Energy Conclave 2006-Implementing the Integrated Energy Policy: The Way Forward

Prime Minister’s speech at the Inaugural Session, 26 July 2006

Ladies and Gentleman,

I am happy to be with you at this Energy Conclave, which is discussing the Integrated Energy Policy. I thank Dr.Parikh and his colleagues for the report they have prepared. I am sure it provides valuable insights into the energy scenario unfolding in our country and can be a valuable tool in planning our energy requirements.

Ladies and Gentleman,

The goals of eliminating chronic poverty and providing a better quality of life to our people can be achieved only in the framework of a rapidly expanding economy. As our economy grows rapidly,-and I am confident it will,- the demand for energy will continue to accelerate. In this context, an integrated energy policy becomes vital for sustaining our economic growth.

If we need to improve the lives of our people, we need adequate energy at a reasonable cost. It is needed for cooking, lighting and transport. Our women and children bear a disproportionate burden caused by the lack of clean, convenient, affordable energy. Their health and their lives are critically affected by this. If we have to free them from drudgery and ill health, we need to address the issue of access to energy.

We set up an Energy Coordination Committee under my chairmanship to enable various ministers to take an integrated energy view of energy policy. The Planning Commission was asked to suggest an Integrated Energy Policy that addresses energy security, access and availability, affordability and pricing, efficiency and environment covering all sources of energy.

I believe the Integrated Energy Policy document has estimated energy requirements in the year 2030 to be higher than today’s levels by factor of anywhere between 4 and 5, if our economy grows at around 8% per annum. The figures of future requirements are gigantic. Electricity generation capacity would need to go up from our current installed capacity of a 131,000 MW to between 800,000 to a 950,000 MW. This would imply huge annual import of oil-anywhere between 300 to 450 million tons-and coal imports that could touch 800 million tons annually.

Ladies and Gentleman,

These numbers raise important questions. Can we afford to follow this energy path? How can we ensure that such vast quantities of energy are available to us? What would be the investment and foreign exchange requirements? India urgently needs to define a new paradigm of development for its energy sector. This paradigm would have to focus on both the demand side and the supply side; it would have to be based on a coordinated development and judicious use of our domestic resources. It would also have to focus on efficiency at all levels.

India is short of modern energy resources like oil, gas and uranium. Even coal is not as abundant as is generally believed. Thus we must use energy resources optimally and efficiently. This requires large investment in exploration, in production of fuels, in generation, transmission and distribution of power and is setting up a gas grid and import infrastructure Unless the sectoral policies are consistent and unless they provide reasonable returns, we cannot attract the needed investment in each of these areas. I believe the power sector alone will need more than Rs.60 lakh crores of investment over the next 25 years. Equally large investments are required in other sectors. Both the public and private sectors have to play important roles here We need to develop public private partnership in ways that attract the needed investment and provides energy services to the consumers to the least cost. We, however, recognize that in many areas and regions, the public sector and the government will continue to play an important role.

Given the shortage of energy resources, we need to reduce wastage of energy by improving efficiency in production, and in consumption. We need to develop all resources, coal, gas, oil, hydro and nuclear along with renewables, such as wind and solar. Moreover, there are many options of using alternative fuel and technologies. We need to make serious efforts to promote the use of all available alternative sources of energy. The report says that from a long term prospective, nuclear energy and solar energy are two abundant sources for our country. The speed with which we can develop nuclear power is constrained by the availability of uranium. The civil nuclear agreement we have entered into with the United States, and our discussions with the Nuclear Suppliers Group should help in accelerating the development of nuclear energy.

As for solar energy we are blessed with an abundance of this source and it could be the major source in coming years. It is time we expanded research in the use of solar energy so that we not only develop appropriate technologies but also generate economies of scale by promoting their extensive use. We also need to examine the potential of hydrogen as a fuel of the future. Hydroelectric resources too should be optimally utilized to reduce the dependence on fossil fuels.

I see that Integrated Research and Action for Development has devoted some effort in understanding the role of bio-fuels, especially as a means of ensuring energy security in rural areas. Our government has launched various biofuel programmes. To make them successful we need to mobilize people and provide information through the agricultural extension system. We must ensure availability of planting material and create an enabling policy framework. We can also use the resources available from the employment guarantee scheme for developing these plantations. We have launched a large scale programme that will be spread out over many villages. We need to help, steer and assess this programme. Here institutions like IRADe can help in identifying problems, analyzing possible solution and working out their implications.

Ladies and gentlemen,

Pricing policies play an important role in consumer’s selection of energy sources. We must examine the relevance of the entire gamut of taxes and subsidies on various energy forms and energy using devices. Are we sending the correct signals to consumers and producers of energy? Are these in line with the country’s overall energy strategy and our economic security?

The extreme volatility that we have seen in international oil markets, couple with similar magnitude of price increases in natural gas and imported coal, has put enormous pressure on domestic prices. We need to factor in the economic cost and the environmental cost of alternative sources of energy while setting their prices. Only then we will be able to ensure that the energy security we desire gets translated into reality.

Ladies and gentlemen,

While supply side issues are relevant equally important is the need to focus public attention on the demand management. This is an area, which has not received the attention that it deserves in our country. We need to promote economy on the use of energy in public and private transportation and for domestic and industrial use. Many countries have demonstrated the importance of energy efficiency in reducing their dependence on energy for fuelling growth. Given the magnitude of our future demand, if we follow current trends, it is imperative that we pay urgent attention to this neglected area. If India continues to focus primarily on enhancing supply and imports to meet its ever-growing energy demand, we could be tying up our resources into an unduly high cost energy economy.

Ladies and gentlemen,

Our government launched the Rajiv Ghandhi Grameen Vidutikaran Yojana to provide electricity to all households by 2009. This programme has an ambitious target of extending the grid to all households by the year 2012. Significant progress has been made towards this objective. We have introduced a fairly innovative concept of franchisees for rural electricity distribution. These would be responsible for providing last mile connectivity and service. All the concerned stakeholders should see if the same franchisees can take responsibility for the delivery of the wider set of services. That would also improve their viability. We would clearly need to supplement grid based electricity supply with more decentralized distributed generation option based on locally available renewable energy resources.

While all villages will be connected to the grid, 25000 remote villages will be provided electricity based on their own local generators. These would use locally available resources. Clean cooking fuels in the form of kerosene, LPG or biogas are desirable to reduce indoor air pollution, and its adverse healthy impact. A subsidy for such fuels targeted at poor households can, therefore, be justified.

Ladies and gentlemen,

I hope that this Conclave will offer a guide to the way forward in implementing the recommendations of the Expert Committee on Integrated Energy Policy. I look forward to receiving the suggestions from this conclave. I wish IRADe and this conclave all success.

Thank you.