The Energy Conundrum

Energy is a very crucial aspect of civilisation. Work requires energy and so the more the use of energy and the higher the efficiency of its use, the greater the work done and surplus produced. From the time fire was discovered the use of artificial energy generated by burning combustible materials has added to the energy of human and animal labour. This increased substantially first with the invention of the steam engine, then with the invention of the diesel engine and finally with the invention of electricity. Human and animal labour which used to be the mainstay of economic activity earlier, gradually began to recede in importance and artificial energy became the mainstay of economic development and electricity is the dominant form of energy. Thus, for any modern economy, the planning of electrical power is crucial for its development. 

The development push that was required after independence from British rule necessarily had to have a major energy component, especially in the generation of electric power. Since the private sector at the time of independence was very weak, so it fell on the Government to fund infrastructure development, including the generation and distribution of electric power. So mainly coal based thermal power generation and some hydro-electric power generation was done by central and state government institutions. This led to two main distortions over time as follows -

1. Inefficiencies in power generation and distribution with low capacity utilisation in generation and high transmission and distribution losses resulting in huge shortages in supply and a large uncovered population.

2. Poor financial condition of the State Electricity Boards which had to bear the cost of subsidies that were given to farmers and industries legally or illegally by condoning theft of power.

Consequently, when the economy was liberalised in the 1990s, the power sector too was sought to be reformed to remove the above distortions. Now that a quarter century of reforms have elapsed the Prayas Energy Group (PEG) of Pune has recently done a critical review of this reform process in the power sector and the allied fuel sectors of coal and gas and published it - "Many Sparks but Little Light - The Rhetoric and Practice of Electricity Sector Reforms in India" (http://www.prayaspune.org/peg/publications/item/332-many-sparks-but-little-light-the-rhetoric-and-practice-of-electricity-sector-reforms-in-india.html).

The book does a detailed evaluation not only of the achievements of the reform process with regard to removing the two problems mentioned above but also in ensuring better conservation of the environment and natural resources and better rehabilitation of people displaced due to power and mining projects. The conclusions of the book based on detailed factual analysis are -

1. The extension of the market for power and the introduction of private enterprise into the sector has been of a half hearted nature and in many cases private entities have been favoured without a true competitive market structure being established for the power sector.

2. The private sector has made investments only when it has had agreements assuring guaranteed returns and not if they have to depend on the vagaries of the market and so even today the bulk of the generation, transmission and distribution is being done by the public sector.

3. Enough has not been done to promote renewable energy generation and consumption which given their higher costs require pro-active subsidies.

4. The environmental and social costs of power projects which have been rising with time and have now become critical have not been adequately addressed.

5. Access to power still remains minimal for a large section of the population.

6. The financial condition of power sector entities both in the private and the public sector remains precarious and the costs to the public too are high necessitating continuing subsidies to the poor.

While the review competently exposes the inadequacy and misdirection of the reform process in the power sector and allied coal and gas sectors, it does not go far enough in critiquing the energy scenario in this country. For instance nowhere in the book is there any mention of the per capita power consumption level in this country and its comparison with the global average. The average per capita power consumption in India is about 2 units of electricity per day whereas the global average is 8 units of electricity per capita per day which is the minimum required for providing a dignified existence and a thriving economy. The first problem that arises is from this big shortfall is that the present power generation paradigm based mainly on coal fired thermal power plants will not be able to assure a quadrupling of supply to make up this shortfall due to environmental and technical concerns. Neither will such quadrupling be possible through centralised gas based thermal power generation, hydro-power, nuclear power or wind and solar power. 

Thus, there needs to be a reorientation towards decentralised power generation which, in addition to ensuring greater access to power for the poor, will also bring down the transmission and distribution losses. There is no discussion of this whatsoever in the book. The possibility of decentralised generation of power from a combination of solar, wind and anaerobic incineration of forest and agricultural biomass is considerable if it is properly supported by government policies and programmes. Currently, this support is either minimal or non-existent. Indeed not just in the power sector but for our overall energy needs too, decentralised energy production is the way to go given our huge foreign exchange out go for the import of crude oil, gas and good quality coal. 

There is also inadequate discussion of the problems arising out of the need to subsidise the supply of electricity to agriculture given the worsening economics of that sector and the huge number of people dependent on it for their livelihoods. Most State Governments are having to provide huge subsidies to the distribution companies to provide cheap or free electricity to farmers. Once again this underlines the need for decentralised power generation in rural areas.