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OGEL Cover v2.6
Ensuring Sustainable Energy Security:
Challenges and Opportunities for India
by S.K. Kar and P.K. Sinha
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 Ensuring Sustainable Energy Security:
Challenges and Opportunities for India
Sanjay Kumar Kar1and Piyush Kumar Sinha2

Abstract:

Energy has been globally recognized as one of the most critical inputs for economic growth and
development of any civilization or society. There is a linear and a bi-directional relationship
between economic prosperity and energy consumption. In the global competitive scenario
growth of an economy is primarily dependent on availability of environment friendly energy at
competitive prices. Also, the productivity of industrial and manufacturing, agricultural, and
services sectors are very much reliant on energy available at competitive prices. These sectors
are considered to be basic drivers of economic growth of any country. Availability of energy with
desired quality at affordable price holds key to sustainable development and quality of services
in the field of industrial productivity, education, health, and most importantly food security.
Considering last decade economic growth most economists see India as one of the economic
powerhouses of the future. It has the economic stability to survive the recessionary pressure and
continue to have stable growth. These are some of the reasons why many of them are projecting
India as the second largest economy just behind China by 2050. This necessitates higher energy
consumption to support the productivity in different industries and services sector. With limited
availability of non-renewable energy in the domestic market the country is forced to be over
dependent on imported energy. Long term exposure to imported energy means economy remains
vulnerable to oil shocks leading to financial un-stability, economic and social unrest. Long
term energy security remains as one of the top most priority for government, industry bodies and
strategic policy makers in India. This paper analyses the constraints of ensuring affordable
energy accessible to all citizens and industries. The paper suggests ways to remove constraints
and move forward to ensure long term energy security in India.

Keywords: Energy, Energy Security, Renewable Energy, Sustainability.

                                                            
1
 Assistant Professor, Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology 
Email: skar@rgipt.ac.in 
2
 Professor, Marketing and Chairman, Centre for Retail Indian Institute of Management Ahmedabad 

1 
 
 1. Introduction

Post liberalization, privatization, and globalization era, modern India has become the
centre of attraction for global eceonomies and communities, investors, and multi-national
corporations. All of them want to capitalize on the massive existing and potential
opportunites offered by 1.3 billion consumer base. The second most demographically rich
country striving forward to reap the much talked about demographic dividend by
developing symbiotic relationship with the global community. In the process energy
plays the most important role as an enabler and integrator. In 2012 India (563.5 Mtoe3)
was the fourth largest consumer of primary energy in the world after China (2735.2
Mtoe), US (2208.8 Mtoe) and Russia (694.2 Mtoe) (BPSR, 2013). According to the
World Bank statistics in 2011 per capita energy use (kg of oil equivalent) in India stood
at 614 which was much lower as compared to the United States (7032). The lower per
capita energy consumption could be an outcome of income disparities prevalent in India.
The Planning Commission (2013) estimates suggest that, in 2011-12, 269.3 million
Indians were below the poverty line (see Planning Commission 2014), a significant
improvement from the figure 407.1 million(2004-05). It is interesting to note that India’s
per capita energy consumption has been steadily increasing, albeit from a lower base.
Considering the growing economic activity along with a large population base and higher
population growth rate (1.4 per cent) total energy requirements may push India to the 3rd
position in the near future. But to meet the increasing demand the domestic energy
resources are inadequate. This is evident from the facts that in 2012, India’s import
dependence on oil, coal, and natural gas stood at 75.5 per cent, 23 per cent, and 37.4 per
cent respectively. Keeping the future socioeconomic growth of the country in mind, it’s
expected that the dependence on oil and gas is likely to continue at the same rate or
increase. It is safe to assume that higher level of dependence on imported energy is
considered as posing serious threat to supply security for the country. This has been
acknowledged across various platforms. Therefore, in recent times energy security has
been one of the most critical and debated issues for the policy makers and industry
leaders in India.

Energy Security comprises of two dimensions- affordability and availability. Any source
of energy that is harnessed to exploit has to meet the above pre-requisites in order to be
viable for any economy. Many of the energy sources in India are found wanting in terms
of availability and affordability to the common man. Conventional energy sources like
petroleum and natural gas are inadequately available in the domestic market. At the end
of 2012 India had only 7 per cent, 0.3 per cent, and 0.7 per cent of global coal, petroleum,
and natural gas reserves respectively. But consumption data as given in Table 1 suggests
that India had a global consumption share of 8 per cent, 4.2 percent, and 1.6 per cent of
                                                            
3
 Million Tons of Oil Equivalent

2 
 
 coal, oil and natural gas respectively. As the consumption share is higher than reserves
and production share, so India is a fossil fuel deficit country. It is pertinent to bring to
notice of policy makers that availability alone can’t resolve the problem unless
affordability issue is addressed appropriately. Often policy makers and government
beileve subsidy enhances affordability but the practice is debatable. We belive that
subsidy may improve short term affordability but can’t improve income status. One
subsidy regime leads to another and finally it becomes part of the ecosystem. Therefore,
social inclusion and economic progress need to marry each other to meet the twin
objectives of affordability and accessibility.

Table 1: Reserves, Production and Consumption of Conventional Energy in India (at the end of 2012)
Coal Oil Gas
Share Share Share
(%) of (%) of (%) of
India World India India World India India World India
Reserves (Mtoe) 40400 573958.7 7.0 777.5 227640.7 0.3 1170 168570 0.7
R/P Ratio (Yrs) 100 109 17.5 52.9 33.1 55.7
Production
(MMT/Mtoe) 228.8 3845.3 6.0 42 4118.9 1.0 36.2 3033.5 1.2
Consumption
(Mtoe) 298.3 3730.1 8.0 171.6 4130.5 4.2 49.1 2987.1 1.6
Source: Compiled from BP Statistical Energy Review 2013

Because of energy demand-supply gap in the country, most part of rural India finds
difficulty in accessing continuous supply of electricity. The current electrification status
suggests that all Indian towns and 83 per cent of villages are electrified, but most of these
towns and villages suffer from discontinuous supply of electricity. Similarly, getting a
cooking gas connection is found to be very difficult in most part of rural India. According
to the basic statistics of Ministry of Petroleum and Natural Gas (MOPNG), as on 1 April
2012, 137.119 million consumers had Liquefied Petroleum Gas (LPG) connections in
India. This means that only one LPG connection per 11 persons, which would be about
45 per cent LPG penetration in the country. The penetration level in the rural areas is
about 20 per cent compared 88 percent (Chandra, 2010) in urban areas. Even with this
meager penetration level in rural areas, it is not very easy to get a timely supply of LPG
due to various supplies and logistic constraints. Same story follows for access to natural
gas. Currently about 2.3 million households have access to piped natural gas (PNG),
mostly in cities. So the rural India has limited access to electricity, natural gas, and LPG
connections.

Fortunately the country is blessed with plenty of renewable resources; the total potential
of generating energy from renewable is about 246 Gigawatt (GW). As given in Table2
Solar and Wind potential contributes 100 GW each.

3 
 
 Table 2: Renewable Energy Potential in India
Resource Estimated Potential (MW)
Solar Power 100,000
Wind Power 100,000
Small Hydro Power (up to 25 MW) 20,000
Bio-Power: Agro-Residues 17,000
Bio-Power: Cogeneration - Bagasse 5,000
Waste to Energy: Municipal Solid Waste to Energy 2,600
Waste to Energy: Industrial Waste to Energy 1,280
TOTAL 2,45,880

Source: http://data.gov.in/dataset/estimated-renewable-energy-potential

Recent power installation status report suggests that as on September 30, 2013, total
installed capacity of power utilities was 228721.74 MW and renewables4 contributed
only 12 per cent. Other major contributors are coal, hydro, and gas with a share of 59 per
cent, 12 per cent, and 9 per cent respectively. The minor contributors are nuclear and
diesel with a share of 2 percent and 1 per cent respectively. Currently, renewable sources,
including large hydro power capitalize on only 12 per cent of the total potential. To
improve the renewable contribution India plans to add over 30 GW of renewable energy
to its energy mix in the next 5 years (PIB, 2013).
 
Currently energy from most of the renewable sources is relatively costly, or suffers from
inadequate supply which directly affects affordability and accessibility. This could be due
to lack of affordable and accessible technology. Breakthrough technology innovations
and successful commercialization of such innovations could make renewable energy
accessible and affordable to all. Ensuring sustainable sources of energy affordable to
every Indian could be the next big thing to happen in the country. According to the
International Energy Agency  (2010), India requires to invest a total of $ 800 billion in
various stages by 2030 to meet its energy demand. The increasing pressure of population
and higher consumption of energy in different sectors of the economy is an area of
concern for India. Driven by the rising population, expanding economy, and a quest for
improved quality of life, the use of coal for electricity generation in India is expected to
increase by 2.2 per cent per annum during 2002–25, thus requiring an additional 59000
Megawatt (MW) of coal-fired capacity. It is quite evident from the data that coal would
continue to be the predominant source of energy in India.

With a prime objective of exploring and exploiting domestic hydrocarbon resources New
Exploration Licensing Policy (NELP) was introduced in 1998. With the launch of NELP,
exploration and production of crude oil & natural gas has increased, but it is not sufficient
                                                            
4
 Renewable Energy Sources (RES) include Solar, Wind, Small Hydro Project (25 MW), Biomass Power, and Urban & Industrial Waste
Power.  

4 
 
 to meet domestic requirements. For the last couple of years Liquefied Natural Gas
(LNG) import has been increasing. According to the Petroleum Planning Analysis Cell
(PPAC), India imported 10.90 Million Metric Tons (MMT) in Financial Year (FY) 2011-
12 compared to 0.247 MMT in FY2003-04.

It is understandable that over dependence on importing hydrocarbon for domestic energy

requirements may cause serious inconvenience in future; especially weakening of Indian
currency against the USD. Ever increasing crude and natural gas price along with higher
import dependence would widen the current account deficit and put significant financial
pressure on the economy. Therefore, ensuring sustainable energy security of the country
driven by domestic energy is absolutely vital for long term growth and development of
India. In order to ensure energy security, there is an urgent need to work on exploring &
exploiting domestic hydrocarbon resources, acquiring hydrocarbon assets outside India,
harnessing renewable, energy conservation and efficient management of supply-side and
demand-side of the energy.

