India is one of the largest markets of energy consumption in the world and it is expected to grow exponentially in the coming years. However, lack of self-sufficiency in the energy industry is a massive problem which continues to plague India despite its seeming progress.
The NITI Aayog, the National Democratic Alliance government’s revamped planning commission, has proposed a draft National Energy Policy, which aspires to reduce this energy deficit by cutting down imports and focusing on more renewable resources for producing energy.
The Niti Aayog came up with this policy after years of deliberation. Its first draft was put out in June 2017 and it is expected to replace the Integrated Energy Policy that the previous United Progressive Alliance dispensation had put into effect. The new policy addresses the potential energy needs of the country till 2022 on a short term basis and till 2040 on a long term basis.
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Key Objectives of National Energy Policy
The policy has four major aims, listed below:
1. Access at Affordable Prices
India’s large-scale poverty has been a significant consideration in the framing of this policy. The new policy endeavours to achieve total electrification of rural India by 2022 and provide the poor with access to cooking fuel, all within a very affordable rate.
2. Improved Security and Independence
Increased energy security implies lesser dependence on foreign imports. Under this, the government aims to diversify imports, enhance domestic production and decrease energy requirement.
Since India already has substantial reserves of fossil fuels, the government plans to harness them for domestic use and may even build an energy bank to help India during lean supply periods. This will ensure that India does not remain beholden to foreign countries for exports, and is not vulnerable to fluctuations in price and supply.
3. Greater Sustainability
Due to the adverse effects of climate change and air pollution, the new policy advocates for de-carbonisation of India’s energy sector. This will lead to lesser dependence on fossil fuels, a major share of which is imported thus also improving energy security. Furthermore, this will also result in a greater dependence on renewable resources like wind and solar power, which India has in abundance.
4. Economics Growth
Since the energy industry is a feeder industry, making energy available at competitive prices will lead to the growth of other sectors. Furthermore, the energy sector itself is massive enough to be one of the biggest contributors to India’s gross domestic product. Thus, rise in India’s energy production would result in more growth for the Indian economy.
Seven Areas of Focus
The government has delineated seven major areas where it feels that greater attention needs to be paid. Some of the salient points that have been included in the policy in regards to each area are listed below:
1. Energy Consumption by Businesses, Households, Transportation and Agriculture
The government plans to reduce energy consumption in the demand sector by promoting measures of energy efficiency. Some of them are as follows:
- Encouraging people to adopt cleaner cooking alternatives like induction cookers and biomass stoves.
- Asking the industrial sector to avail the best available techniques and to install upgraded machinery which runs on electricity rather than solid fuel.
- Promoting the use of electric vehicles and shared or public transport.
- Increasing the thermal efficiency of buildings.
- Using energy efficient agricultural methods and techniques.
- Raising investment in these cleaner alternatives and building infrastructure to facilitate the above mentioned measures.
2. Energy Efficiency/De-Carbonisation Measures on the demand side
Energy efficiency has been accorded special status in this policy. The government recognises that carbon emissions need to be immediately cut down and therefore, has started a campaign to popularise the use of LED bulbs instead of incandescent ones.
This alone is expected to diminish the energy load by about twenty gigawatt and save a hundred billion kilowatt hours of energy. Better energy efficiency will amount to a seventeen per cent less energy demand by 2040.
A National Mission will be launched to this effect and laws will also be framed. Awareness campaigns will be held among people and specific emission targets will be fixed to curb pollution and wastage.
3. Production and Distribution of Coal
Coal is one resource that India has in plenty, with seven per cent of the world’s coal reserves located in India. It is also the major energy source in India, taking up fifty five per cent of the market share. NITI Aayog estimates that coal will continue to be an important resource in 2040, with it occupying forty eight per cent of the market. Coal imports come up to twenty five per cent presently, a number which the government is intent on reducing.
However, despite coal’s present popularity, the government expects that it will slowly be phased out in favour of renewable resources because of its high production cost and low efficiency. Therefore, to recoup its losses, the government will no longer subsidise coal to power generation companies. Instead, price will be determined by market competition.
