The Hindu Business Line : `We want to push energy conservation and efficiency strongly'

The Government is serious and you can see reform in the coal and power sectors and in many areas of non-conventional energy in the next few years. — DR KIRIT S. PARIKH, MEMBER, PLANNING COMMISSION

DR KIRIT S. PARIKH, MEMBER, PLANNING COMMISSION

The ambitious economic growth target of close to nine per cent per annum for the Eleventh Five Year Plan is predicated on meeting the growing needs for energy to fuel the economy. The country has a long way to go not only in oil, but also natural gas, power and coal to secure supply security, reasonable price, and efficiency in delivery of energy. India's hope to compete effectively in world markets would be affected if the critical energy inputs were not available in adequate quantities and at appropriate prices.

An Expert Committee — set up at the behest of the Prime Minister, Dr Manmohan Singh — under the chairmanship of Dr Kirit S. Parikh, Member, Planning Commission, has come out with a final report. Titled `Integrated Energy Policy — Report of the Expert Committee,' the 148-page document talks about with the challenges of ensuring adequate supply of energy at lowest cost, providing clean and convenient `lifeline' energy to the poor, creation of competitive energy markets and ensuring `energy security.'

The report emphasises the need for consistent and balanced regulation, improving efficiency in the energy producing and consuming sectors, development of alternate fuels and renewable energy. It suggests consistent relative prices, level playing field for all participants, uniform treatment of externalities and development of public infrastructure, regionally balanced developments and energy for the poor.

Talking to Business Line about the report, Dr Parikh said, "the Government is serious and you can see reform in the coal and power sector and in many areas of non-conventional energy in the next few years. We do want to push energy conservation and energy efficiency very strongly."

He says, "Oil security in my opinion is a grossly exaggerated fear. We are concerned about the high price of $70 per barrel. On the other hand, there is a huge amount of potential oil substitutes available in the world."

Here is Dr Parikh's take on various aspects of an integrated policy that is both efficient and sustainable over the long haul.

On the committee's suggestion for a National Policy on Domestic Natural Resources in the coalition era and where regional parties have a mind of their own:

We are asking for a via media. If each State thinks that it can get the maximum from the resources, then the system cannot function very efficiently. At the same time, we cannot dictate to the States . So we have to talk, discuss, negotiate and arrive at a consensus. That is why we have the National Development Council. Even the complicated problem of VAT (value added tax) was resolved and the State Finance Ministers formed a small working group. We can sort this problem out too.

For instance, hydro resources mostly belong to the North-East. Arunachal Pradesh has a problem about having its lands submerged so as to allow Assam the benefit of flood control. It is possible to agree on a deal if Assam bears part of the cost by way of compensation to Arunachal Pradesh, and there is a justification for it.

Similarly, States possessing coal may argue that they have to pay the price in terms of pollution and displaced persons for generating power for others. Hence, compensation is needed.

It was agreed that for the hydel plant, a State would get 10-12 per cent free power; for coal mining there is the coal royalty. These arrangements of the past need some revision. They must be in keeping with the changing understanding, concerns and reality.

Earlier rehabilitation and resettlement was not given high priority. Those displaced are now called project-affected; they used to be called oustees.

We are going a step further and saying that they should not only be well off but should benefit from the project. It is clear we need an understanding and it should be acceptable to all.

On power sector reform and the committee's key recommendations: Financial viability of the State Electricity Boards (SEBs) and State utilities is the most important reform necessary. As long as 35-40 per cent of energy is not billed for, the viability is going to remain a big question mark. As long as the State utilities are financially bankrupt, they will not get the money to invest in creating additional capacity and no private investor would come because of the uncertainty of payment. Even the public sector does not get paid and this happened when SEBs ran up huge bills with the Central PSUs.

Even the tripartite agreement cannot function if the share of the Central sector increases very much in the power sector. So the proposition that we rely entirely on Central sector development is not viable. It is absolutely critical that we first make the SEBs financially viable and for that the most important thing is stopping the pilferage.

The committee suggested restructuring the Accelerated Power Development and Reform Programme (APDRP) by tackling issues of lack of baseline data to assign accountability and assess outcomes; poor preparation of projects; and lack of incentives for the staff to reduce the aggregate technical and commercial (AT&C) losses.

The panel suggesting introducing automatic meter reading of all distribution transformers to track losses in each area served by a transformer and supplementing this with a Geographical Information System (GIS) that maps the distribution system to facilitate power audits and pinpoint the offenders.

Second, separation of feeders to farmers to enable the distribution utility to ration agricultural consumers and to meet their requirements at off-peak hours.

On oil and natural gas sector reforms: If the world price of crude oil remains high, there is no way you can avoid passing it on to the consumer. Otherwise, it will have a draft on the budget. The government could to some extent absorb this so that the taxes remain revenue-neutral and still you can absorb some of the price hike because the domestic consumer price is two times the f.o.b (free on board) price. This is a cushion but hasn't been leveraged in the way it should be. We are protecting only the diesel and petrol consumer; passing only a little bit of the hike.

Gas must compete with coal as the key alternative for power generation. The cost of generating peak or base electricity using gas cannot exceed that of peak or base electricity from coal, the cheaper alternative.

On coal sector reform: Ideally, coal prices ought to be determined in a competitive market. This is not possible as long as the number of suppliers is limited and the largest coal consuming sector (power) is fully compensated in determining electricity tariff.

Since other users of coal are numerous and consume substantial quantities, a strategy for competitive pricing discovery is possible.

Twenty per cent of the total coal produced should be sold through e-auctions. Replace the practice of grading coal under wide bands of the empirically determined UHV (Useful Heat Value) by the international practice of grading coal based on GCV (Gross Calorific Value) to encourage efficient use of coal and promote use of washed coal. Pending the passage of the Coal Mines (Nationalisation) Amendment Bill 2000, the number of players in coal mining should be increased under the extant legislation that allows mining by State governments, public sector companies and for captive use by recognised end users (power, steel and cement units).

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