2. Energy Security

Energy has come to be known as a strategic commodity and any uncertainty about its
supply can threaten the functioning of Indian economy. Achieving energy security in this
strategic sense is of fundamental importance not only to India’s economic growth, but
also for the human development objectives (MOSPI, 2013) that aim at the alleviation of
poverty, unemployment and meeting the Millennium Development Goals (MDGs).
Energy security refers to ensuring the supply of energy to every individual irrespective of
their paying ability to effectively meet their energy need in a safe and convenient manner
at a competitive and affordable price (IEA, 2012) at all times and with a prescribed
confidence level considering shocks and disruptions (IEP, 2008).

Integrated Energy Policy aims to bridge the prevailing gap in the demand and supply of
energy in short, medium and long term perspective. The economic growth rate in India
has been above 7 per cent for over a decade and about to continue growing at the same or
better rate over the next decade. Economic slowdown may happen and continue for a
couple of years. In order to deliver a sustained growth rate of 8-9 per cent per through the
next 20 years, till 2034, and to meet the life line energy requirements of all citizens- India
needs, at the very least, to increase its primary energy supply by 3-4 times and its
electricity generation capacity by about 6 times (Shahi, 2006). Energy demand has been
constantly increasing due to increase in population, industrialization and rising middle
class population. According to Applied Economic Research (NCAER) middle class
population would be 267 million (53.3 million households) in India by 2015-16 and the
number would reach 547 million (113.8 million households). As per NCAER, the current

5 
 
 middle class household (31.4 million) that represents only 13.1 per cent of India's
population currently own 49 per cent of the total number of cars in India, 21 per cent of
TVs, 53.2 per cent of computers, 52.9 per cent of ACs, 37.8 per cent of microwaves and
45.7 per cent of credit cards (ET, 2011).

The growing middle class population is likely to drive growth of energy consumption
also. Industrial energy demand is projected to touch 250 Mtoe by 2030. Manufacturing
and services sectors have shown a strong growth over the last decade. In the recent past,
during the economic slowdown in Europe, and especially the Greece economic turmoil
impacted the global economy; so also Indian Economy. However, the long term growth
prospects seem to be robust. As per World Bank data- India’s gross domestic savings as
a share of GDP reached close to 34 per cent in 2010, compared to 25 per cent in 2001
creating a strong domestic capital base to support investment-led growth in future.
Needless to mention high sustained economic growth demands for sustainable energy and
ensuring that is challenging. The next section focuses on reasons and challenges of
ensuring energy security in India.

3. Challenges of Ensuring Energy Security

India, the world’s second most populous country and 10th largest economy requires
energy to sustain the economic growth and improve the life of its every citizen. The
country has been facing several challenges to ensure availability of energy at affordable
price to every citizen and industry. Some of the reasons and challenges are discussed
further.

3.1 High Import Dependence on Fossil Fuels 

The energy requirements of Indian economy are estimated to increase substantially by
2031-32. According to Integrated Energy Policy, for a 9 per cent growth over a sustained
period, imports of crude oil in 2031-32 may be between 362-520 MMT with import
dependence of 91-94 per cent. For natural gas, it might be 25-135 Mtoe with an import
dependence of 20-57 per cent of supply. Coal imports may be between 300- 736 Mtoe
with an import dependence of 34-57 per cent. As the import of fossil fuels directly linked
with the domestic production the scenario may change in future depending on new
exploration and production activities of crude oil, coal-bed methane, natural gas, and
coal. However, limited domestic reserves coupled with the lack of efficient management
of available resources could force the country to be over dependent on import of fossil
fuel. Such a scenario would not only hurt energy security, but also impact the balance of
trade and balance of payment. Any significant change in international price can lead to
high inflation and lower growth and finally may dent domestic economic stability.

6 
 
 3.2 Inadequate Exploration and Production (E&P) Activities 
Prior to NELP there was hardly any investment by private companies in the exploration
and production activities. E&P business is investment intensive and massive investment
is needed. Even after NELP the exploration and production story has not changed much.
High percentage of acreages have not been translated into productive oil & gas fields.
The Government’s opening the E&P sector expected greater participation from the
foreign companies but at the end of ninth round of NELP not much success has been
achieved (see Table3).

Table 3: Production Sharing Contracts Signed

NELP-I NELP-II NELP-III NELP-IV NELP-V NELP-VI NELP-VII NELP-VIII NELP-IX

(1999) (2000) (2002) (2003) (2005) (2006) (2008) (2010) (2012)

Deep 7 8 9 9 6 21 11 8
water

Shallow 16 8 6 1 2 6 7 11 2
Water

On-land 01 7 8 10 12 25 23 12 11

PSC 24 23 23 20 20 52 41 31 13
Signed

Source: Compiled from Annual reports of Directorate General of Hydrocarbons (DGH)

According to media reports serious doubts have been raised over DGH’s role in fair
allocation of blocks. But we are not sure to what extent such doubts are true. The
government encourages higher participation from the private players in petroleum and
natural gas field developments, coal-field development and coal-bed methane extraction.
The state owned enterprises have been little slower in developing the fields allotted and
unable to provide an adequate supply. So the idea of bringing private players has been
promoted to infuse much needed investment and thus the fast track E&P developments.
Despite all efforts NELP-XI round couldn’t achieve the desirable result in terms of
production sharing contracts signed- which is clearly evident from the figures presented
in the Table3. In order to bring higher investment and create win-win situation the
government was seriously working on the open acreage licensing policy. The principal
objective of planned Open acreage licensing policy (OALP) was to enable bidders to bid
for blocks on offer at any time of the year to make the process much more convenient and
reduce unnecessary delay. The data for these blocks would be made available to the
bidders through the National Data Repositories (NDR). However, due to various reasons
the government decided to continue with NELP and NELP-X round for auction of 86 oil
and gas blocks is likely to be launched by January 2014 (DNA, 2013).

7 
 
 3.3 Lack of Sufficient Storage Facilities
To ensure energy security various risks are to be handled and mitigated. The threat of
energy security increases by manifolds: (1) due to lack of domestic supply and (2) due to
unavailability of energy sources/ uncertainty of availability of imported energy.
Insufficient domestic production has been negatively impacting the energy security of the
nation. In 2012 many of power producers faced a shortage of coal leading to almost
stoppage of power production. Supply risks from domestic producers of non-renewable
energy like- coal, natural gas and crude oil could seriously damage short term and long
term energy security of the country. Inadequate storage facilities in India mean that the
nation is not capable of handling any emergency/shortage of supply during a crisis.
About 75 percent of the crude oil requirement of the country is imported and there are
hardly any steps taken for its storage. The oil companies have their own storage capacity
and such storage is primarily to address very short term need for those companies. During
the economic crisis, India may suffer from a shortfall of crude oil for refining and will
eventually have to purchase it at higher prices leading to decline in the country’s
economy.

3.4 Electricity for All

India has a major part of the population (68.84 percent) living in the rural areas. Just over
half of the rural India uses electricity as its main source of lighting and 43 per cent of
rural households still use kerosene to light their houses (TOI, 2012). As of September 30,
2013 a total number of 3227villages (CEA, 2013) were still to be electrified. As per the
new definition an electrified village is considered to be having transmission and
distribution lines and at least 10 per cent households are electrified. A significant amount
of efforts is needed not just to get a certificate of electrifying all villages, but truly
making electricity available for 24x7. The Rural Electrification Corporation (REC) has
been working continuously in this direction. For those villages or hamlets for which
electricity couldn’t be provided under Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY), the Ministry of New & Renewable Energy (MNRE) will provide basic
lighting facilities to each household. CEA data suggest that by November 30, 2013
RGGVY electrified or provided intensive electrification to 3, 29,487 villages in India.
Still a significant amount of work needs to be done in terms of complete village
electrification with consistent power supply. Even the industries face serious power
supply crunch in India and this certainly negatively impacts their productivity. According
to a recent study conducted by FICCI, India loses $68 billion of its Gross Domestic
Product due to electricity shortages (BT, 2013). The present power scenario of the
country is not satisfactory, as the existing power shortage in the country is at 8.5 per cent
(PHD, 2011) and Economic Survey of India (2013) estimates a peak shortage of 9 per
cent.

8 
 
 3.5 Underutilized Renewable Resources 
Renewable sources of energy as a part of energy mix are increasingly getting important in
the long term planning for the energy security of India. The country has been gifted with
diversified renewable energy resources such as solar and wind, however it is very evident
that the resources have been underutilized till date. The gross wind power potential has
been estimated at around 100 GW in the country; a capacity of 19933.68 MW up to
October 31, 2013 has so far been added through the wind, which places India in the fifth
position globally. By 2020 India is expected to have 65 GW of wind power in operation.
At the end of 2012, the states like Tamil Nadu (7173MW), Gujarat (3093MW),
Maharashtra (2976MW), Rajasthan (2355MW), Karnataka (2113MW), Andhra Pradesh
(435MW), Madhya Pradesh (386MW), and Kerala (35MW) were driving the wind
energy capacity installation (MNRE, 2012-13, p.15) and production. It is believed that
the cost of renewable energy is comparatively higher than non-renewable sources of
energy; which is responsible for the lesser penetration of renewable energy in India. The
belief seems to be closer to reality because in most of the cases the comparison ignores
the explicit or hidden subsidies for competing fuels. On top of that the environmental
externalities have been partially or completely ignored. For any economic rationality we
should consider all explicit, implicit and associated costs of competing fuels. Investors
rarely include critical environmental costs in the bottom line used to make decisions. On
the other hand the renewable energy projects are comparatively smaller and costly in the
short term. Therefore, the renewable energy sector seems to be unattractive for investors.

Despite the huge potential for renewable sources, India is lagging behind China.
Government of India has shown a strong desire to promote renewable power generation.
In 2009, the Government of India implemented a Generation Based Incentive (GBI)
scheme for grid connected wind power projects. A GBI of Rs. 0.50 per kWh, with a cap
of approximately $33,000 per MW per year, totaling $138,000 per MW over 10 years of
a project’s life is being offered under this scheme. The GBI is over and above the tariff
approved by respective State Electricity Regulatory Commission (SERC) and is
disbursed on a half yearly basis through the Indian Renewable Energy Development
Agency (IREDA).

