Energy

India Announces New Climate Change Targets

The Indian government has committed to reduce greenhouse gas emissions intensity by 33-35% of its 2005 levels by 2030.

The Indian government has committed to reduce greenhouse gas emissions intensity – the ratio between gross emissions and a country’s GDP at a particular point in time – by 33-35% of its 2005 levels by 2030. To do so, India will ensure that about 40% of its electricity will come from non-fossil fuel sources. Additionally, it will increase its tree and forest cover to create an additional carbon sink of 2.5-3 billion tonnes of carbon dioxide equivalent.

The government has submitted these numbers to the United Nations Framework Convention on Climate Change as its targets (technically called the Intended Nationally Determined Contribution or INDC) for the global Paris agreement, which is to be finalised by December this year. The numbers will be officially released by Union Environment and Forests minister Prakash Javadekar in Delhi today.

In 2010, India had committed to reducing the emissions intensity of its economy by 20-25% below 2005 levels by 2020.

The government has said the new emission intensity reduction targets and adapting to climate change will require approximately $2.5 trillion at 2014-15 prices between now and 2030, besides an array of technologies. It is also committed to mobilising additional finance from developed countries. It has also said that it will work to build an international architecture for diffusion of cutting edge technologies, as well as collaborative research and development for future technologies.

In its submission, the NDA government has said that “the successful implementation of INDC is contingent upon an ambitious global agreement including additional means of implementation to be provided by developed country parties, technology transfer and capacity building following Article 3.1 and 4.7 of the Convention.”

Article 3.1 of the convention refers to the principle of equity and common but differentiated responsibility and the need for the developed countries to take the lead in combating climate change. Article 4.7 of the climate convention says: “The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.”

Defying pressure from some nations to undertake sector specific targets, India has clarified that “… India’s INDC do not bind it to any sector specific mitigation obligation or action, including in agriculture sector. India’s goal is to reduce overall emission intensity and improve energy efficiency of its economy over time and at the same time protecting the vulnerable sectors of economy and segments of our society”.

Of the estimated total to reach the 2030 target, about $206 billion will be required for adaptation actions in agriculture, forestry, fisheries infrastructure, water resources and ecosystems. The study quotes the Asian Development Bank to note that “approximate adaptation cost for India in energy sector alone would roughly be about $7.7 billion in 2030s. The report also projects the economic damage and losses in India from climate change to be around 1.8% of its GDP annually by 2050.” It also quotes the NITI Aayog (National Institution for Transforming India) assessment that mitigation activities (greenhouse gas emissions reducing actions) would cost around $834 billion till 2030 at 2011 prices.

The document says India would undertake the emission intensity reduction and the changing of energy mix by 2030, “being sanguine about the unencumbered availability of clean technologies and financial resource from around the world.” Operationally, it says India will need to “mobilise domestic and new and additional funds from developed countries to implement the above mitigation and adaptation actions in view of the resource required and the resource gap.”

Again, in another section of the document while India lists out an array of existing and future technologies that India would require to move towards a low carbon development route it adds in the operational bit that India would “build capacities, create domestic framework and international architecture for quick diffusion of cutting edge climate technology in India and for joint collaborative R&D for such future technologies.”

The INDC begins by listing a wide array of activities India has already undertaken to reduce emissions and adapt to climate change including the ambitious target of building 175 GW of Solar and Wind Power capacity by 2022 and an enhanced energy efficiency mission cutting across industrial sectors.

It also promises to increase the share of renewable energy in the energy mix though it does not explicitly mention that about 350 GW of solar and wind power would be required to achieve the 40% non-fossil fuel power capacity – a projection the government had made to reach the INDC numbers.

The INDC mentions new initiatives the government will launch include introduction of new, more efficient and cleaner technologies in thermal power generation, reducing emissions from transportation sector, promoting energy efficiency in industry, transportation, buildings and appliances and reducing emissions from waste.

This article was originally published on Business Standard.

India’s Energy Mix to Have 40% Renewable Sources by 2030

The decision to substantially alter the energy mix that powers India in future is likely to be taken at the Union Cabinet meeting on Wednesday.

At least 40% of India’s total power capacity will come from renewable sources by 2030. The decision to substantially alter the energy mix that powers India in future is likely to be taken at the Union Cabinet meeting on Wednesday when the National Democratic Alliance (NDA) government decides the country’s targets for the Paris climate change agreement.