Reforms will be introduced so as to make the now-stagnant coal economy an open, free and competitive market system. If the price of electricity increases for consumers, the government will implement a Direct Benefit Transfer scheme so that Indians can avail a subsidy. An independent Coal Regulator body will be created for quick decision-making.
4. Electricity Generation, Transmission and Distribution
The National Energy Policy promises that the government will ensure the ambitious target of hundred per cent universal electrification by 2022. Electricity, being a major requirement for both economic progress and for living a quality life, has to be made abundantly available for people to use. Furthermore, greater use of electricity operated appliances, vehicles and machines entails a lesser dependence on carbon-based fuels, thus advancing the Indian government’s de-carbonisation goal.
Reforms will be introduced to improve the distribution and transmission of electricity. First of all, the government intends to introduce competitive pricing and reduce financial assistance to loss-making public sector distribution companies, in order to prevent them from becoming too complacent.
It has been seen that the disconnect between India’s underutilisation of electricity-producing infrastructure and its contrasting unsatiated market demand is due to these failing entities. Generation companies are reluctant to enter into partnerships with these for fear of non-payment of dues.
To rectify this, the government proposes to create a system, like in the telecom sector, where consumers will be able to choose their preferred distributor. Reforms will also be brought in for overhauling the bureaucratic system, which is sluggish and inefficient at present.
5. Augmenting Supply of Oil and Gas, Both by Domestic Exploration and Production, and Through Acquisition of Overseas Acreages
The domestic consumption of both oil and gas has increased by leaps and bounds in the recent years. However, India’s production capacity of these resources has not been able to keep up with the pace, leaving India with no choice but to rely on imports. To compound matters, it has been observed that out of 3.17 million square kilometre of potential area, only nineteen per cent has been explored well.
Thus, the policy recommends that exploration and reconnaissance be boosted by providing companies with all necessary data and initiating cost-recovery schemes.
Restrictions on data sharing will be eased to enhance the rate of success for prospectors. Reconnaissance of previously unexplored sedimentary basins will be given a nudge with the revamped cost-recovery schemes that the government is set to launch.
6. Refining and Distribution of Oil and Gas
It has been seen that India’s domestic refining capacity has progressively grown higher than its required capacity. It has become a valuable source of forex for the country as well as strengthening its energy security. The government has decided to capitalise on this aspect and the petrochemical sector will receive a boost under this.
Popularisation of the use of natural gas has also been given top priority, with natural gas being billed as a cleaner substitute to oil. A National Gas Grid will be established to achieve this aim.
The government also has every intention of catering to the domestic market. It plans to change its marketing strategy by providing attractive deals, payment offers and by increasing the various capacities available for sale. A direct benefit transfer scheme for kerosene is also in the works.
Price distortions and fluctuations in the sale of oil will be minimised, according to the policy. The government hopes that by adopting competitive, free market prices, consumers will switch to electricity-based alternatives.
7. Installation, Generation and Distribution of Renewable Energy
Due to the falling cost of renewable resources technology, high efficiency and environmental concerns, the government has decided that it would be more than worthwhile to concentrate on developing India’s renewable resources infrastructure. The government has declared a target of 175 gigawatt of renewable energy, to be achieved by 2022, and a target of roughly 597-710 gigawatt, to be achieved by 2040.
A Renewable Energy Policy will also be formulated to that effect. Competitive pricing and financial incentives will be initiated to encourage this sector’s growth.
Aside from wind and solar energy, the use of hydropower and biomass will also be publicised. India has huge potential in the hydropower sector, but its market share has fallen steadily over the past few years. Therefore, the government intends to reinvigorate this sector by infusing more capital and emulating successful hydropower projects that it sponsored in Bhutan. Biomass is an extremely flexible source of energy.
It is usually locally produced and therefore easily available. The government has planned to frame a Bio-energy Policy which will include recommendations on the production and appropriate use of all biomass-based resources. It also hopes to augment the production of ethanol and bio-diesel for use in liquid transport fuels.
Construction of rooftop solar panels will be pushed as generation of solar power is a land-intensive programme.
Besides these seven points of interest, the draft National Policy also contains sections on nuclear energy, human resource development, hundred per cent rural electrification by 2022, clean cooking alternatives and grid integration of renewable energy.