9 
 
 Table 4: Cumulative Deployment of Various Renewable Energy Systems/ Devices in India as on
October 31, 2013
Cumulative
Deployment Total Achievement up
Target for to October 31,
Renewable Energy Program/ Systems during October, Deployment
2013-14 2013
2013 2013-14

I. POWER FROM RENEWABLES:

A. GRID-INTERACTIVE POWER (CAPACITIES IN MW)

Wind Power 2500 52.25 880.73 19933.68

Small Hydro Power 300 20 114.5 3746.75

Biomass Power 20 1284.8

Bagasse Cogeneration 405 55.05 2392.48

Waste to Power - Urban 3

Industrial 20 NA NA 99.08

Solar Power (SPV) 1100 NA 395.13 2079.97

Total 4325 72.25 1468.41 29536.76

B. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ)

Waste to Energy -Urban 3 3 118.57

West to Energy - Industrial 10

Biomass(non-bagasse) Cogeneration 80 2.85 22.54 493.69

Biomass Gasifiers - Rural 1 16.924

Biomass Gasifiers - Industrial 9 4.74 146.32

Aero-Genrators/Hybrid systems 1 0.03 2.14

SPV Systems (>1kW) 40 14.32 138.99

Water mills/micro hydel (No. 2131) 500 10.65

Bio-gas based energy system 2

Total 143 5.85 44.63 927.284

II. OTHER RENEWABLE ENERGY SYSTEMS

Family Biogas Plants (,000) 1.1 0.15 46.83

Solar Water Heating - Coll. Areas

(Million m2) 0.6 0.07 0.31 7.31
Source: http://www.mnre.gov.in/ [ Accessed on November 27, 2013]

10 
 
 According to Indian Wind Energy Outlook (2011) the GBI scheme was expected to
broaden the investor base by facilitating the entry of large independent power producers
and attract foreign direct investment (FDI) to the wind power sector. In addition to that
GBI would bring level playing field for all classes of investors, bring higher efficiencies
and provide a framework for transition from a purely investment based incentive to an
outcome based incentive. The GBI scheme was expected to increase actual wind energy
production rather than installation.

There have been a few early moves on offshore wind in India. Corporate behemoth like
Oil and Natural Gas Corporation (ONGC) announced its plans to tap offshore wind
power. Such moves would certainly excite other corporate houses to enter the wind
market. MNRE has been proactively encouraging private, public and government
organizations produce, distribute, and consume renewable energy. Deployment of various
energy systems/devices primarily driven by wind power (see Table4) has been steadily
increasing.

3.6 Energy Efficiency and Energy Conservation 

Energy efficiency along with energy conservation is believed to be critical in pursuit of
improving energy access and use. Energy efficiency and conservation is primarily an
outcome of demand-supply scenario. Increasing demand for energy consumption is
driven by higher population growth and sophisticated social life. Shortage of energy
necessitates efficient use of energy and cutting down avoidable energy consumption. The
concept of efficiency can be applicable in energy extraction, transportation, conversion,
and in consumption. In several sectors the same level of productivity can be achieved
using alternate means that consume less energy. The major areas where it can make a
substantial impact are refining, mining, electricity generation, electricity transmission,
electricity distribution, transport equipment, pumping water, industrial production and
processes, mass transport, building design, construction, lighting and household
appliances, heating ventilation and air conditioning. Especially in summers cooling
consumes the maximum electricity. It is clearly understandable that the impact of a unit
of energy saved by any user is far greater than a unit produced as it saves energy across
the entire energy value chain.

India has been already suffering from electricity deficit and fuelling this concern is the
hurdle of transmission & distribution (T&D) losses. According to Central Electricity
Authority (CEA) by the end of September 2013, India had an installed capacity of
228721.73 MW and World Bank estimates indicate that transmission losses (in 2011)
were about 21 percent. The T&D losses in India are one of the highest compared to
Korea (3 per cent), China (6 per cent), U.S (6 per cent), Italy (7 per cent), and U.K (8 Per
cent). As per CEA observations such high T&D losses are largely due to outright theft

11 
 
 and un-metered supply. Huge T&D losses have been a burden for the companies or the
consumers. At times such burdens translate into higher tariff and passed on to the final
consumer. The total T&D loss is estimated to be equivalent to 1.5% of India’s GDP
(CEA, 2010) or approximately $17 billion in terms of 2010 GDP. IEA
(2012) research suggests that T&D losses have a close linkage to private investment;
states with high losses have low private share in power capacity. Investors view high
T&D losses not only as a risk undermining commercial viability, but also as showing
weak institutional credibility and high regulatory risk. Reduction in the T&D losses
would certainly help India in improving energy access, efficiency, and energy security in
the long run.

Importance of energy efficiency and conservation has clearly come out from the various
supply scenarios and is again visible from government initiatives. The concept of
efficiency can be applied across the entire energy value chain starting from energy
extraction to final consumption. Across all stages of energy production, transportation
and consumption certain amount of energy loss is inevitable. So, conscious efforts should
be made to reduce losses and wastage of energy in all spheres of life. For example, a
leakage of one drop of oil per second amounts to 2000 litres/annum, which could be
avoided with careful observations. According to the Petroleum Conservation Research
Association (PCRA), by controlling and dropping 10 per cent excess air in furnaces could
provide 1 per cent savings of furnace oil. Therefore, PCRA has been actively promoting
energy conservation and efficient use of energy. It has been making spirited efforts to
educate the masses about the importance, methods, and benefits of conserving energy.
Over the years PCRA has developed and implemented educational campaigns for
industrial, agricultural, transport and domestic customers. In order to make a desirable
impact on the target audience PCRA has been pursuing 360 degree communication for
greater effectiveness. As a strategic move electronic, print, TV, and outdoor media have
been used to promote these campaigns. In addition to that field interactive programs like-
seminars, technical meets, workshops, consumer meets, van publicity, and farmer meets
have been regularly conducted for efficient and effective dissemination of conservation
messages and demonstration of conservation techniques. In order to enhance India’s
chances to achieve the goal of energy security the government should take both
preventive and reactive measures as and when needed.
 
3.7 Uniform Pricing and Subsidy Removal 
The biggest and most debated issues related to energy are artificial pricing and offering
subsidy. The pricing of energy products has long been an issue in India due to subsidy
given by the government and different tax structure admissible in various states, leading
to non-uniform pricing. As defined by the government, sensitive products like kerosene,
diesel, and LPG have been heavily subsidized for a long time. Such subsidies put

12 
 
 significant financial burden on the exchequer and the industry. Such practices encourage
users to consume more energy and may work against efficiency, as it is available below
the market price. Of course subsidy schemes are devised to fulfill the social and political
objectives of many stakeholders. However, such objectives need careful evaluation and
should not sacrifice resource efficiency.

It has been observed that giving subsidy for diesel encouraged many consumers to move
to diesel driven vehicles purely because of the cost benefits. There has been strong
arguments in favour of removing subsidies for many petroleum products and thereby
bringing price uniformity for efficient utilization of resources. But, it is easier said than
done; as such decisions are not free from political turbulence. However, the UPA
government has been taking bold steps to completely de-regulate diesel price by 2014
and may be gradually reducing subsidy on LPG. The government’s move to reduce
domestic subsidized cylinders from 12 to 6 per year faced strong opposition. But the
government went ahead with the decision with slight modification which means a
consumer can buy 9 subsidized cylinders and the rest with a market determined price.
Similarly the domestic gas prices believed to be artificially maintained at a lower level
($4.2/MMBTU) compared to imported LNG (long term contract) price of $10.5-
16/MMBTU (ET, 2013). On the other hand the Asian spot LNG found to be even costlier
with a trading price of around $18.30-18.60 per MMBTU during the third week of
November 2013. With strong winter demand from China, Japan and South Korea, prices
of the super-cooled fuel may very much reach $20/MMBTU by the end of the year
(Reuters, 2013); and may even move further. Considering the current and future demand
and supply scenario and objectives of the IEP, rationalization of energy subsidy is the
need of the hour. Complete removal of subsidy from diesel and LPG needs to be carefully
administered. Only targeted subsidy should be given for kerosene. The direct cash
transfer scheme may be helpful in this direction to ensure targeted subsidy reaching the
needy section of the society.

4 Policy Framework for Ensuring Energy Security

Energy exploration and exploitation (MOSPI, 2013) within and outside India, capacity
additions, clean energy alternatives, conservation, and energy sector reforms are going to
be critical for ensuring energy security of the country.

4.1 Acquiring Assets

Acquiring assets or developing energy resources could be critically important to bridge
energy demand-supply gap in India. It is estimated that about 4 per cent of sedimentary
basins of the world lie in India; however production is only 0.9 per cent of the world. A
huge scope exists in future E&P and deep water could be the thrust area. Developing
assets or sources could be classified under two major heads such as conventional and
unconventional. Conventional energy sources in India are primarily driven by oil & gas,

13 
 
 coal, and nuclear. Unconventional sources such as gas hydrates; coal-bed methane
(CBM) and shale are getting significant importance now.

4.1.1 Oil and Gas Sector

One of the most important sources of primary energy in India is oil. Well thought out
policy for oil & gas sector would ensure consistent supply in future. One of the ways to
assure long term availability of oil & gas is to invest in developing domestic assets, and
exploring opportunities outside India. The government should proactively promote heavy
investment in exploration & production, developing LNG receiving facilities, building
distribution infrastructure. Indian companies investing to acquire oil & gas assets outside
India would certainly help the country in bringing their share of oil & gas and contribute
towards stable supply. ONGC Videsh has been actively pursuing acquisition of Oil &
Gas assets in Commonwealth Independent States (CIS), Far East, Middle East, Africa
and Latin American countries. From its overseas operations, oil production increased
from 3.35 MMT in 2003-04 to 6.75 MMT in 2010-11.Similarly gas production increased
from 0.52 BCM to 2.69 BCM during the same period. In October 2006, Bharat Petroleum
Corporation Limited incorporated a wholly owned subsidiary Bharat Petroresources
Limited (BPRL) for carrying out upstream Oil & Gas operations in India and abroad.
With recent discoveries in Brazil, Mozambique and Indonesia, BPRL is poised to
contribute towards the larger goal of ensuring energy security for India in the long run
(PES, 2010-11).

4.1.2 Coal Sector

In India, coal still plays a critical role in meeting the total energy requirement. Still, coal
meets over 60 per cent commercial energy needs and 70 per cent power produced from
coal based power plants. Shortage of availability of domestic natural gas along with the
high price of LNG ($10-19/MMBTU) is making a strong case for user industries like
power, fertilizer, steel, cement, and ceramics etc. to continue to depend on coal. Abrupt
supply and quality of domestic coal has been a bigger issue for many of the user
industries; especially the coal based power plants. In the recent past the power plants
have been facing serious challenges of getting coal on time, especially during the
monsoon season.