Government sources confirmed that the aggressive target for renewable energy capacity was worked out by the power and environment ministries under close supervision of the Prime Minister’s Office and is now expected to be cleared by the Cabinet.

If the Cabinet approves this proposal, India would be looking at a commitment of building a total of 350 Gw of solar and wind power by 2030. Out of this, the government expects 250 Gw of the renewable portfolio to come from solar power and 100 Gw from wind power.

The NDA government has already committed to 100 Gw of solar power and 60 Gw of wind power by 2022. In the case of solar power, even the 100 Gw target for 2022 was a five-time jump over the target committed by the United Progressive Alliance (UPA) government under the Jawaharlal Nehru National Solar Mission.

The projections done by the government suggest that by 2030, India would have a total built up power capacity of 850 Gw. This ambitious target will help India offer the global community a 35 per cent reduction in the greenhouse gas emission intensity of its economy below 2005 levels by 2030 as part of its Intended Nationally Determined Contributions (INDCs) under the Paris agreement. At present, India has committed to 20-25 per cent reduction below 2005 levels by 2020. The government’s preliminary assessments suggest India is on way to achieve the lower end of the existing target comfortably and could attain more with some extra effort in the remaining years.

While the usual definition of renewable sources includes hydropower and nuclear the government does not project substantial growth of capacity from these sources in future. “From the current levels of about 56 Gw, we should be able to ramp up capacity in nuclear and hydropower to about 80 Gw,” one of the sources involved in the preparation of the INDC told Business Standard . The bulk of our growth shall come from solar, wind and coal, he added.

Hydropower could see an addition of 15 Gw over the existing roughly 50 Gw and nuclear power should be able to increase from about six Gw at present to about 16 Gw by 2030. Growth in gas-based power is also not expected to grow though utilisation of the existing 25 Gw could be enhanced from around 10 per cent at present to 60 per cent officials said.

A second official, wishing not to be named, said, “While India will continue to demand developed countries come through on their obligations under the UN Framework Convention on Climate Change, the government also wants to do more than its fair bit. It is a very ambitious leap. It has taken a long period of discussions with many parts of the government involved besides all kinds of other stakeholders like the civil society and the industry.”

Prime Minister Narendra Modi will be attending the UN General Assembly as well as special summit by UN Secretary General on climate change as part of his tour to the US which starts on September 23.

The decision on India’s INDC is timed to make the announcement accordingly. The government is expected to formally submit the INDC document to the UN Framework Convention on Climate Change in the coming week as well.

Key countries and blocks have already declared their INDCs and the global community for a while has been watching India for its contributions. The US has declared that it would reduce its emissions by 24-26 per cent below 2005 levels by 2025, the EU has said it would reduce its emissions by at least 40 per cent below 1990 levels by 2030. China on the other hand has committed to peak its emissions around 2030 and reduce its greenhouse gas emission intensity between 60 and 65 per cent below 2005 levels by 2030 and ensure that the share of total non-fossil fuel rises to 20 per cent of its total total primary energy supply over the same period.

But observers have noted that the figures given by countries in percentage terms contain elements of uncertainty when converted to gross greenhouse gas emission reductions it entails. A published scientific paper in reputed journal has suggested that China might have already over-estimated its emissions from burning coal by around 15 per cent. If the Chinese government was to now relook at its method of calculating emissions, it could get greater legroom in future to peak.

This article was originally published in Business Standard.

Short Documentary Highlights the Painful Consequences of India’s Coal Rush

‘India’s Coal Rush’, a short documentary, travels from Jharia’s vast, burning coalfields to the smoky plains of Chhattisgarh, tracing the impact of India’s growing appetite for coal.

One of the first pledges made by Narendra Modi’s government was that it would look to double the amount of coal India extracted, from the 565 million tons in 2014 to 1 billion tonnes by 2020. The government said it was a necessary measure to ensure development as well as provide power to the estimated 300 million Indians who don’t have access to electricity.

In the year since, mining permits and environmental clearances have been granted at a rapid pace. The zeal for new mines has been matched by the crackdown on dissent, most notably on environmental groups such as Greenpeace. And communities in coal-rich belts in states like Chhattisgarh say they’re facing unprecedented pressure to give up their lands for mining. Laws empowering these communities have been placed under review.

Even though it is India’s most abundant and easily accessible fuel, scientists say India’s decision to back coal will have devastating consequences on the health of the country’s population as well as the environment. The country already has 13 of the world’s 20 most polluted cities, and an estimated 230,000 people are likely to die each year because of air pollution caused by burning coal, according to a study by Urban Emissions.

