Will India's energy landscape look brighter?

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As India marches towards a 2013, it's a time to set new targets. More importantly, it is time to devise feasible roadmap to achieve them. The year 2012 was quite challenging for India as reflected in the slowdown in the GDP growth rate. So will 2013 be any better for us?

Well, the Government does intend to increase the growth rate to 8%-9% per annum. However, before the wish comes true, we have issues to deal with. And the most crucial of them at this point is the energy security. Currently, India happens to be the fourth largest consumer of energy in the world. Unfortunately, it is also one of the most underpenetrated. Most of its energy needs met by oil and gas, around 80% and 25% (respectively) of which are sourced from outside nations. Needless to say, the country is facing a grave energy crisis. And that makes it quite likely that we may further skid off the growth trajectory.

The imports, be it natural gas or oil, are getting costlier like never before. The situation is further compounded by falling domestic gas supplies, increasing LNG and crude oil prices and lack of enough investment in oil and gas assets. Not to mention the geopolitical challenges like crisis in Middle East or sanctions on Iran (that used to be second largest crude oil supplier for the country).

So how do we plan to meet the energy demand that is likely to grow to 5.7 % percent per year in 12th five year plan (as compared to 5.1% per annum in the eleventh five year plan)? As per the Planning Commission's projections, coal, natural gas and LNG (imported gas) will substitute the oil to a significant extent in the future. The plan hardly looks convincing as coal supplies are already dwindling while rising LNG prices are making even existing projects in the country unviable. While the Government has some ambitious plans with regards to renewable energy sources, the reality is it will take a very long time before they contribute anything significant to the energy needs of the nation.

Before we plan something grand, we need to plug the existing loopholes in India's energy policy. The biggest of which is the misalignment of prices of energy resources and distorted power tariffs. It discourages energy efficiency, promotes adulteration of fuels and disincentivizes investment in energy sector. Not to mention, huge under recoveries and resultant subsidies over burden the budget. Another major issue is multiple ministries handling the country's energy sector that often leads to confusion, contradictions and ultimately missed opportunities.

If the above mentioned issues are tackled sensibly, it is likely to incentivize and step up investment in domestic energy sector. This further needs to be accompanied by clearing bottlenecks such as land acquisition issues, undue delays in getting environmental clearances, lack of clarity on production sharing contracts to name a few. India's energy security challenges are internal. We hope the year 2013 brings some positive developments in the sector. Else it is hardly likely that India's energy landscape will look any brighter!