Various estimates suggest that at the current rate of production, coal reserves in India are
going to last for 122 years (International Energy Outlook, 2010, p.73) and 100 years (BP
Energy Statistics, 2013). Under these circumstances a school of thought suggests that-
sparingly deplete the domestic resources and import more. In light of such
developments, dependence on imported coal is likely to increase rapidly. Government of
India has been encouraging Indian companies to acquire assets outside India. For
instance, Coal India Limited had kept an ad-hoc provision of Rs 35000.00 crores ($5.63
billion5) for acquisition of assets abroad & development of coal blocks in Mozambique in
2012-13. For long term benefit and ensuring energy security of the country, it may be

                                                            
5
 $1=Rs. 62.12, exchange rate as on December 2, 2013. 

14 
 
 thought of importing coal from countries where it is already available at affordable
prices. However, such a strategy may put undesirable pressure on the current account
deficit and balance of payment.

4.1.3 Nuclear Energy

Nuclear Energy seems to one of the alternative options available to countries like India.
For several decades, countries like France and Japan have been producing 60 -70 per cent
of their power from uranium. They have been able to develop mining sources in different
countries like Kazakhstan, South Africa, Australia and Nigeria. The investment in mining
assets provides security for uninterrupted supply of raw material and ensures continuous
operations. Theoretically nuclear energy offers a potent solution to long term energy
security of the country (Sahi, 2006, p.7). India needs to look into nuclear power
generations seriously to ensure sustainable and adequate power supply in the long term.
In order to convert potentiality to reality, vast reserves of thorium need to be sufficiently
exploited. Of course few serious issues like safety and proper disposal of nuclear waste
should be taken care of to avoid disasters, like the one that happened in Fukushima
(Japan) in 2011. It is better harness nuclear energy with all safeguards rather than
remaining black. According to Economic Survey of India (2013) nuclear is expected to
contribute 12 per cent by 2030. IEP (2008) envisages for building a strategic stockpile of
nuclear fuel to counter the risk of disruption of international fuel supply to ensure energy
security of the country.

4.1.4 Unconventional Energy Sources

4.1.4.1 Gas Hydrates

As an unconventional hydrocarbon resource, methane hydrates have been the center of
attraction for many nations including India. In order to strengthen the drive of getting
energy from the gas hydrates Government of India initiated a National Gas Hydrate
Program (NGHP) in 1997. The National Gas Hydrate Program (NGHP) is a consortium
of National E&P companies (Oil and Natural Gas Corporation Ltd ‘ONGC’, GAIL India
Ltd & Oil India Ltd ‘OIL’) and National Research Institutions (National Institute of
Oceanography, National Geophysical Research Institute and National Institute of Ocean
Technology). A study carried out under NGHP confirmed that huge reserve of Gas
Hydrates is available in Krishna-Godavari and Mahanadi Basins but the commercial
production seem to be a costly affair. However, through continuous research new and
affordable technology can be developed and the cost of production can be reduced to
make the commercial viability of producing gas from gas hydrates.

4.1.4.2 Coal-bed Methane (CBM)

India, having the fourth largest proven coal reserves in the world, holds significant
prospects for exploration and exploitation of CBM. According to DGH the
prognosticated CBM resources in the country are about 92 TCF (2608 BCM). Coal bed
methane extraction seems to be another alternative solution to meet the demand-supply
gap. Efficient production of CBM is becoming a real challenge for the E & P companies
due to lack in detailed reservoir characterization (Ojha et.al 2011). However, efforts have
been made to remove such bottlenecks to make India one of the largest producers of

15 
 
 CBM. Most important aspects of CBM is that it is clean gas and having similar calorific
value as compared to natural gas and can be directly fed into the pipeline network (see
Map1 for pipeline infrastructure in India) for distribution. Since 1997 total contracts
awarded for prognosticated CBM resources is 33 CBM blocks. These are having a
potential of about 63.85 TCF (1808 BCM), of which, so far, 8.92 TCF (252.69 BCM) has
been established as Gas in Place (GIP). According DGH estimation the total CBM
production is expected to be around 4MMSCMD by the end of 12th plan. Experiences of
CBM production in some of the states like West Bengal suggest that- few critical areas
such as land acquisition, affordable technology, pipeline infrastructure and pricing could
prove instrumental for faster progress in the field of CBM gas production and
consumption in India.

4.1.4.3 Oil Shale

Oil Shale prospectivity has been mapped in Assam-Arakan Basin and Oil Shale resources
estimated to be around 400 MMT of oil up to a depth of 500m in selected areas in the
same basin. Oil and Natural Gas Corporation Limited (ONGC), India and
ConocoPhillips, USA, two E&P majors have signed a Memorandum of Understanding
(MoU) for cooperation in the exploration and development of shale resources in India,
North America and elsewhere besides deepwater opportunities in Eastern offshore India
(ONGC, 2012). The MoU signed between ONGC and ConocoPhillips on 30th March
2012 in Mumbai will promote stronger technical and business cooperation. This
cooperation would certainly help ONGC’s continued interest in hydrocarbon exploration
in India and abroad. This could prove a big step towards achieving energy security and
sustaining India’s booming economy.

4.1.4.4 Shale Gas

Based on the available data it appears that sedimentary basins namely Cambay,
Gondwana, KG, Cauvery, Indo-Gangetic, Assam Arakan and Damodar may be
prospective from Shale Gas production point of view. Various media reports suggest
Shale Gas resources availability ranging from 300 TCF (8498 BCM) to 2100 TCF
(59490BCM) in India. Different studies have put recoverable reserves of shale gas
between 6 and 63 TCF (Moneycontrol, 2012). Since 2010 a systematic approach has been
initiated by the government of India to identify, characterize and prioritize the Indian
sedimentary basins for focused gas exploitation and also to assess and establish the
potential of fields. Preliminary explorations by ONGC indicate presence of Shale Gas in
Gondwana and Damodar basins. Shale Gas pilot project in Damodar Basin confirms
availability of Shale Gas. In Raniganj sub basin, the GIP has been estimated at 48 TCF
(1359.77 BCM) based on the core log data (DGH, 2011-12, p.70). In the US some of the
factors contributed to the rapid development of Shale Gas are: advances in horizontal
drilling, advances in hydraulic fracturing, and perhaps most importantly, rapid increases
in natural gas prices in the last several years as a result of significant supply and demand
pressures (Shenoy, 2012). Such developments have forced Indian companies to
aggressively search for acquiring shale gas assets outside India.

According to media reports GAIL has set aside $1 billion for shale-gas acquisitions and
actively looking at assets in the U.S. and Canada. GAIL has already bought a 20 percent

16 
 
 stake in shale areas in the Eagle Ford region in Texas from Carizzo Oil & Gas Inc. for
$95 million (Katakey and Sethuraman, 2012). Other Indian companies acquired stake in
shale gas assets in Colorado of Carizzo Oil & Gas Inc. are Oil India (20 per cent) and
Indian Oil (10 per cent). Reliance Industries Ltd (RIL) has a joint venture with for the
Marcellus shale acreage of Carrizo Oil (Saikia, 2012). Government of India through
DGH is in the process of developing policies for effective and efficient exploration and
production of Shale Gas in India. While speaking at the 3rd National Conference on
‘Energy Security’ organized by Federation of Indian Chambers of Commerce and
Industries (FICCI), New Delhi the Director General, DGH said “the draft policy
document is under review of Ministry of Petroleum and Natural Gas and may be finalized
at the earliest”. Once the policy document, receives necessary approval the existing and
prospective operators may seriously look for exploration and production of shale gas in
India. However, anticipated shale gas pricing mechanism seems to be a major concern for
the operators; the policy makers need a lot of strategic thinking to bring incentive linked
investment schemes for effective shale gas production and distribution in India.

4.2 Diversifying Energy Mix

In 2012 energy mix of India was dominated by coal (52.9 per cent) followed by oil (30.4
per cent), gas (8.7 per cent), hydro (4.6 per cent), renewable (1.9 per cent), and nuclear
(1.3 per cent). It is critical for a country like India to have a well spread energy basket
having a suitable balance between renewable and non-renewable; domestic and imported
sources. Over reliance on any one source or form of energy could prove detrimental,
especially in case of overdependence on imported energy. An optimal energy mix (ES,
2013) not only can reduce risk of failure, but also can offer a sense of security. There is a
strong case for promoting renewable energy like solar, wind and biofuel. Government at
different levels has been seriously trying to provide affordable renewable energy to all. It
has been observed that over the last couple of years the cost of solar energy came down
and likely to match or become cheaper compared to other mainstream sources of energy
like diesel. According media reports solar power unit cost across the country ranges from
Rs.5.78-15.00 which seems to be closer to grid parity and even better than diesel
generated power.

Governments at various levels have been putting appreciable efforts to reduce over
dependence on one form or source of energy. For example, new power plants have been
encouraged to set up the combined cycle system. It is expected that many of the new
units would be gas based. However, lack of availability of domestic gas forcing the
power producers to rethink about their fuel sourcing strategies. In 2012, the government
encouraged power producers to import duty free LNG to incentivize them to go for
greener fuel and secure gas sourcing. Governments at different levels have been
aggressively promoting the use of natural gas in India. Several states like Gujarat,
Maharashtra, and Delhi are the leading the natural gas revolution in India. Especially
Gujarat has been making remarkable progress owning to availability of domestic gas and
accessibility to imported natural gas. The state boosts with two operational LNG terminal

17 
 
 at Dahej (15 MMTPA) and Hazira (5 MMTPA). Gujarat contributes 51 per cent of the
total domestic PNG connections in India followed by Maharashtra (29 per cent) and
Delhi (17 per cent). Similarly Gujarat leads with 76 per cent commercial PNG
connections followed by Maharashtra (12 per cent) and Delhi (6 per cent). Again Gujarat
(70 per cent) is well ahead of others in terms of industrial piped natural gas (PNG)
connections (see Table5). Also, in the transport segment Gujarat leads with the highest
313 compressed natural gas (CNG) stations closely followed by Delhi (286), but Delhi
has been selling more CNG than Gujarat.

Table 5: PNG Status in India (as on 31.03.2013)

Domestic Comm. Ind.
Domestic PNG Comm. PNG Ind. PNG
State City Covered Company
PNG (#) Share PNG Share PNG Share
(%) (%) (%)

Delhi, NOIDA, Greater NOIDA,

Delhi IGL 410000 18.14 1370 8.0 570 10.6
Ghaziabad

Mumbai, Thane, Mira-

Bhayandar, Navi Mumbai,
Maharashtra MGL, MNGL 647790 28.67 1990 11.6 98 1.8
Pune, Kalyan, Ambernath,
Panvel, Bhiwandi

GSPC,
Sabarmati
Ahmedabad, Baroda, Surat, Gas, Gujarat 368
Gujarat 1144424 50.65 12693 73.9 68.5
Ankeleswar Gas, HPCL, 6
VMSS,Adani
Gas

Green Gas Ltd.