This documentary has visual journalists Vikram Singh and Enrico Fabian traveled from the burning coalfields of Jharia to the coal-fired power plants of Chhattisgarh to document the impact of India’s growing appetite for coal. Their previous work includes Toxic Legacy, a film on the Bhopal survivors ongoing fight for justice and Deadly Medicine, which looked at pharmaceutical drug abuse in India.

Centre Bypasses Law to Restart Work on Polavaram Project

Chhattisgarh and Odisha were kept in the dark, statutory public hearings weren’t held, and clearances were never sought in the two states

Union Minister Prakash Javadekar. Source: YouTube Screengrab

Without completing the statutory public hearings in Odisha and Chhattisgarh, Environment, Forests and Climate Change Minister Prakash Javadekar has done away with a stop-work order against the Polavaram dam, allowing construction work to resume.

He did so at the personal request of Andhra Pradesh Chief Minister Chandrababu Naidu, an ally of the Bharatiya Janata Party (BJP), and without informing Odisha and Chhattisgarh. Also, the orders of the environment ministry have not been put in the public domain.

The project is expected to displace about 200,000 and affect 300 villages, according to the 2010 environmental clearance order which uses data of 2001 population of these villages. The population over the decade and a half has risen considerably. It is to irrigate about 300,000 ha of agricultural land, store 550 million cubic metres of water and generate 960 Mw of power.

The project is to be built on the Godavari in Andhra Pradesh. But the water is expected to inundate many tribal villages in Odisha and Chhattisgarh, too. Construction has to be carried out for the project in these states, too.

A July 3 letter by Javadekar to Naidu, reviewed by Business Standard, reads: “I have your letter dated April 25 regarding continuation of works of the Indira Sagar Polavaram project in Andhra Pradesh. I have got the matter examined in my ministry… with the anticipation that the pending public hearing will be resolved through discussions and persistent engagement with Odisha and Chhattisgarh, my ministry has taken the decision to keep the ‘stop-work order’ in abeyance for a period of a year. A copy of the office memorandum in this regard is enclosed for your information.”

The letter attaches executive orders from joint secretary Biswanath Sinha, dated June 23. It says, “This ministry has decided to keep the stop-work order in abeyance for a period of a year.” It conceded public hearings hadn’t been carried out in the two states and that both had approached the Supreme Court against the project and the verdicts were pending. The order is marked to principal secretary (irrigation) in the Andhra Pradesh government.

Baijendra Kumar, principal secretary to the Chhattisgarh chief minister, told Business Standard, “We have not been informed of this order. We have filed a plea in the Supreme Court against the project. Mandatory public hearings have not been conducted in the state. Sometimes, they say four villages in our state will be submerged and sometimes they say 40. How can we know the exact situation till studies are done and public hearings are carried out in our state as well? We are surprised how the Centre keeps permitting work be carried out like this. The project has been almost completed like this, illegally.”

Pradeep Kumar Jena, Odisha’s water resources secretary, confirmed the state hadn’t been informed of the decision, though the Centre was aware the state had taken strong objections to the project.

While Chhattisgarh has a BJP government, headed by Chief Minister Raman Singh, Odisha has a Biju Janata Dal government, under Chief Minister Naveen Patnaik.

A detailed questionnaire sent to Javadekar did not elicit a response till the time of going to print.

Oddly, the executive order from his ministry reads, “During the first three-six months of this period of one year, the government of Andhra Pradesh shall ensure public hearings are conducted in the states of Chhattisgarh and Odisha and submit the outcome of the public hearings to the environment ministry.” This is despite the fact that public hearings in the two states cannot be organised by the Andhra Pradesh government; these have to be carried out by the respective state government, through the state pollution control board concerned.

The Environment Protection Act makes it mandatory for public hearings to be held for all areas impacted by a project. Only after the hearings can an environment-impact assessment be conducted. A positive appraisal of the assessment permits the Centre to give a nod. Construction on the project can take place only after this and other clearances.

In 2005, the Andhra Pradesh government secured a clearance for the project component falling within its territory. In 2010, the state sought clearance for the parts of the project in the two other states. The Union environment ministry gave its approval that year. However, in 2011, it issued a stop-work order when Chhattisgarh and Odisha protested that their areas would also be impacted, adding no studies or hearings had been conducted. Subsequently, the two approached the Supreme Court separately against the project.

