parikh, also a former Planning Commission member. in his Integrated Energy Report of 2006 he had already recommended the liberalization of petroleum product prices and the distribution of subsidized kerosene through a smart-card system. Naturally his recommendations were along the same line.
Oil sector subsidies are resulting in generating more than Rs 30,000 crores per year of black money. This is the mother of all corruption in India which has failed to attract the attention of the public. Finally in June, 2010, the government decided to allow the oil companies to set prices for petrol based on international market while continuing to control diesel price and subsidizing kerosene and residential LPG. While this is a small help to the oil marketing companies, they will continue to lose money because of huge subsidies on LPG and kerosene. Oil sector subsidies are resulting in generating
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Developed countries have made huge investment in fossil fuel based energy infrastructure and initiating any change is politically suicidal. Developing countries blindly follow their path.
India can be a shining example to solve energy crisis by gandhian approach
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more than Rs 30,000 crores per year of black money (before the recent price increase, it was Rs 40,000 crores per year). This is the mother of all corruption in India which has failed to attract the attention of the public. Basic Features of Energy Policy to Avoid Future Crisis Despite all the obvious problems, opposition parties protested vehemently against the decision of the government to liberalize the petroleum pricing even partially. The ruling congress party was no different when it was in the opposition. Since politicians belonging to all parties are direct or indirect beneficiaries of the long prevailing corrupt system in the oil sector, no one calls for oil sector reforms. Oil sector has become the new sacred cow to be milked and not reformed to minimize the energy demand. Indian government should give the highest priority to rationalize energy prices -oil, gas, coal and power as recommended in IEPR. In every way possible the government should promote public transportation by levying heavy taxes on private cars and promoting railways on a war footing. In comparison with the developed world, India's car ownership is still very low and we should be proud of this. Luckily India is not yet wedded to private vehicles, nor dependent on automobile sector economy. While India can be rightfully proud of Tata's latest $2000 car which has taken the auto world by surprise, it will be a great disaster when the middle class Indians start buying it in millions and India joins the rank of 'developed' world like China, which is close to achieving that status. During the recent financial melt down, the US government became painfully aware of the importance of the auto sector for economic recovery. Despite all its faith in basic principles of capitalism, it could not allow auto companies to go bankrupt. But in future when energy becomes scarce and auto industry faces the inevitable shut down, autodependent economies will go through wrenching pain. Fortunately India is still not close to reaching such dependency on auto industry for economic viability. India should have a well defined plan to reduce ownership of private vehicles and should promote public transportation. Even in IEPR there is no such strategy since it is influenced by the Western concept of development.
The goal of development should not be ever increasing GNP, but minimizing the number of people living below the poverty line in the shortest possible time. Not only India should stop the process of urbanization, it should seriously consider adapting policies of reversing the urbanization. Most Indian cities have reached the critical stage of complete break down, and life for most in such cities is unbearable because of traffic congestion, lack of drinking water, frequent brown outs and black outs, ever present garbage etc.
Human Development Index should be redesigned based on percentage of people living below the poverty line, educational achievement, longevity, discretionary time available to spend with family and friends, and inversely proportional to per capita energy consumption, murder rate, violent crimes and harm done to environment. Sustainable living should not remain as a simple slogan. It should be the main deciding factor influencing India's developmental and energy policies. The competition among countries should be not to increase per capita income or per capita energy consumption, but to have the lowest number of people below the poverty line. Human Development Index should be redesigned based on percentage of people living below the poverty line, educational achievement, longevity, discretionary time available to spend with family and friends, and inversely proportional to per capita energy consumption, murder rate, violent crimes and harm done to environment. These are the the goals which Indians are familiar with thanks to our much celebrated civilization. By incorporating these at this point of our development, we can avoid the energy crisis and become a shining example to the world. Dreaming Utopia or Frightening Prophesy I will not be surprised if readers conclude that I am dreaming while recommending the adaption of a different development model for India to solve India's energy crisis. I could have quoted the dreadful impact of peak oil cultists or frightening consequences of global warming and climate change to impress upon the need to reduce energy consumption. But such warnings in the past have turned to be erroneous as a result of discovery of new oil and gas reserves ( since 1900s every now and then there have been predictions of the world running out of oil) or development of new technology. Even now there are scientists and energy experts predicting that there would be some breakthroughs to make nuclear energy or cellulosic ethanol or solar energy economical and bountiful soon and we need not worry about transition. Can we afford that luxury of waiting for technology to save from future catastrophic energy crisis? The tyranny of legacy investment in energy infrastructure has already sealed our fate. India may not find the kind of political leadership to adapt the development paradigm presented here. (Mr Bhamy V Shenoy is Convener, Mysore Grahakara Parishat, former Board Member of Georgia's National Oil Company and Honorary Senior Advisor at Center for Energy Economics at University of Texas, Austin.)