Agra, Kanpur, Bareilly,
Uttar Pradesh (Lucknow), 7090 0.31 55 0.3 430 8.0
Lucknow
CUGL(Kanpur)

Tripura Agartala TNGCL 11431 0.51 256 1.5 41 0.8

Madhya
Dewas, Indore, Ujjain, Gwalior GAIL Gas, AGL 1775 0.08 6 0.0 49 0.9
Pradesh

Rajasthan Kota GAIL Gas 177 0.01 0 0.0 16 0.3

Tinsukia, Dibrugarh, Sibsagar, Assam Gas Co.

Assam 23632 1.05 759 4.4 366 6.8
Jorhat Ltd.

Kakinada,
Andhra
Hyderabad,Vijaywada,Rajmund BGL 1802 0.08 15 0.1 1 0.0
Pradesh
ry

GAIL Gas,
Adani Gas,
Haryana Sonepat, Gurgaon, Faridabad 11508 0.51 43 0.3 123 2.3
Haryana City
Gas

538
Total 2259629 100 17187 100 100
0

Source :PPAC, IGL, GSPC, MGL

18 
 
 4.3 Improving Storage Facilities
India is being a net importer of energy faces perennial challenge of meeting the energy
requirements from domestic sources. Improving storage facilities may not provide a long
term solution to the problem of shortage, but may address any short term shocks arising
out of external or internal disturbances, emergencies, and unexpected rise in crude price
in the International Market. The Indian has been working on developing 5.33 MMT
underground storages Vishkhapatnam (Andhra Pradesh), Mangalore (Karnataka) and
Padur (Karnataka) and these projects are to be completed by 2013. Media reports suggest
that 1.33 MMT strategic storages are under construction at Visakhapatnam and 1.5
MMT at Mangalore (Karnataka), these storages would be completed by December 2013
and the third storage at Padur in Karnataka, with a capacity to stock 2.5 MMT of crude
oil, would be ready by April 2014 (Dutta, 2012). The combined estimated cost of
developing above storages is about Rs.27, 630.00 million. Studies have been initiated to
construct space to store an additional 12.5 MMT of strategic reserves in Padur (5 MMT)
and Chandikhol (2.5 MMT) in Odisha, Rajkot (2.5 MMT) in Gujarat and Bikaner (2.5
MMT) in Rajasthan.

Compared to India, our neighboring country China has been very proactive in building
strategic petroleum reserve (SPR) facilities. China has already completed and filled 103
million barrels of storage in the first phase of its SPR plan. It is now working on the
second phase of 169 million barrels of storage by 2013 and by 2016 will build a final
phase of 228 million barrels of storage (Dutta, 2012). The US has the largest SPR with a
capacity of 727 million barrels of crude oil that is equivalent to 77 days net import.
Stockpiling of crude oil in the SPR has been helping the US to reduce the nation's
vulnerability to economic, national security and foreign policy consequences of
petroleum supply interruptions. Therefore, drawing lessons from the US and China, it is
not only desirable, but a must for India to develop and maintain more than the planned
SPR capacity of 18 MMT (132 million barrels). The IEP aims to achieve at least 90 days
storage capacity, but the panned SPR capacity in India at the current import rate is
equivalent to 37 days of net import. It is suggested that these storage facilities should be
connected through crude pipeline network with refineries so that in case of emergency all
the refineries get crude oil for refining.

4.4 Optimal Use of Domestic Resources

India needs judicious and optimal use of its domestic energy resources. Although India is
relatively rich with coal (7 percent of global reserves) energy, but such resources are
finite and at current production rates would last about 100 years only and thus leaving the
future generations in the dark. The future generation may require far more energy than
the current generation. So the non-renewable sources need to be carefully used. New
sources of energy need to be added to the current energy mix and focus should shift
towards renewable sources like wind, solar, and hydrogen. On the other hand safe and
sustainable use of nuclear energy should be explored. As a strategic measure Jawaharlal
Nehru National Solar Mission (JNNSM) has been set up and several policy initiatives
have been successfully implemented. JNNSM has set an ambitious target to achieve
installed solar capacity of 20000MW by 2022. In order to achieve the above objective

19 
 
 most of the government buildings, corporate and commercial buildings, schools, and
colleges need to partially or completely switch to solar power. The residential complexes
with unused rooftop in the urban/rural areas should be encouraged to generate renewable
energy. To achieve greater penetration of renewable, MNRE and nodal agencies are
constantly devising suitable strategies and incentive schemes. The central and state
electricity regulatory bodies are enforcing mandatory purchase of renewable power from
the producers to increase accessibility at affordable price. However, any effort at the
individual or organizational level in isolation may not produce the best result. There is a
greater need for collective, collaborative, and well directed public-private-socially
integrated efforts to ensure energy security of the country.

4.5 Demand and Supply Side Management

Ever increasing demand for energy should be carefully and sensibly evaluated. Greater
industrialization and urbanization propels higher demand for energy making sustainable
supply of the same as a much difficult proposition. Needless to mention that stronger and
sustainable economic growth over a longer period of time demands higher energy use.
With limited supply of energy, better and efficient demand side management is seriously
called for. Far more efficient management of energy demand both at supplier and
consumer end is desirable. Cutting down unnecessary energy consumption and
transmission or fuel losses should be addressed with utmost intent and priority. Rightful
and meaningful use of energy is a must in India. In order to meet the short term and long
term demand of fossil fuel India needs to carefully harness international relationship with
countries like Qatar, Turkmenistan, Afghanistan, Russia, Iran and USA. Securing long
term supply of natural gas both in the form of LNG and PNG could make a significant
impact on future energy mix of this country. The much discussed transnational pipelines
such as Turkmenistan-Afghanistan-Pakistan-India (TAPI), Myanmar-Bangladesh-India
and Iran-Pakistan-India could really improve the supply scenario.

4.6 Improving Energy Intensity

Energy intensity, defined as the energy input required for a unit of gross domestic
product (GDP), is a measure of the energy efficiency of a nation’s economy. Energy
intensity has been a very critical component to evaluate the efficient use of energy and
economic productivity. Off late globally there has been a serious debate over energy
intensity and carbon footprint. The energy intensity (total primary energy consumption
British thermal unit per Dollar of GDP) in India has been declining since 2008. (see
Table 6).

20 
 
 Table 6: Energy Intensity - Total Primary Energy Consumption per Dollar of GDP (Btu per
Year 2005 U.S. Dollars (Purchasing Power Parities))

2007 2008 2009 2010 2011

North America 7738 7573 7476 7514 NA
Canada 11447 10980 10918 10500 10661
Mexico 5220 4977 5071 5044 5209
United States 7670 7543 7412 7505 7313
Central & South America 6011 5956 5882 5896 NA
Argentina 5187 4974 4857 4513 NA
Brazil 5988 5812 5899 5948 5928
Europe 5593 5497 5430 5486 NA
France 5643 5655 5519 5592 5385
Germany 5367 5387 5332 5305 4837
Italy 4888 4830 4780 4898 4727
Spain 5524 5288 5133 5258 5104
United Kingdom 4308 4231 4185 4174 3952
Eurasia 15269 14887 14363 14592 NA
Azerbaijan 9201 10071 7268 6790 NA
Russia 14364 14096 14288 14544 15624
Turkmenistan 59205 55485 49745 47435 NA
Middle East 9936 10386 10867 10945 NA
Iran 10044 10372 11851 11657 NA
Iraq 6611 6136 6403 6413 NA
Qatar 11365 9273 9141 7983 NA
Saudi Arabia 11927 13785 13356 13931 14629
Africa 5523 5616 5405 5279 NA
Algeria 6446 6690 6848 6547 NA
Nigeria 3894 3755 2316 2330 NA
Asia & Oceania 8017 7942 8124 7975 NA
Australia 8035 7629 7498 7359 6977
China 11338 11072 11263 10902 10842
India 6242 6293 6206 5838 5860
Indonesia 6726 6482 6619 6506 NA
Japan 5702 5480 5529 5587 5355
Korea, South 9975 9801 9853 10037 10025
Pakistan 4863 4781 4661 4576 NA
World 7527 7456 7461 7452 NA
Source: U.S Energy Information Administration

Falling energy intensity clearly indicates that the growth in energy consumption is less
than the growth of GDP, which means that energy elasticity, that is, the ratio of the
growth of energy to the growth of GDP is less than unity. According to twelfth five year
plan by the Planning Commission, India the total primary energy–GDP elasticity was
around 0.73 during the period 1980–81 to 2000–01 and it declined to 0.66 in the period
1981–81 to 2010–11.

Looking at the energy security issues and concerns in India, energy intensity need to be
seriously taken and measures should be adopted to constantly reduce the energy intensity.

21 
 
 Most of the European countries have been doing better than India. On the other hand
Russia seems to be less efficient in terms of energy intensity. This may be because of rich
primary energy resources, especially natural gas. Similarly, performance of Saudi Arabia
with reference to energy intensity compared to the world average is very high. However,
this may not be the concern for such countries having a significant amount of energy
resources. The energy intensity of China is roughly 1.8 times higher than India, but
certainly China shouldn’t be considered as a benchmark in terms of energy intensity.
Considering high energy import dependence, a country like India certainly can’t afford a
high level of energy intensity.

4.7 Improving Energy Efficiency

Every unit of energy saved is more than one unit of energy produced. So improving
energy efficiency could help in reducing energy consumption in several consuming
industries and households. India needs large investment in bringing innovative products
with higher energy efficiency. The government has been encouraging the use of energy
efficient products to reduce carbon footprint. With the help of World Bank several
projects have been under progress to replace high energy consuming bulbs with low
energy consuming CFL. Multinational firms like Philips, LG and others have been
constantly working on to provide energy efficient white goods to reduce total energy
consumption per household. Government should proactively encourage firms to consume
less energy by incentivizing the efficient ones and pushing the energy inefficient ones to
become efficient. As a significant amount of energy is consumed by the transport sector
so investment in research & development activities needed to produce energy efficient
vehicles.

