Contents
India: Energy Scenario
D. N. Raina

Introduction
India's economic growth has been steady but slow. The GDP increased to over Rs 22,000 billion by 2003-04 and the per capita income increased to over Rs. 21,000 per year. The growth pattern, which started with 3 to 3.5 percent during the early years of development, has consistently been over 5-6 per cent during the 1990s. Of late, the GDP has grown over 6-8 per cent. With these growth levels it has emerged as one of the fastest growing economies in the world. India needs large quantities of energy not only to sustain these growth levels, but also to meet the growing energy needs of its growing population, which is now over 1.05 billion.

The level of economic performance and fast growing population has made India one of the largest consumers of commercial energy (coal, oil, gas and electricity). However, it still continues to be among the large consumers of traditional energy (like firewood, animal and vegetable waste). In addition, even now, mechanical energy obtained from animal power and manpower is used to draw water, plough the land and transport men and materials in substantial quantities. These contributions to the energy availability of the country are never measured or even taken note of. While production and consumption of commercial energy is properly measured and recorded, only some approximate estimates are available in respect of traditional fuels.

Energy Consumption
The consumption of traditional fuels has grown at the rate of 2.7 per cent from 185 million tonnes of oil equivalent (mtoe) in 1980-81 to 331 mtoe in 2002-03. Coal consumption has increased at the rate of 5.8 percent from 109 million tones to 358 million tones; oil consumption increased at the rate of 6.4 per cent from 31 million tones to 111 million tones; natural gas consumption increased at the rate of 15.6 percent from 1522 million cubic meters to 29,718 million cubic meters; hydroelectricity consumption has increased at the rate of 3.2 per cent from 46,557 million Kwh to 84,619 Kwh; nuclear electricity consumption has increased at the rate of 9 per cent from 3,001 million Kwh to 21,273 million Kwh and electricity consumption from renewable sources has increased from 69 million Kwh to 16,122 million Kwh over the same period.

Indigenous Resources
India has primarily been meeting its electricity requirements indigenously, except for about 300 MW imported from Bhutan and small exchanges of the order of 50 MW with Nepal. India has one of the largest coal reserves in the world that has helped to sustain the fuel supply for the coal based thermal power stations, which generate about 70 per cent of the total electricity in the country. Recently, the problems with the local coal have resulted in import of small quantities of high-grade coal from countries like Australia. India has some oil and gas reserves, which have been meeting a small portion of its demand for hydrocarbon fuels. As a result India imports large quantities of liquid as well as gaseous hydrocarbon fuels to meet its energy requirement.

Import Dependence
It is necessary to examine the import dependence of fuel supply. The data of fuel consumption, production within the country and the imports each year in detail is set out in Table 1.

Table 1: Consumption,production and imports of commercial fuels

Sl. Item Units 1980- 81 1990- 91 1995- 96 2000- 01 2001- 02
1 Coal/Lignite consumption mtoe 58.5 108.2 140.7 169.1 181.9
2 Coal Imports mtoe 0.2 4.0 9.0 11.0 12
3 Dependency of Coal % 0.3 % 2.8 % 4.4 % 7.0 % 6.7 %
4 Oil Product Consumption mt 31 68.2 77.3 98.6 99.2
5 Oil Imports as Crude Products mt 7 26.1 49.8 83.4 85.7
6 Oil imports Dependency % 23 38 64 85 86
7 tion of Natural Gas (All
domestic)		 mtoe 0.2 10 16 25 27
8 Electricity Consumption
(All domestic)		 mtoe 5.0 6.0 8.0 8.0 9.0
9 Total fuel imports as % of total Consumption in toe terms. % 8 16 24 24 31

The above table shows that the import dependence has increased in the decade of the 1980s and 1990s and this is due to the increased imports of oil products. The increase in oil import dependency has generated a phenomenal growth from a low 23 per cent in 1980-81 to 86 per cent in 2001-02.

Impact on Foreign Exchange
Oil prices have sharply fluctuated in the international market and the heavy dependence on oil imports have had a big impact on the foreign exchange requirements. Though in absolute terms, the oil imports have substantially increased from US$ 6,655 million in 1980-81 to 10,482 million in 1999-2000, in terms of percentage of the total foreign exchange earnings, the oil imports have come down from 78.4 per cent to 27.8 per cent over the same period. The reason for this situation is that the foreign earnings have increased substantially over this period. However, the volatility of the oil prices in the international market creates uncertainties and sudden jolts to India's foreign exchange balance. Though, the overall oil imports have proved to be manageable. But behind the figures of imports are several risk prone features, which need to be carefully addressed.

