India is facing major challenges in meeting its increasing energy demands.
A few crucial decisions such as price pooling and allowing exploration of shale gas are pending with Government. Moreover, scarcity of gas and coal has made some power capacities idle facing the risk of becoming non-performing assets.
B.K. Chaturvedi, Member (Energy) of Planning Commission talks about different models that need to be put in place.
Excerpts from the interview:
Is the Government taking a final view on coal pool pricing?
Coal pool pricing is one of the issues, which needs to be settled. We cannot have energy prices going up. However, the central issue in my opinion is that we should increase the domestic production of coal. Also, simultaneously we should provide support to States that transport and import coal from long distances. It is to be seen how it can be done.
Does this mean Coal India must import to meet the supply gaps?
Coal India has to meet its commitments as per the fuel supply agreements (FSA). Whatever the volumes it cannot meet, it must provide through imports. All this must be at one price. It is like a contractual solution.
But is price-pooling going to solve the crisis in the longer term?
No, it is not a long-term solution. This is a temporary relief for the problem of falling domestic production.
What support are you giving to States?
One of the supports is pool pricing. This can remain till domestic prices go up and international prices come down. But, finally the domestic production must match with demand. So that could be one way.
Do you think price pooling should be implemented for natural gas too?
Gas price pooling is very important. I think the whole thing (for fertiliser and power sectors) should be pooled. Otherwise, it is not possible for power plants to run.
But what about gas pricing?
In the long run, gas must be priced according to the recommendations of various committees including the Rangarajan panel.
But what about the impact of higher gas price on the fertiliser sector and Government’s subsidy bill?
Availability of gas will lead to overall economic benefits. As of now, there are stranded capacities of power plants. If you take the cost of interest on that; that itself is much more than the cost (increase in subsidy) to Government.
Second, the benefits that would flow from more power will lead to economic growth and additional income to Government by way of taxes. Third, the argument is that give all gas to the fertiliser sector. That’s not the way pricing should be done. Power plants cannot be shut.
Then what is the way out?
It is about policy regime. There should be a balanced approach based on the Government’s resources.