Bureau of Energy Efficiency (BEE) in India in association with FICCI and Indo-German
energy forum has been constantly trying to increase energy efficiency both in demand
and supply side. Especially in demand side BEE has been constantly promoting the use of
energy efficient technology in lighting, cooling and heating. In this direction tri-
generation technology has been promoted for building sector, hospitals and hotels where
electricity required for lighting, heating, and cooling found to be immensely important.
Tri-generation technology allows generating electricity and waste heat or vapour to be
absorbed for heating or chilling. This brings efficiency both in production and
consumption. In Germany tri-generation technology has been very successful and
contributes 15-20 per cent energy requirements in Germany. During a workshop on tri-
generation technology organized by FICCI many participants from the user industry
raised concerns about the availability of affordable natural gas to adopt this technology,
from a cost efficiency standpoint. One of the companies adopted tri-generation
technology indicated that the average unit cost is slightly higher than alternatives like
diesel based power and significantly higher than grid power.

22 
 
 4.8 Power Sector Reforms
Power sector reforms in India have been underway through enactment of Electricity Act
2003. Since then a significant progress has been made in setting up the institutional
structure, but there are several important areas where reforms are yet to happen. One of
the important areas identified by the Planning Commission is- regular market determined
electricity retail tariffs, setting which has remained more or less static for many years.
This could be because of political pressure, widening the gap between the average tariff
and average cost of supply. Also, reforms are highly desirable in the area of transmission
and distribution. The distribution companies are suffering from serious financial losses.
According to twelfth Planning Commission report many of the state owned distribution
companies have been struggling to recover the cost of supply through tariffs, and the gap
between Average Cost of Supply (ACS) and Average Revenue Realized (ARR) has been
increasing over the years. This situation may be due to lower power tariff and high
aggregate Technical and Commercial (T&C) losses (see Table7) across the country. Due
to unsustainable T&C losses- as high as 74 per cent of power available for commercial
sale and other process related inefficiencies like metering, billing and collection
commercial viability of state utility companies are under question mark.

In order to reduce transmission losses significant amount of investment is desirable in the

field of advanced transmission lines, efficient billing and collection system. Probably
privatization of state owned power distribution companies is the way forward to improve
efficiency, effectiveness and service level in the distribution sector. Some of the cities
where privatization has been found to be effective are: Delhi, Ahmedabad, Mumbai,
Surat and Kolkata. Even a franchise model seems to be working in some states and
public-private partnership (PPP) model may be explored. Efficient use of energy would
help in big ways to ensure energy security of the country. At least the scarce resources
can be efficiently deployed and made accessible to a larger customer base.

With the future investments in power sector planned up to $75 billion during 2012-2022
and about 46.7 per cent should be in the transmission sector (BT, 2013). Out of $35
billion invest in transmission sector, Power Grid Corporation was expected to invest $19
billion and the rest ($16 billion) by the private players. This is an indication that in the
areas of power production, distribution, and investment; still the private participation is
less than anticipated. Private sector contributed only about 22 per cent of power
generation. Private participation across the entire electricity value chain should be more
than 50 per cent. Private participation is expected to increase by bringing additional
reforms for strengthening regulation, improving distribution, opening bulk supply to
competition, revising tariffs to more economic levels and lastly synchronization of tariff
structure amongst the states (PHD, 2011:p.9).

23 
 
 Table 7: Aggregate Technical and Commercial Losses of State Power Utilities (within State)
(Percentage)
2007–08 2008–09 2009–10 2010–11
State Status of State (Actual) (Actual) (Actual) (Provisional)

Arunachal Pradesh Special Category 78.31 74.27 63.14 65.48

Assam Special Category 36.77 35.37 38.24 45.13
Himachal Pradesh Special Category 19.52 16.2 17.39 13.53
Jammu & Kashmir Special Category 73.43 70.69 72.03 74.3
Manipur Special Category 86.75 83.55 69.23 67.74
Meghalaya Special Category 39.74 35.27 43.19 37.93
Mizoram Special Category 38.38 46.43 42.89 42.08
Nagaland Special Category 51.2 55.85 58.02 55.98
Sikkim Special Category 46.87 46.81 51.37 46.81
Tripura Special Category 41.44 40.08 37.52 41.19
Uttarakhand Special Category 35.37 29.35 28.61 29.17
Andhra Pradesh Non-special Category 20.61 19.39 18.32 16.78
Bihar Non-special Category 47.6 41.66 42.39 49.99
Chhattisgarh Non-special Category 35.17 37.78 46.62 36.41
Goa Non-special Category 17.69 17.81 16.18 15.57
Gujarat Non-special Category 26.43 25.46 26.87 18.25
Haryana Non-special Category 29.01 28.43 29.5 26.72
Jharkhand Non-special Category 54.18 54.23 49.07 45.11
Karnataka Non-special Category 31.63 24.79 23.69 23.64
Kerala Non-special Category 44.8 34.98 28.81 29.72
Madhya Pradesh Non-special Category 46.64 45.78 42.93 41.1
Maharashtra Non-special Category 30.67 28.75 27.44 23.47
Orissa Non-special Category 41.68 42.2 39.71 44.35
Punjab Non-special Category 22.36 19.76 19.97 18.35
Rajasthan Non-special Category 40.18 32.99 33.06 25.6
Tamil Nadu Non-special Category 19.25 20.19 19.11 18.27
Uttar Pradesh Non-special Category 38.89 35.29 36.69 37.86
West Bengal Non-special Category 20.67 28.81 26.13 28.87
Delhi Non-special Category 34.58 17.92 20.78 15.76
Mean 17.69 16.2 36.86 13.53
Maximum 86.75 83.55 72.03 74.3
Source: Planning Commission, India

24 
 
 4.9 Research & Development (R&D) in Hybrid Vehicles
Hybrid vehicles are going to be one of the prime drivers of transport revolution in the
world. It is high time for India to focus on R&D activities, especially developing hybrid
vehicles. Concentrated and collaborative efforts should be made by the industry body,
technical institutes and R&D centers of Indian Corporations/MNCs to significantly
improve the efficiency of Hybrid Vehicles. Hyundai Motor Company, South Korea, has
set up one of the most advanced R&D Centre in Hyderabad for developing better vehicles
for the Indian market. Introduction of more efficient vehicles means better mileage and
less consumption of energy. Recently, in Japan facilities has been created to charge the
electric vehicles on the road; which would facilitate more electric vehicles on the road.
Similar kind of initiatives may be taken in India to introduce and promote more electric
vehicles to reduce consumption of fossil fuel in the transport sector.

Serious R&D efforts are desired to produce hydrogen/fuel cell driven vehicle in India. To
promote cutting edge research and development in the field of hybrid vehicle and
production of hydrogen-special Hydrogen Fund has been set up in India which is an
outcome of Hydrogen Road Map for India. An important hindrance to hydrogen initiative
is hydrogen is not approved as a transport fuel in the country. The sooner or later
hydrogen needs to be declared as a transport fuel. But currently hydrogen and CNG mix
is allowed as a transport fuel.

Hydrogen could be produced domestically from resources like natural gas, coal, solar
energy, wind, and biomass. Highly efficient fuel cell electric vehicles powered by
hydrogen holds the promise of the offsetting use of petroleum in the transportation sector,
reducing carbon emission, and leading towards ensuring the energy security of the
country.

4.10 Land Access and Compensation Reform

Land acquisition has been a concern both for corporations and the land owners. For the
corporate it has been a difficult task to acquire land-which is a critical component of
project execution, especially developing CBM blocks. On the other hand the owner of the
land, most of the cases, poor farmers fight for a suitable price for their land. Numerous
studies indicate that over the years inequalities in India have been increasing, rather than
decreasing. It has been observed that the rich are getting richer and the poor are getting
even poorer; leading to a sense of social insecurity for some sections of the society.
According to Besley and Burgess (2000) lack of land reform has had a negative and a
significant impact on poverty. It has been argued by researchers that suitable land reform
will raise productivity as well as serve the goal of equity. It is acknowledged by many oil
and gas operators that land acquisition for drilling large number of vertical well,
especially in case of CBM is a challenge in India. For example: Essar Oil was awarded a
contract to produce coal-bed methane in Ranigunj block (West Bengal). This requires
1000 acres of land to drill; about 500 additional well, but Essar Oil has been facing
difficulty to acquire additional land (ET, 2012). Delays in land acquisition could prove
detrimental to the progress of the project and finally may very much impact the
production of CBM, and energy security of the country.

25 
 
5 Discussions

The current energy policy envisages-affordable energy for all, but the time line for this
has not been clearly set. The ways suggested include lowering the requirement of
energy, substituting imported fuels with alternatives, expanding the domestic energy
resource base, maintaining reserve equivalent to 90 days of oil imports, acquiring energy
assets abroad, and setting up energy using industries such as fertilizer plants in energy
rich countries. In some of the recommended areas considerable progress has been made
(see Table 8) and some areas require additional work.

Table8: Objectives and Progress Review of Integrated Energy Policy

Objectives of IEP (Dec 2008)and Progress (Nov 2013)
Objective: Provide appropriate fiscal policies to take care of externalities and independent regulation to
take care of anti-competitive market behaviour.
Progress: Government provides appropriate fiscal policy as and when necessary.
Objective: Both the tax structure and regulatory philosophy applied in each energy sector should be
consistent with the overall energy policy should provide a level playing field to all players whether public
or private.

Progress: Both tax structure and regulatory philosophy found to be still inconsistent across various
energy sectors. To some extent the regulatory philosophy found to be matching in terms of creating a
competitive energy market but the political philosophy doesn’t match the regulatory philosophy. This
creates implementation challenges at the ground level.

Objective: Taxes should be neutral across energy sources, except where differentials in taxation across
energy sources are specifically intended to counter differential externalities, such as those reflecting
environmental externalities.
Progress: Uniform taxation, yet to be achieved.

Objective: Subsidies must be transparent and targeted. Consideration should be given to alternative
means of achieving the social objectives sought to be achieved by energy subsidies.

Progress: Moderate level of transparency on subsidy has been achieved. Targeted energy subsidy
schemes have been tried out but efficiency needs to be measured over a period of time.

Objective: Promote energy-efficiency by enforcing energy standards effectively.

Progress: Some progress has been made. The Energy Conservation (Amendment) Act, 2010 was
implemented to strengthen the Energy Conservation Act, 2001 (52 of 2001). To enforce energy
efficiency mandatory labelling for 12 equipments and appliance from 7th January, 2010. Other
important initiatives like Energy conservation building code, Bachat lamp yojna (electricity saving
through lamp), and state energy conservation fund have been introduced. The National Mission for
Enhanced Energy Efficiency (NMEEE) has been set up and the mission by 2014-15, is likely to achieve
about 23 million tons oil-equivalent of fuel savings- in coal, gas, and petroleum products, along with an
expected avoided capacity addition of over 19,000 MW6.