Indian Energy Sector
In order to appreciate the prevailing energy scenario in the country, it is important to look separately at the various sub-sectors within the energy sector.

Electricity sector
Generation and availability
The overall growth of power sector has been very impressive. Starting with a modest installed capacity of 1564 MW in 1950, the installed capacity under utilities has grown to 115,544 MW as of end January 2005. This comprises 80,201 MW thermal; 30,135 MW hydro; 2,720 MW nuclear and 2,488 MW wind resources. As per the annual report of the Ministry of Power for the financial year 2004-05, the country generated 558 billion units (Bu) of energy. However, shortages continue. Against the energy requirement of 491,348 MU the energy available was 456,009 MU, resulting in the energy Shortage of 35,339 MU (7.1%). Against the peak-demand of 87,906 MW; the peak demand met was 77,281 MW, resulting in peak shortage of 10,625 MW (12.1%). The overall PLF of all the power plants at the national level is 74.3%. The generation has grown from 5100 Mu in1950 to 558 billion units in 2004. About 81 % of villages in India are electrified. Over 13.9 million agriculture pump-sets are energized through electricity. The per capita consumption of electricity has increased from about 16 units per person to 556 units per person in 2004.

In addition to the figures stated above, there are a number of large industries, which have their captive power generation facilities to meet their in-house requirement. Power shortages have forced other consumers as well to resort to captive generation. As such the latent demand is not reflected in the figures above.

Ownership
Of the above capacity 58 per cent is owned by the state governments, 32 per cent by the central government, and 10 per cent by the private sector. Indian power system has been divided into five regional grids. These link all the state grids within a region. There are a few inter-regional linkages also. Plans have been formulated to form an operational national grid in the near future linking all the regional grids.

Forecast
The forecast of demand for the Tenth Five Year Plan ending with 2006-07 and Eleventh Five Year Plan ending with 2011-12 has been made by CEA in 2000 and approved by the Government. It has projected that the energy demand would be 719,097 MU and 975,222 MU and peak load will be 115,705 MW and 157,107 MW in the year 2006-07 and 2011-12, respectively.

To meet the demand the plans for additional capacity in power generation for the Tenth and Eleventh Plans have been fixed as 46000 MW and 65000 MW, respectively. In effect the power generation capacity at the end of the Ninth Plan would be almost doubled with the addition of about 100,000 MW in the Tenth and Eleventh Plan.

Power sector reforms
The projected power sector plan would call for massive investment in expansion of power generations and the associated transmission and distribution capacities. However, the operational and financial health of the power utilities calls for remedial action. The major shortcomings to be remedied through reform and restructuring are: a) high level of T&D losses extending from 30 per cent to 50 per cent, b) non-rational tariffs, c) un-metered supplies to agriculture and rural small households d) poor quality of service, e) poor consumer service, f) weakening of the financial viability of power business, especially of rural distribution business. Reform efforts since 1998 were based on a two-pronged approach – regulatory reform and restructuring initiatives. Electricity Regulatory Act 1998 was enacted as a Central Act under which each state was to set up a State Electricity Regulatory Commission (ERCs) which would take over the responsibility for fixing tariff through an open transparent system and so far 18 states have set up ERCs, besides the Central Electrical Regulatory Commission (CERC). On the restructuring side, the efforts were to un-bundle generation, transmission and distribution to enable the introduction of competition through private investments by several players in generation and distribution.

Electricity Act 2003
After years of debate and wide consultation, the old Acts governing the power sector were replaced by a Comprehensive Single Act, Electricity Act 2003. The key objectives of the Electricity Act 2003 are to:

  • Consolidate the laws relating to generation, transmission, distribution, trading and use of electricity.
  • Promote competition in the industry.
  • Protect the interests of consumers and to provide for reach of electricity to all areas.
  • Rationalise electricity tariffs.
  • Ensure introduction of transparent policies regarding subsidies.

The Electricity Act, 2003 contains several far-reaching reforms. Some of them are listed below:

  • Generation de-licensed.
  • Captive generation liberalised
  • Distributed generation encouraged.
  • Open Access on Transmission lines.
  • Open Access in Distribution.
  • Trading in power
  • Removal of exclusivity in Distribution license.
  • State Government shall establish a State Load Despatch Centre (SLDC).
  • State Load Despatch Centre shall not engage in the business of trading.
  • State Government may notify the Board or a Government company as the State Transmission Utility (STU).
  • STU shall not engage in the business of trading.

