Power Plays

Last few weeks have seen hectic political activity and different sets of people and political parties voicing their views on the Nuclear Deal, which refers to the agreement India has signed with the United States, with regard to Nuclear Cooperation between India and United States. What is this whole Deal about? Is it good for us? In what ways it will affect the way we live our lives. Why is our Prime Minister Manmohan Singh so passionate about the deal and why the Left parties are opposing the deal? It is a very interesting development in the overall scheme of things. And it also has lots of ramifications for our Energy needs for the years to come as also for how firm can we be with regard to agreements made with foreign countries.

The Government’s logic in going ahead with the deal is that it is vital for our energy needs and in no way compromises our nuclear weapons programme. Our Energy scenario is really bleak. Our Power sector is characterized by 13.8 % peaking deficit and 9.6 % energy shortage. Our Transmission and Distribution losses are as high as 40 % and the sector hardly has any competition. Private investment is highly adequate. We were supposed to add 100,000 MW from 2002 to 2012, but the increase in generation capacity has been much less than what was planned. One of the reasons cited has been that Power has been a concurrent subject and it is very difficult for Regulators to bring in reforms in the States and hence the growth remains sluggish. This is partly true, in particular, in comparison to the telecom sector where the growth has been phenomenal. Telecom has been marked by huge investments by the Private sector leading to rapid improvement of the tele density as also almost 90 % drop in the tariffs. Of course, Telecom is a Central subject, and hence the job of regulators becomes easier, but the woes of Power sector are much beyond just being in the Concurrent List.

Apart from the problems in Transmission and Distribution, the major bottleneck remains Generation. Thermal energy and Hydel Energy projects have long gestation periods. We have been traditionally been dependent on Coal and Petroleum for our energy needs. The key challenges facing our energy scenario are :

· Coal depletion and pollution. Coal accounts for more than half of the country’s energy consumption. However the quality of our coal is quite poor and coupled with a lack of infrastructure to clean it, can be a major environmental threat. Corruption and poor productivity dog the industry. Although it is the world’s third biggest coal producer after the United States and China, India’s coal reserves could run out in forty years.
· Rising oil imports. Oil consumption, which accounts for roughly a third of our energy use, has increased six times in the last twenty-five years. We import about 65 percent of its petroleum. Infact rising crude prices has put lots of pressure on our Foreign Exchange and we had a deficit last month for the first time after several years. With energy demands rising, the figure could be as high as 90 percent by 2025, according to a report by the Center for Strategic and International Studies. Infact this is a key reason for which we need to have good relations with countries like Syria and Iran.
· Natural gas demands. Natural gas consumption has risen faster than any other type of energy source, but our limited domestic gas reserves spell a need for foreign dependency in this sector as well. The government has slowly been switching from highly polluting coal-fired power plants to plants using natural gas. Our natural gas needs have resulted in negotiations with nations of concern in terms of reliability, including Iran, Bangladesh, and Burma.
· Inefficient electricity distribution systems. Although 80 percent of the country has access to electricity, unreliable power grids cause regular blackouts. Furthermore, inefficient electric systems result in almost 40 percent loss of power in the distribution system. State electricity boards run the infrastructure behind the country’s power distribution and own a large portion of electrical output. The boards are in poor financial shape, largely because they provide power at highly subsidized rates, particularly to farmers. Although the government has loosened limitations on foreign investment in the power sector, the notion of working with the financially beleaguered electricity boards has scared off private investment.
· Energy-related water shortages. Indian farmers have access to heavily subsidized power to pump water for irrigation. The low costs lead them to wasteful water use, depleting the water tables. As water tables lower, larger pumps require more power to access deeper water supplies.
· Limited nuclear energy. With fourteen nuclear power plants run by state-owned companies, nuclear energy accounts for just 3 percent of our energy consumption. Government of India hopes to boost this sector through the nuclear deal allowing U.S. companies to sell equipment, nuclear fuel, and reactors to India. However, the agreement requires us to allow inspections and implement safeguards for our nuclear facilities in lieu of the assistance for our civilian nuclear energy program. Proponents say the deal could help India meet its energy needs over the medium to long term by opening the door to investment in the country’s nuclear energy sector. The left parties are crying foul as they believe that we have succumbed to US pressure in allowing inspections of our nuclear facilities thereby virtually halting our weapons programme. They contend that the deal compromises Indian sovereignty. In view of the fact that we already have the necessary deterrence, the moot question is that should we go ahead in order to make us Energy secure. Most scientists including former President Kalam are in favour of the deal. There are other critics of the deal who say it will hurt international nonproliferation efforts because India, which has tested nuclear weapons, is not a member of the Nuclear Non Proliferation Treaty (NPT) and the U.S.-India deal only safeguards civilian nuclear facilities made by India when the deal was reached and it does not limit the number of nuclear weapons India produces.

Looking from a pragmatic point of view, it is very clear that we need assistance of United States in order to move ahead on our Nuclear Energy programme. This is essential as our Uranium deposits are limited and we also need the technology to manage big civilian nuclear reactors. Energy security is vital for our sustained economic growth and Nuclear Energy can be an environmentally safe solution for our energy needs. Thus rather than continue to harp on a nuclear weapons programme, which in today’s world is not really required, and we already have the necessary deterrence, it seems to be natural for us to go ahead with the deal. Already lot of time has gone by and in the days to come, with US Presidency elections just round the corner, it is to be seen if the deal sees the light of the day. Meanwhile Power plays continue and Samajwadis are going to occupy the vacuum created by the Left. Government has other pressing issues like Inflation to handle. It seems interesting days are ahead.

Anyways, have a nice week ahead.

PS Views expressed above are entirely my personal and any feed back can be given to abhish18@gmail.com or by SMS to 9436434432.

Abhishek Singh