India’s phenomenal growth in last two decades has made it a strong contender in the race of emerging global superpowers. However, if India wants to fuel any hopes to realize its ambitious plans, gaining energy security will be a paramount concern. India’s huge dependence on foreign imports not only puts a great strain on its economic resources, but also makes it vulnerable to the whims of outside world.
India’s energy sector has been majorly crippled by issues pertaining to domestic nature. Due to scarcity of domestic oil and gas reserves, more than three-fourths of India’s oil needs are met by imports. Even the existing reserves are not fully exploited. Excessive bureaucracy and requirement of approval from 7 different ministries has stalled production plans at numerous occasions. Government’s changing stance on tax laws, policy ambiguities and uncertainty on revenue sharing models has resulted in lower enthusiasm among foreign players. Moreover, Government’s regular intervention in fixing oil prices and misalignment with global prices has discouraged private sector to become a partner in finding solutions to India’s myriad energy problems.
In spite of abundant coal reserves, India imports huge quantities of coal owing to the poor domestic quality. While India’s long sunshine period and long coastline present a huge potential of exploiting renewable resources, their doubtful commercialization and huge investments have deterred any big plans. Moreover, the recent nuclear catastrophe in Japan has put looming concerns over the future of nuclear energy. The growing public awareness and stringent environmental regulations have made harnessing of conventional sources of energy even more difficult and costlier. Thus, India’s energy future looks bleak and need some immediate corrections.
India has to adopt a multi thronged strategy to effectively counter the above challenges. While India’s energy giants like ONGC have taken right steps by acquiring foreign oil and gas assets to overcome the domestic shortages, more such efforts need to be taken. Both private players and national oil firms have to aggressively pursue the path of acquisition of O&G reserves in Latin American, African and other countries. Government has to promote these initiatives by increasing its budget outlay for these acquisitions.
Coal to Gasification (CTG) technology is an answer to India’s poor quality of coal. The success of China in converting poor quality of coal into gas and transporting it form remote places to country’s main centre highlights the efficacy of this new technology in helping India harness its full coal potential.
Fuel subsidies have to be phased out in a systematic manner to cut their inefficient usage. Diversion of these funds towards R&D for better exploration techniques will pay huge dividends in increasing domestic production. India has to increase diplomatic efforts to bring more Clean Development Mechanism (CDM) projects to its shores. Such projects will bring much needed investments and build India’s base of renewable sources. The discovery of unconventional sources of energy like shale gas and coal bed methane reserves has also opened up a new window of opportunity. Schlumberger has already confirmed the availability of shale gas basins in Cambay and Cauveri basin. US’s shale gas success demonstrates that successful shale gas exploitation can go a long way in enhancing country’s gas production.
However, the area that requires major overhaul is India’s poor domestic exploration environment. While the New Exploration Licensing Policy (NELP) has played a role in bringing some private players to the domestic oil and gas exploration market, a lot needs to be done still. India urgently requires the technical expertise (deep sea and ultra deep sea technology) and huge investments from global energy players to increase production and oil and gas recovery. More transparency in product sharing contracts and implementation of open acreage policy will encourage participation of global players. Strong legal system has to be established to resolve the disputes arising out of contracts from allocated blocks. Currently, more than 52 of the allotted 114 blocks under NELP are pending approval from various ministries. The question is why these blocks were allotted before approvals of different ministries. Such cases set a bad precedent to future allocations. Single window clearance mechanism has to be developed to reduce the time and hassles of moving through different ministries. Moreover, Government has to launch aggressive marketing campaigns and make seismic data available for different regions to improve perception about India’s geology. Private players have to be encouraged through tax breaks and risk sharing agreements to make investments in the infrastructure and modern equipments for exploration.
To sum up, more proactive Government approach, higher private sector participation and efficient use of available resources will drive not only India’s energy security but also give more teeth to India’s rising dominance as a global superpower.
Ankur Goyal is a PGP1 student at IIMA, and is member of the Consult Club here. He graduated with a B.Tech in Chemical Engineering from IIT Delhi, and worked for a year in Kellogg Brown and Root Technology group, before joining the post-graduate program at IIMA.