Other Energy Resources
The major commercial energy resources in the country are coal and lignite, oil and natural gas, nuclear power and hydropower. Other (non-conventional) sources of energy such as wind, solar energy, biogas and geothermal energy are also available but the technology for the use of these sources is in the developing stage. The primary energy resources available in the country are:

Coal
Coal reserves of India have been estimated in different ways by different agencies. The issue of assurance of different categories of resources can be addressed on the lines accepted by the Association of German Metrological and Mining Engineers (AGMME). The estimated assured resources in the depth range of 0-1200 meters is 204 billion tonnes comprising proven reserves of 84.4 billion tonnes, indicated 69 billion tonnes, inferred 15.3 billion tonnes, prognosticated 35.8 billion tonnes. The sum of all these estimates works out to 204.5 billion tonnes.

The recoverability of the assured geological resources can also be estimated on the basis of the norms specified by AGMME, which are based on the mine depth, seam thickness etc. That gives the ratio of recoverability. The estimates of mine-able reserves have been put at 39.6 billion tonnes. This estimate indicates that even on a very strict assessment 39.6 billion tonnes could be recovered from the known resources of coal. Considering that the coal demand may reach over 500 million tonens in 2006 and over 800 million tonnes in 2020, we can be assured of 45-50 years of required production. There are efforts to acquire technology which can mine in conditions that are not amenable to mining now. The resources are likely to be much more and according to some estimates the available coal can last for more than 75 years.

Petroleum
Known reserves of crude oil and natural gas are not adequate and the country has to depend on bulk imports of crude oil. In 2002, the balance recoverable reserves of crude oil are about 660 million tones and that of Natural Gas are about 763 billion cubic meters, excluding the latest finds in the Krishna Godavari basin of the coast of Andhara Pradesh.

Exploration for hydrocarbons has so far been limited to the on land and shallow water offshore areas. Private and public sector companies have made a beginning to undertake deep-sea exploration for oil and natural off the west and east coast of India falling below 400 meters. The results are very encouraging. Public sector E&P companies are also registering reasonable success in gas finds at deeper levels.

Nuclear power
The Nuclear Power Corporation of India is a Public Sector Undertaking under the Department of Atomic Energy entrusted with the responsibility for design, construction and operation of nuclear generating units. The Nuclear Power Corporation has a program for commissioning additional capacity in order to obtain a total installed capacity of 11,600 Mwe of nuclear power by the end of the 11th Plan.

Hydro-power potential
The Central Electricity Authority undertook assessment of the hydro-power resources of the country in the 1980s. In this survey, the theoretical hydro potential of the Indian rivers was also worked out and the economic hydro-electric potential assessed by identifying specific sites found suitable for setting up hydro power stations based on topographical studies. The reassessment of hydroelectric potential is based on water availability corresponding to a 90 per cent dependable year. The total potential of the river systems in India at 60 per cent load factor was assessed as 301,117 MW, and the economic potential at 84,044 MW. The resources are concentrated in the Northern and Eastern sectors. The details of this potential are indicated in Table 3 below.

Table 3: Region-wise Distribution of Hydroelectric Potential

Region Energy Potential (TWH) Capacity Potential at 60 % Load Factor (MW) Percentage
Developed
Northern 225.0 30155 14.3
Western 31.4 5679 31.9
Southern 61.8 10763 49.2
Eastern 239.3 31857 1.0

Non-conventional energy resources
The non-conventional energy resources are particularly attractive for development because they are renewable and environmentally benign. The development of such resources was initiated in the country on a small scale following the energy crisis of 1973. Since then as a result of the continued thrust on the part of the government, information base on non-conventional energy resources for the commercial exploitation of these resources has been created. The most important renewable energy resource, which has been developed so far, is the wind energy. The country had an installed generation capacity of 2,488 MW at the end of January 2005 based on wind resources. The capacity under micro hydro-power is about 205.3 MW. The potential and exploited potential of various renewable energy technologies is given in the Table 4.

Table 4:Renewable Energy potential & Achievement march(2003)

Source Potential Potential Exploited
Solar Energy 5x10 whr/yr 47 MW
Biomass based power 17,000 M W 484 MW
mall hydro 15,000 MW 1509 MW
Wind Energy 45,000 MW 1870 MW
Ocean Thermal 50,000 MW --
Sea Wave Power 20,000 MW --
Tidal Power 9,000 MW --

Outlook for Energy Demand and Supply
Long-term energy forecast for a large country like India has always been problematic. The task has become more complicated, as in the recent years India's economic growth rate is over 5 per cent per annum (after exceeding 6 per cent) showing a discontinuity from the earlier trend of 3-4 per cent per year and the composition and structure of industrial sector is undergoing a big shift towards Information Technology and service industries. However, the Planning Commission has produced two important reports, the Tenth Five Year Plan in 2002-2003 and the Report of the Committee on India Vision 2020, which provide a reasonable basis for the analysis in this paper.

