An integrated energy policy

Inaugurating the Retreat, a training-cum-conference centre designed by TERI to run exclusively on renewable energy, the prime minister gave a timely call for an integrated energy policy. The matter is complex and an initiative only at the PM?s level has some chance of success. Policy-making in the energy sector involves the ministries of power, petroleum and natural gas, coal, and non-conventional energy. A number of user ministries such as fertilizers and chemicals, service providers like the railways, and regulators such as the ministry of environment and forests also influence the policies. However, the ministries do not form their respective plans in isolation and a number of mechanisms exist to make them compatible with each other. Each ministry has an opportunity to comment on the policies, programmes, and projects of other ministries when these come up for approval in the Cabinet. The energy division of the Planning Commission co-ordinates the plans of these ministries to remove inconsistencies and bring about some amount of dove-tailing of the projects. Such interventions, however, remain piecemeal and incomplete. Experience shows that there are no simple solutions; merging all the ministries into one ministry has been tried but has run into problems of manageability. Energy policy has multiple objectives. It has to improve the efficiency of energy use, influence the choice of fuels, and ensure that energy shortages do not hold up the growth of the economy. These are formidable tasks in the Indian context today. Our energy requirement is increasing at a rate of 6-7 per cent annually. The dependence on imports of oil, and even coal, is increasing. Infrastructural bottlenecks by way of shortage of storage space, and port and railway facilities are serious. The regime of administered prices of petroleum and coal and subsidies on power have not encouraged efficiency in either production or consumption and, further, have distorted fuel choice. An integrated energy policy helps us to think in terms of energy rather than in terms of a particular fuel. This brings efficiency considerations to the forefront, helps optimal planning for infrastructure, and also encourages the energy industry to integrate. A thrust on such renewable energy sources as wind, bio-mass, and the sun would require integration at a fundamental level so that targets are jointly adopted, and each ministry feels responsible towards realizing these targets. It could be said that coordination problems are common when there is too much planning. Now that we are deregulating the energy sector, would the market not bring about the necessary integration? To a large extent it should. However, there are aspects of integration that the market would not take care of and these must remain public policy concerns. First, the integration with environmental considerations. The market price of a fuel will not include the costs of pollution along the energy chain. These costs must be brought in through taxes on emissions and effluents. Another consideration would be the access to and affordability of environment-friendly cooking fuels such as LPG and kerosene, as compared to fuelwood, for the poor. Secondly, the integration with our foreign and defense policies. Only a conviction arising from an integrated energy approach would compel the government to ensure the facilitation of politically sensitive, but economically and environmentally highly beneficial projects such as the Iran gas pipeline. With increasing dependence on imported energy, we will be vulnerable to supply disruptions arising from political or military considerations. Japan has been the major energy importer in Asia. India and China will soon join this league. In the past, we have been able to make use of our diplomatic ties to keep the oil flowing even in times of crisis. There can be no doubt that we would have to call on these resources again in the future.