Objective: Public Sector Undertakings (PSU) operating in the energy sector must operate with autonomy
and also full accountability to ensure incentives for adequate investment through their own resources
and improvements in efficiency in energy production and distribution.

                                                            
 
6
 For more details see http://powermin.nic.in/acts_notification/energy_conservation_act/introduction.htm 

26 
 
Progress: This is partially achieved. Still today the Energy PSUs do heavily depend on the directives of government
for price change and investment related decisions. Under the current system the PSU can justify the inefficiency at
various levels citing the government interference. It is a must to transfer full autonomy and accountability to the
PSUs.

Objective: India will have to pursue all available fuel options and forms of energy and must seek to acquire new
energy sources abroad.
Progress: A significant progress has been made in this direction. Half a dozen Indian energy companies own asset
abroad and this is going to increase in future.

Table8: Objectives and Progress Review of Integrated Energy Policy (continued)

Objective: India must actively promote technologies that maximize energy efficiency; demand side management,
conservation and energy security and this must be done by encouraging domestic research into such technologies
and free access to suitable energy related technologies available abroad.

Progress: Investment culture in green technology by Indian corporations yet to develop. Government and corporates
have been doing at independent level. Collaboration and Synergy in this direction is much desirable.

Objective: For economic efficiency and for promoting optimal investment in energy, energy markets should be
competitive wherever possible. Competitive markets would lead to trade parity prices ensuring that energy use and
inter-fuel choices would be economically rational. But a truly competitive market requires that there are multiple
producers and that there are no entry barriers to new producers or to import.

Progress: At least in the field of production and distribution of petroleum products competition is there. In the areas
of marketing of petroleum products, especially petrol the market is very competitive. But selling diesel is
uncompetitive for private players as the government still gives financial support to public sector companies, but
private players are not getting the same kind of benefit. This creates market imbalance. Probably efficient
competition rational inter-fuel choice would take another decade.
Objective: Energy prices must send the right signal to producers and energy users to conserve energy and, where
relevant, switch to preferred sources.
Progress: In some cases this is happening and some cases a lot is desirable. There is a huge difference between
domestic ($4.2/MMBTU) and imported ($10-17/MMBTU) natural gas prices. The increased price may send signals to
the consumer to consume less or switch to renewable sources.
Objective: Prices of all commercial primary energy sources which are tradable should be set at trade parity prices at
the point of sale.

Progress: Currently this is not happening for all commercial energy sources. This is happening in only petrol pricing.

Objective: A phased adjustment of domestic petroleum prices to trade parity prices must be undertaken in a
relatively short period.
Progress: Even after 5 years, this has not been done and probably would take another 2 years to achieve this
objective.

Objective: Coal prices should ideally be left to the market and trading of coal, nationally and internationally, should
be free. Coal prices should be made fully variable based on Gross Calorific Value (GCV) and other quality parameters
instead of the current system of pricing on the basis of broad bands of useful heat value.

Progress: Coal Regulatory Bill (2013) cleared by the cabinet, wherein the regulator's role will be to set frameworks
for pricing (raw and washed coal), attract investment in mining, help resolve disputes and advise on policy
issues. Dual pricing in coal is proposed.

Objective: Trade parity principles cannot be easily applied to Natural Gas because it requires significant investments
in pipelines or, alternatively, in liquefaction, cryogenic shipping & re-gasification for trading. Natural gas price can be
determined through competition among different producers where multiple sources and a competitive supply-
demand balance exist.

Progress: Natural Gas pricing is one of the most grey areas in India. Natural gas pricing in India seems to be
politically driven rather than market driven.

27 
 
 Table8: Objectives and Progress Review of Integrated Energy Policy (continued)

Objective: Reduce technical and commercial losses in transmission and distribution utilities.

Progress: Technical and commercial losses remain higher than acceptable level.

Objective: Separate the cost of the pure wires business (carriage) from the energy business (content) in both
transmission and distribution.
Progress: Unbundling of production and transmission and marketing is being done to some extent in in the
electricity sector.
Objective: All generation and transmission projects should be competitively built on the basis of tariff-based
bidding.
Progress: A lot of progress has been made in this direction. All new projects are based on competitive tariff based
bidding.
Objective: Set multi-year tariffs and differentiate them by time of day tariff.
Progress: Some of states have implemented multi-year tariffs, but yet to implement dynamic tariff policy (see CEA,
2014).

Objective: Incentives for promoting renewable should be linked to outcomes (energy generated) and not just
outlays (capacity installed). Alternative incentive structures such as mandated feed-in-laws or differential tariffs or
specifying renewable portfolio percentage in total supply would encourage utilities to integrate wind, small hydro,
cogeneration etc. into their systems.

Progress: Generation based incentive schemes are in place to achieve the objective. Renewable purchase
obligation (RPO) is put in place and regulatory authority closely monitors the progress. RPO is designed to ensure
off-takers of renewable energy.

Objective: Fuel wood plantations, bio-gas plants, wood gasifier based power plants, bio-diesel and ethanol should
be promoted.

Progress: This is being done, but difficult to measure impact immediately. Bio-gas plants really improve the rural
energy access. The ethanol blend policy seems to have limited takers.

Objective: Set-up a National Energy Fund (NEF) to finance R&D in Energy sector.

Progress: National Energy Fund yet to be established. But NEF was set up in July 2012 to provide interest subsidy
on loans disbursed to the State Power Utilities, Distribution Companies (DISCOMS) – both in public and private
sector for the loans taken from Private & Public Financial Institutions, to improve the infrastructure in the
distribution sector.

Objective: A number of technology missions, including Solar Energy Mission should be mounted for developing
near-commercial technologies and rolling out in a time bound manner new technologies that emphasises nationally
relevant sources of energy.

Progress: The Jawaharlal Nehru National Solar Mission was launched on the 11th January, 2010. The Mission has
set the ambitious target of deploying 20,000 MW of grid connected solar power by 2022 is aimed at reducing the
cost of solar power generation in the country through: (i) long term policy; (ii) large scale deployment goals; (iii)
aggressive R&D; and (iv) domestic production of critical raw materials, components and products, as a result to
achieve grid tariff parity by 2022.

28 
 
 Table8: Objectives and Progress Review of Integrated Energy Policy (continued)

Objective: Provide electricity to all rural households through Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
and clean cooking energy such as LPG, NG, biogas or kerosene to all within ten years.

Progress: As of November 30, 2013 RGGVY electrified 101032 villages and completed intensive electrification for
329487 villages. However, due to supply constraints, RGGVY is not in a position to ensure 24X7 electricity
supply.

Objective: Subsidy for electricity and cleaner fuels, kerosene or LPG to targeted households should be delivered
through a system of the debit card in phased manner.

Progress: Direct cash transfer scheme has been implemented since 2012. The objective of the scheme is to
transfer targeted subsidy (fuel) directly to the needy.

Objective: A large scale socioeconomic experiment should be financed to operate community sized bio-gas plants
as a commercial enterprise either by a community cooperative or by a commercial entrepreneur. Bio-gas plants
on this scale could meet the need for clean cooking energy of a sizable segment of the rural population.

Progress: This has been done. For example, Germany's Green Elephant that has set up India's largest biogas
production (25,000 cubic metres) unit in Satara, Maharashtra. The unit, a product of Indo-German Development
Partnership, essentially uses the advanced continuous stirred tank reactor (CSTR) process of anaerobic digestion
to boost gas production from waste with the help of microbes.

Objective: Recommended initiatives would have an effect on reducing the greenhouse gas intensity of the
economy by as much as by one third.

Progress: For example, through actions of National Mission for Enhanced Energy Efficiency the carbon dioxide
emission reduction is estimated to be 98.55 million tons annually. The greenhouse gas emission reduction level
needs to be measured and consistently strive for betterment.

Some of the areas which demand more work include: domestic exploration and
production policy, gas pricing, and phasing out subsidies. Attractiveness of the domestic
E&P market holds key to bring much needed investment and improve domestic
productivity. The private players or Joint Ventures have been allowed to sell crude oil at
a market determined price. However, natural gas price has been fixed by the government
subject to revision in 2014. In the recent past it has been argued by the contractors to
align domestic natural gas prices with imported LNG prices. Such a move may
incentivize the producers, but the consumers may have to pay higher prices than the
current level. Under the current system the producers have been allowed to recover full
costs and sell natural gas in $ (USD) value. In case of depreciation of local currency the
producers do gain. Despite this the existing exploration policy has not been able to attract
many foreign players and Indian companies are not excited to invest either. Sources in
the regulatory body believe that certain investor friendly environment needs to be created
to encourage the domestic and foreign companies to commit investment in the risky E&P
business. There is a need to create win-win-win situation for the government-producer-
consumer.

29 
 
 It is observed that the prevailing high levels of global LNG prices and sellers’ preference
for spot sales are most likely to be a significant barrier for new long-term LNG supply
contracts to India. LNG market dynamics are moving towards spot contracts rather than
long term contracts, especially the suppliers from the Middle East are avoiding long term
contracts. Japan has been very aggressive in terms of securing long term LNG contracts
by paying higher prices compared to prevailing market prices. In the changing scenario,
India needs to be competitive enough to attract some of the possible long term LNG
suppliers and ensure long term supply security, if not the complete energy security. State
owned companies like- GAIL India Limited, Indian Oil Corporation Limited and Bharat
Petroleum Corporation Limited have been actively exploring opportunities in various gas
rich countries like the United States, Russia and Australia for long-term LNG contracts.
Prabhat Singh- marketing director, GAIL opines that “U.S. LNG is relatively affordable,
and GAIL has been looking for the right price at the right place”,
(Katakey and Sethuraman, 2012). GAIL is seriously looking forward to increase its LNG
import to 10 million tonnes by 2020. Indian companies should actively look for
opportunities to have equity oil/gas in foreign countries, especially in the Middle East and
North African countries. Greater oil/gas equity would lead to lesser dependence on
import of Oil & Gas and help the country reduce imports.

The option of lowering the requirements of energy for a growing economy seems very
difficult but substituting imported fuel with alternative fuel to a large extent is feasible.
The government has set a target of achieving about 40 per cent contribution from
Renewable by, 2030. Plans and policies are evolving to achieve the target and move
towards a green economy. The government actively promotes solar and wind energy with
fiscal and other incentives. Well thought out guidelines and incentive schemes have been
designed for wind energy producers in India (see Table 9).