The elasticity of energy consumption to GDP in the world has become less than unity. The elasticity of primary commercial energy consumption in India which was over unity in the early years of development has over the long period 1953-2001, been found to be a little less than unity. Based on this trend in elasticity, the commercial energy demand was forecast as 408 mtoe in 2006-07 and 544 mtoe in 2011-12 (See Table 12 ). This is in line with the demand projections made for different fuels organised by the respective ministries with groups of experts and other stakeholders. This resulted in the estimates for commercial energy growing at 6.5 per cent during the Tenth Plan and at 6.1 % during the Eleventh Plan. Table 5 sets out the summary of fuel-wise demand.

Table 5: Estimated Energy Demand in 2006,12

Primary Fuel Unit Demand (in Original Units) Demand (MTOE)
    2006- 07 2011- 12
 2006- 07 2011- 12
Coal mt 460.50 620.00 190.00 254.93
Lignite mt 57.79 81.84 15.51 22.05
Oil mt 134.50 172.47 144.58* 185.40*
Natural Gas BCM 47.45 64.00 42.70 57.60
Hydro Power BKwh 158.08 215.66 12.73 18.54
Nuclear Power BKwh 23.15 54.74 6.04 14.16
Wind Power BKwh 4.00 11.62 0.35 1.00
Total Commercial Energy       408.02 544.23
Commercial Energy       151.30 170.25
Total Energy Demand       559.32 714.48
Source:Planning Commission of India ced from Indian refiner Five Year Plan document.
* As oil products would be fully produced from Indian refineries 1 tone of product is assumed to be 1.075 mtoe.

While analysing the availability of energy resources to meet this level of demand, the highly skewed distribution of India's energy resources has to be kept in view. Details set out in Table 6 below:

Table 6: Regional Distribution of Commercial Energy Resources

Region Coal (bt) Lignite (bt) Crude Oil (mt) Natural Gas (BCM) Hydro BKwh
Northern 1.06 2.51 0.03 0.0 225.00
Western 56.90 1.87 519.47 516.42 31.40
Southern 15.46 30.38 45.84 80.94 61.80
Eastern 146.67 0 2.19 0.29 42.50
North Eastern 0.89 0 166.17 152.00 239.30
Total 220.98 34.76 733.70 749.65 600.00
bt: Billion Tones BCM: Billion Cubic meters
BKwh: Billion Kilo Watt hour; mt: Million Tones

Vision 2020
The Committee on India Vision 2020 has made forecast up-to 2020. The first level scenario was based on the trends of the past with some adjustments for the recent developments in energy efficiency in the energy using sectors. This was further improved by assuming that rational corrections to energy consumption patterns and improved energy efficiency of usage could be made and a Best Case forecast was built and the energy demand estimate revised (Best case scenario). The results are summarised in Table 7 .

 

Table 7: Forecast for Energy Consumption 2020

Sl.No. Fuel Coal Oil Products Electricity
  Units mt mt Billion Kwh
1 Business As Usual Scenario Forecast 688 245 1551
2 Best Case Scenario Forecast 538 195 1363
Source: Report of the Committee on Vision 2020, Pla nning Commission of India.


The feasibility of meeting these demand figures have to be examined with reference to the reserve available and the trends in production within the country. The trends of production growth and the required growth rate of production from 1960-61 to 2001-02 may be seen in Table 8.

 

Table 8: Achieved & Required Growth Rate of Commercial Energy

Resource Growth Rate Required Rate
  1960- 61 to 1980- 81 1980- 81 to 2001- 02 2001- 02 to 2006- 07 2006- 07 to 2011- 12
Coal 3.5 5.1 4.5 6.1
Lignite - 8.5 18.2 7.2
Electricity - 7.8 6.7 6.2

The growth rates increases necessary to meet the demand may not be very difficult to achieve. The issues in increasing production to meet the fast growth in demand of specific fuels are discussed below:

Coal
Of the indigenous fuels, Coal is the least expensive and the prices are stable for long period. Coal is safe and easy to transport. The drawbacks are the high ash/content, and the environmental hazards. The new clean coal technologies can increase the fuel utilization efficiency to 45 per cent as compared to 22 per cent. Given price relatives, coal will continue to remain India's principal source for meeting its every needs. Even now 70 per cent of the installed capacity of power generation is based on coal and the trend will continue. Even in 2004, the coal industry could not rise up to meet the demand from power industries. This is due to coal production being under one public sector agency Coal India Limited. While Coal India Limited (CIL) has several achievements to its credit, it has not been able to meet the production targets in time. Several years, small import of coal has to be arranged to meet the gap in supply. The law governing coal sector permits only public sector units to produce coal and offer it on sale. Private participation has so far been not allowed except for production by the power plants from coal bearing areas assigned to them on lease, from which they can produce coal, but only for their own use.