The executive order of the environment ministry says, “The government of Andhra Pradesh has assured it will bring about changes in the design and operating parameters of the project in case warranted as a result of public hearings in Chhattisgarh and Odisha and such changes would be carried out in consultation with the CWC (Central Water Commission) and the consent of all states. In that case, change in design or/and operating parameters might be required to ensure the area falling in the states of Chhattisgarh and Odisha does not come under submergence due to impounding of the project reservoir.”

It wasn’t explained how the project could be retrofited once near completion.

An executive order of the ministry has to operate within the legal provisions of the environmental laws governing clearances. The law provides only for a prior-informed consent for the project. The ministry order says a similar order to let work on the Polavaram project continue had been issued on January 1, 2014, for six months.

Business Standard had asked the environment minister under what provisions and on what legal grounds the stop-work order for the Polavaram project had been withdrawn, and whether Chhattisgarh and Odisha had been consulted on the matter before the decision or informed of it after the decision was taken.

This article originally appeared in Business Standard.

Take a Tour of This All-Green School in Ladakh

With the rising demand for clean energy, SECMOL represents the idea of environment consciousness that goes hand in hand with development

In the age of fast cars and skyscrapers, the true purpose of technology seems to occupy the space of a forgotten footnote. Even with the awareness surrounding global warming and with depleting sources of energy, most societies have not wholly adopted a model of living that is in tune with the delicate ecology they inhabit.

Thankfully, there are a few places that serve as a beacon of hope of sustainability. Tucked away in the northernmost state of our country, in the high altitude mountain-deserts of Ladakh, 18 km from its capital and occupying about 20 acres is the Students’ Educational and Cultural Movement of Ladakh (SECMOL). The school, started by Sonam Wangchuk and five Ladakhi university students from diverse backgrounds in 1988, seeks to reform education in the remote region.

The SECMOL structure. Credit: Sejal Bhat

As more than 95% of students in Ladakh used to fail their 10th Board exams, they believed that the problem lay in the system as opposed to the students. Apart from being taught in a language they barely understood, the textbooks had concepts and examples drastically different from the environment they lived in. SECMOL sought to address these problems and educate the young Ladakhis with concepts relevant to their fragile desert region – the model of a sustainable life. The school, run by students whose responsibilities change on rotation, utilises solar energy for daily domestic needs. It houses 70 students on average per year and seven staff members.

At SECMOL, solar power is used to run almost all devices. The wall sockets draw energy from the batteries that store power using sun’s energy during the day. The buildings themselves have also been constructed in keeping with the idea of using modified designs in infrastructure instead of buying expensive materials. For example, the structure is made of rammed earth which is able to keep the warmth in during the winters and provide ventilation in summer – the same earth that was accumulated as mud when the foundation was dug.

The windows face south and so receive sunlight all year round, providing natural light during most of the day. Additional skylights in the main halls make sure the interior is not gloomy. For warmth, makeshift greenhouses outside the windows (sheets of ultraviolet stabilised plastic that can be pulled down during winter to trap the heat in) keep a warm temperature inside even when the mercury slides as low as -20 degrees Celsius. The ceilings and the walls are also insulated – excess sawdust – between the inner and the outer panels to trap the heat.

The temporary greenhouse for the winters. Source: SECMOL

Producing sustainable energy is usually looked at as being able to provide electricity in households for lighting or fans but in this cold desert area, most of the energy is required for heating during the winters. Says Wangchuk, “An average house in each room would burn at least two litres of kerosene or equivalent in wood to keep warm.” This, assuming the occupants don’t use electric room heaters or blowers. “Two litres of kerosene costs around 100 rupees right now so for the 30 rooms at SECMOL, we would’ve had to incur a cost of 3,000 rupees per day. Through winter this would add up to 4.5 lakhs for the five months.”

The solar cookers. Source: SECMOL

Another way solar energy has been utilised is for cooking. The setup consists of a parabolic reflector (made up of a lot of smaller mirrors stuck to a dish-like structure) that concentrates the sunlight on a smaller area on the ground. This is then reflected upwards to the bottom of any cooking vessel and is thus able to use sunlight directly without the need of any semiconductor material.

An illustration of how a parabolic reflector works. Source: SECMOL

Ahead of time

The cherry on this green cake though is the concept of having their own time zone. This small institute has initiated the practice of moving their clocks ahead by one hour during the summer, calling it “SECMOL time”. This maximises all their other efforts by a significant amount since it ensures all the students, teachers and volunteers wake up and retire in the evening earlier than usual and are able to make the most of daylight. Wangchuk confesses that this is his favourite solar device.