Table9: Guidelines / Incentives for Wind Power Generation in Various States in India
[IWTMA, 2012, and other published sources)

Wheeling Capital Subsidy (CS)/

(W)/Banking (B) Buyback Third Party Sales Other Incentives (OI)
Andhra W: 5 % of energy Rs. 3.50/per KWh Allowed under Industrial Status (CS)
Pradesh wheeled. w.e.f. 09.09.2008 Electricity Act 2003 Reactive Power: 10
B: Not allowed (frozen for 10 subject to paise per KVARh up to
years) regulation framed 10% & 25 paise per
by respective SERs KVARh above 10%. (OI)
Tamil Nadu W: 5% of Energy Rs. 3.39/ per KWh Allowed under Nil (CS)
B: 5% (12 months (No Escalation) Electricity Act 2003 Reactive Power: 25
financial year (April subject to paise perKVARh upto
to March) regulation framed 10% & 50 paise per
by respective SERs KVARh above 10%. (OI)
Karnataka W: 5% of Energy Rs. 3.40/ per KWh Allowed under No Electricity Duty or 5
B: Allowed @ 2% without any Electricity Act 2003 Years. (CS)
of energy Input escalation for 10 subject to Reactive Power: 40
years of regulation framed paise per KVARh. (OI)
commercial by respective SERs
operation but
revised to
Rs.4.20/KWh-will
be applicable till
10 Oct. 2018.

30 
 
 continued
Table9: Guidelines / Incentives for Wind Power Generation in Various States in India
[IWTMA, 2012, and other published sources)
Kerala W: To be decided Rs. 3.14/ KWh for Allowed under NA (CS)
by SERC. 20 years but Electricity Act 2003 NA (OI)
B: To be decided recently revised subject to
by SERC to Rs.4.77/KWh. regulation framed
by respective SERs
West Bengal W: 7.5% . of Allowed under NA (CS)
energy fed of grid Capped at Rs. Electricity Act 2003 Reactive Power: 20
B: NA 4.87/ KWh. subject to paise per KVARh. (OI)
regulation framed
by respective SERs
Gujarat W: 4% of energy. Rs. 3.50/KWh for Allowed under Electricity duty
B: Settlement to be 20 years Electricity Act 2003 exempted. (CS)
done month to subject to Reactive power < 10%
month & surplus regulation framed energy exempted, then
energy at end of by respective SERs 10 paise/ KVARh.
month & surplus Reactive Power > 10%
energy at end of of energy expected, then
month shall be 20 paise/ KVARh (OI)
deemed as sold to
Utility as per Tariff
Rate.
Madhya W: 2% of Energy. Year wise rates Allowed under No Electricity Duty for 5
Pradesh B: Allowed, but (Rs./kWh) from Electricity Act 2003 years. (CS)
proposal for this 1st to 20th year subject to Reactive Power: 27
invited from 1styr- 4.03 2nd yr regulation framed paise for KVARh. (OI)
DISCOM - 3.86, 3rd yr- 3. by respective SERs
69 4th yr- 3.52
,5th yr - To 20th
yr - 3.36
Maharashtra W: 2% of Energy + Tariff: Rs.5.46, Allowed under Power evacuation
5% as T&D Loss Rs.4.74, Rs. 4.05, Electricity Act 2003 arrangement, Approach
B: 12 Months and Rs.3.65 per subject to Road, Electricity Duty,
KWh for wind regulation framed Loan to Cooperative
zone 1, 2,3 and 4 by respective SERs Societies. (CS)
respectively. Reactive Power: 25
paise per KVARh. (OI)
Rajasthan W: 50% of normal Rs. 4.2S/ KWh for Allowed under Exemption from
charge as Jaisalmer, Barmer Electricity Act 2003 Electricity Duty @50%
applicable for 33 & Jodhpur. Rs. subject to for 7 years. (CS)
KV, in addition to 4.50/KWh for all regulation framed Reactive Power 5.75
the transmission other districts by respective SERs paise per KVARh with
charges of 3.6% escalation of 0.25 paise
and surcharge. per year. (OI)
B: Six Months (Apr.
-Sept. and Oct. -
March. Utilization
of banking energy
not permitted in
Dec. to Feb.)

It is clearly evident that the government is forcing the issue of affordable energy, which is
accessible to all. If affordability is defined by using the same parameter for the poor and
rich, then making energy affordable to people below the poverty line could mean
providing energy almost free of cost. The economists argue that energy price should be
determined by market forces, but the government fundamentally favours a social
inclusion driven energy pricing model in India. The social inclusion model aimed at
reduction of energy starvation shouldn’t be done at the cost of efficient use of energy.

31 
 
 One of the major salient features of the IEP is the focus on ensuring the transition to
market economy where private companies compete on a fair footing with public
companies, stating “both the tax structure and regulatory philosophy applied in each
energy sector should be consistent with the overall energy policy [and] should provide a
level playing field to all players whether public or private” (PIB, 2008). However, under
the current circumstances, many of the power producers and oil marketing companies in
India are not free to price their products, incurring losses, so they are struggling to
survive. The reality is contrary to what was envisaged in the Integrated Energy Policy.
IEP to some extent has been successful and a lot of additional work needs to be done to
achieve its objectives. As Mehta (2012) suggests that there is a strong need in India to
formulate and implement energy policy within an integrative and collaborative decision-
making structure—one that aligns technology, infrastructure, markets, people and policy
for all energy sources and facilitates partnerships between public and private. The energy
heads of leading energy companies argue for creating the enabling environment to steer
the energy sector through the storms of its current travails. However, at the energy policy
should encourage clean technology innovations and adoption, attract investment into
‘smart’ infrastructure and reshape consumption habits to ensure sustainable energy
security.

Reshaping consumption habits hold key to sustainable energy security and requires
government and regulatory interventions. For example, the transport sector is one of the
biggest consumers of energy and subsidized energy leads to suboptimal use. It is believed
that right pricing may discourage reckless use of energy and reduce unnecessary
consumption. It is high time that the government should seriously think about levying a
carbon tax to discourage high undesirable consumption at any level. Government should
strictly encourage commuters to use public transport system wherever available and
feasible.

Industrial customers should be directed to generate certain percent of energy from

renewable sources for captive use or purchase renewable energy. Of course it is difficult
to suggest an exact percentage, but it should be in line with the objective of achieving 40
percent contribution of renewable by 2030. The government may find it difficult to
administer any mandatory plan without proper guidance from the Judiciary. In the past
interventions from judiciary have been productive and such initiatives in the future will
ensure growth of green manufacturing and green consumption in India.

Similarly, green building norms should be strictly followed to achieve sustainable energy
supply. In recent times, especially in peak summer most of the states face severe power
shortage and peak demand leading to grid failure. Such failures can be easily avoided by
encouraging the green residential building and renewable power generation. For example,
if builders are constructing residential apartments, commercial complexes or cities, there
should be mandatory provision of generating at least 10-40% electricity through
renewable sources. Such a move will create green cities and reduce load on the grid.

32 
 
 Devising policies may not be enough to ensure change in consumption behavior. It is
desirable to develop educational strategies to induce and enforce judicious consumption
behavior. Energy education through celebrity endorsement (Sahakian, 2011), outdoor
media lie metro train, railways, road transport, and online social media can create a high
level of awareness. Informative communication through community in rural and urban
areas could be effective. Communication through the internet and mobile can be effective
to reach millions of prospective target audience.

6 Conclusion

To achieve sustainable energy security for India, exploration and exploitation of

conventional, unconventional, renewable sources of energy like solar, wind, small hydro,
and bio-mass should be vigorously pursued with the utmost priority. Along with the
government the policy makers like DGH, Petroleum & Natural Gas Regulatory Board,
Central Electricity Authority, and State Electricity Regulatory Commisions are active in
promoting new technology, creating an investor friendly environment, and attracting
investment to explore and exploit existing and new resources. However, dwindling
interest from both domestic and international investors due to delay in policy framing and
implementation, especially in the emploration and production area is a big concern for the
investors. Even the uncertainty over gas pricing and CGD bidding keeps all stakeholder
guessing.There is an urgent need for aggressive, purposeful, and time bound policy
formulation, revision and implementation pertinent to the energy sector to generate and
revive adequate interest from the investors across the globe. New investments from the
public, private and foreign companies would certainly transform sectors like exploration
and production, solar and wind energy. Fresh investments, especially in the areas of
renewable energy would be useful to bring down the cost of renewable energy to be
affordable for the buyers.

33 
 
 Figure1: Model for Energy Security and Economic Growth
Interdependence

Import reduction Higher  Improved 

Reduced  Climate 
efficiency and  quality  of 
Optimizing  Pollution Change
productivity life
indigenous  
sources
Energy 
Effective and 
Demand  Security
efficient 
management Energy 
Economic 
Management
Frontier  growth
technologies

Changing 
consumption habit Investment in 
Integrated 
Capacity  energy  
R&D decision 
Policy framing &  building up infrastructure 
making
Enforcement and assests

Source: Partially adapted from a classroom presentation made by Retd. Major General Ajay Chaturvedi, RGIPT
NOIDA, July 2014.

Our conceptual model (see Figure 1) suggests that policy framing and enforcement is one
of the important drivers of energy security and economic growth. The integrated process
suggested in the conceptual model will ensure economic growth, employment generation,
reduction in income disparity, and finally lead towards sustainable energy security. It is
to be noted that the energy affordability problem can’t be resolved in isolation as it is
directly linked to income distribution and other socioeconomic indicators. In India, the
existence of very serious poverty at the bottom of the pyramid forces the government to
promote less efficient but pro-poor energy policy-leading to long term economic
inefficiency. We feel that addressing the income inequality and poverty issues could
derisk energy security and bring economic efficiency. Finally, the optimal utilization of
host of energy resources with all possible integration and interdependence should be
explored to ensure much desired energy security in India by 2030

34 
 
 Map1: Natural Gas Pipeline Infrastructure in India

Source: GAIL

35 
 
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Acknowledgement: The authors are grateful to the Director, Dr. JP Gupta and the President, Shri D M Reddy,
RGIPT for their encouragement to conduct research on the topic. We are very thankful to the anonymous reviewers
of OGEL for the constructive, insightful, and meaningful suggestions. We are really grateful to the editorial board of
OGEL for giving the opportunity.

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