At The Crossroads: India’s Energy Demands

Following is an article I wrote for the first edition of the Energy Bulletin of IIT Madras. 

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At The Crossroads: India’s Energy Demands

India is firmly on the superhighway of accelerated economic growth. Along with China, India will be an important player in determining where the world will be poised a couple decades hence. India’s stance on major contemporary issues of energy security and climate change are especially relevant in view of the depleting natural resources and increasing international attention towards our vehicles of growth.

During 2002-2007, India’s GDP has grown at a rate of over 8 % which has been achieved by an energy growth of less than 4% per annum.  Experts refer to this as ‘GDP-Energy Decoupling’ - the independence of economic growth from energy growth. You might be inclined to conclude that our energy mechanisms are becoming more efficient, thereby able to make-do with the below par growth in energy. But such a conclusion will be grossly unfair; a deeper analysis of GDP brings forth our myopia in doing so.

While the Industry sector of India is one of the most energy-intensive sectors accounting for about 35-40 pc of the consumption of electricity in the country, its contribution to India’s GDP, however, is only about 20 percent. On the other hand, India’s growth is mainly fuelled by the knowledge-intensive services sector which accounts for 60 pc of the GDP. While intrinsically the industry sector is energy-intensive, it also suggests that a conscious increase in power input to the sector will accelerate its growth thereby giving the GDP a shot in the arm.

The   per capita consumption of power in the country in 2005-06 was about 631 Kilowatt Hours. The government of India envisages increasing it to 1000 units by 2012. A look at the global pattern of power consumption suggests a striking correlation between economic growth and power consumption. USA, the world’s largest economy has a per capita consumption of 13,338 units. Japan and Germany measure at 8076 and 7030 units respectively. Closer home, states like Haryana, Gujarat & Punjab which have high per capita GDP consume more than 1000 units of electricity per capita. Economically background states like Bihar, Madhya Pradesh, Rajasthan and north-eastern states fare poorly on per capita consumption scale with Bihar recording a meager 86 units per capita.

That we cannot call ourselves a world superpower without ensuring inclusive growth places huge expectations from our citizens and responsibilities from our policy makers. Inspite of the economic recession being a dampener, the manufacturing sector is growing faster than ever. India’s residential consumption is growing at 14 pc. Around 1,25,000 villages will have to be electrified to fulfil the vision of providing power for all by 2012. With this background, McKinsey & Co. in a recent report on India’s power sector estimates that India will need an investment of Rs. 24 lakh crores to keep pace with the growth.

India’s installed power capacity should triple in another 10 years time. We are presently at 140 GW. It needs to touch 415-440 GW by 2017. In the last 10 years, our annual addition was 4 GW. What we really need is 20 GW per year from now on. We are clearly at the crossroads.

Are our policy makers up for the challenge?

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