During the Ninth Plan, a Committee was setup to ensure an Integrated Coal Policy. On the basis of its report, coal prices have been deregulated and the Coal Mines (Nationalization) Amendment Bill of 2000 permitting private sector in Commercial Coal Mining has been introduced in the Parliament. However, the Bill has not been taken up for various considerations for several years. In November 2004, the government set up an Expert Committee under the Chairmanship of T. L. Sankar to draw the road map for the reforms in coal sector and to suggest immediate measures to match the demand and supply in the near future.

Coal Bed Methane
Recently, a new and clean coal resource has emerged. The availability of an estimated quantity of over 100,000 billion Cubic meters of Coal Bed Methane (CBM) was known for quite some time. A demonstration project is under implementation with the assistance from Global Environment Facility (GEF) and UNDP. In April 2001, Government invited bids for CBM blocks and private companies have taken up the blocks besides two public sector undertakings. Recent reports indicate that commercial production of Coal Bed Methane is established in at least one of the private blocks. If this deposit and other deposits prove to be commercially viable, a large number of CBM based power plants can be set up.

Oil and gas
The demand from petroleum products in the terminal year 2006-07 is 33.97 mt and that of Natural Gas is 103.08 mmcm. As against this domestic production of crude oil, it is likely to stagnate around 33-34 million tones as in the Ninth Plan and the remaining nearly 90 m.t. of oil requirements will have to be imported mostly as crude to be refined in Indian refineries or as oil products. In respect of natural gas there might be a slight increase from the current 80 Mmscmd (million standard cubic meters per day) to about 103-104 Mmscmd. The projected year wise anticipation production from 2002-03 to 2006-07 within India of oil and gas will be as in Table 9 given below:

Table 9: Crude Oil/Natural Gas Production in Tenth Planl

Resource   2002- 03 2003- 04 2004- 05 2005- 06 2007- 08
Crude Oil Million tones 33.08 33.22 34.63 34.48 33.97
Natural Gas Mmscmd 86.56 90.54 103.84 101.99 103.08
mmscmd: million standard cubic meters per day.

The table above shows that only about one third of the hydrocarbon needs are met by indigenous production. The rest of the needs have to be met by imports. In respect of oil, the import will not cause insurmountable physical problem. However, volatility of high price in the international markets and possible supply disruptions due to unrest in Middle East, raise questions of oil supply security. A number of initiatives are under consideration to address these issues.

Renewable energy resources development
Among other developing countries of the world, India has made the largest progress in terms of developing renewable energy resources both by finding new applications for known resources and for bringing out systems and procedures of making renewable energy resource utilisation cost effective. Much of the success can be attributed to the fact that India is the only country in the world with a separate Ministry for Non-Conventional Energy Resources (MNES). This ministry has a number of divisions dealing with wind, solar, biomass, bio-fuels etc. India has also set up Indian Renewable Energy Development Agency (IREDA), exclusively devoted to the renewable energy sector. Some of the innovative tax concessions given to corporate sector to take up investment in wind power have been very successful. Today, India has wind energy system for over 1870 MW. Biomass utilisation for power generation and bio-fuel development is receiving priority attention now. India could benefit by developing cooperation among the Institutions doing similar work within the South Asian region.

Conclusion
A large number of initiatives have been taken up to mitigate the shortage in energy supply faced by India. Though several of the initiatives could be taken by India independently, but for several of others, India would need the help of the neighboring countries to act as energy suppliers, such as Bhutan and Nepal. For several of these initiatives, India would require the participation and support of the neighbors to provide transit facilities, such as in the case of gas pipelines India would need the support and may be participation in these projects by Pakistan and Bangladesh. The globalisation of economy teaches us to be more pragmatic and open to new emerging situations and adopt ourselves to the new dynamics, burying the past inhibitions. If India is to be where it wants to be in the comity of nations either economically or politically, it shall have to endeavor to accelerate its economic programs and also carry the neighbours along on the trajectory of growth.
(D. N. Raina is Senior Energy Advisor, SARI/Energy Program, India)
Produced By: Free Media Foundation For South Asian Free Media Association