Source: SECMOL

Nothing goes to waste in this place. The excess food goes to the cows; the dry Ladakhi toilets ensure that the human waste is used as compost; the excess water from the bathrooms goes to the trees and the rest of the waste is segregated into five different sections depending on how reusable or recyclable they are. In fact, the only time a discreet amount of plastic came into view was an old 500 ml soft drink bottle full of sand being used on a pulley, instead of the spring-loaded hinge, to shut doors.

With the rising demand for clean energy, SECMOL represents the idea of environment consciousness that goes hand in hand with development. If an urban household uses 2-5 kW of electricity on average every day, SECMOL produces and uses 15 KWh of solar electricity for the entire school without sacrificing convenience.

“You needn’t be destructive in order to be modern,” says Wangchuk. “The idea of life here is that people should be able to use good amount of modern comfort without burning up resources.”

Neither Switzerland nor Singapore but a Site of Daily Struggle

Singrauli is the energy capital of India, a place critical to the Modi government’s plans for power for all, yet its own people are powerless

Coal-fired thermal power plants in Singrauli. Credit: International Accountability Project, CC 2.0

At a time when the Modi government is promising 24 x 7 power-for-all, the ‘last man’ and woman in Singrauli must be wondering where they stand in the Prime Minister’s vision. Certainly, none of the steps that have been spelt out towards achieving this goal, have anything to say on their condition.

While, the debate over the Land Acquisition Act continues, the Singrauli region provides a perfect illustration of why the state-mediated transfer of land to private corporations is always preferred by the project developers. It is unfortunate that even after a long history of unfair rehabilitation and displacement, we still need to discuss the importance of social impact assessments, free, prior informed consent and the definition of “public purpose” itself. In a federal democratic polity, it is crucial to understand the regional interest and need to be attentive to local concerns if resource development projects are to truly be in the national interest. It is also important to realise that there are layers of ‘public’ in the bracket of “public purpose”: those who lose their land and livelihood because of such projects and those who are actual beneficiaries residing thousands of kilometres away.

Singrauli, popularly known as the “energy capital of India”, hosts more than 10% of the total installed thermal power capacity of India and presently provides power to 16 states. But Singrauli itself is a geographically isolated and socio-economically backward region of Madhya Pradesh. Approximately 50% of the population still lives below the poverty line.

By 2017, Singrauli alone is expected to feed around 35,000 MW of electrical power to the national grid. In the last 10 years, the Madhya Pradesh government has received massive private investment of approximately 1 lakh crore rupees for the development of thermal power plants and coal mining in the Singrauli region. Perhaps, this is why Singrauli was carved out of Sidhi district as an independent district in 2008, following the inherent tendency of capital to redraw geographical boundaries according to the value of resources. The newly created “spaces” of Jharkhand and Chhattisgarh went through a similar process of spatial, political and economic restructuring, to facilitate the smooth entry of industrial and mining capital.

Singrauli has a long history of multiple displacement, and is locked into relations of dependency, serving the ‘national’ interest since the 1960s, while bearing huge social and environmental costs. Since the district was formed in 2008, more than 15,000 acres of land have been acquired, displacing more than 10,000 families. While land has been acquired at a phenomenal rate, there has been no similar progress in rehabilitating people and restoring their livelihood. The government and developers need to understand that R&R is a “project within project” and requires the same effort and attention that is given to land acquisition.

No regional development plan

When inaugurating the Rihand Dam in 1962, Nehru had promised that Singrauli would become the ‘Switzerland of India’. While inaugurating the district in 2008, Madhya Pradesh Chief Minister, Shivraj Singh Chauhan, claimed he wanted to “develop Singrauli into another Singapore”. But far from being Switzerland or Singapore, for thousands of displaced families, Singrauli today means a long struggle for land and livelihood. The district does not have a proper regional development plan which demarcates coal bearing and non-coal bearing regions so that people can plan future settlement after being displaced, and access alternative land and livelihood. It would not be surprising if one of the recently developed R&R colonies is classified as a coal bearing zone or project area and the State again kicks the displaced families out. The M.P. government has never realised the importance of having a rehabilitation department at the district level, working towards the regulation and monitoring of rehabilitation programs.

What is required is a comprehensive social audit of previous rehabilitation programs. Instead, the priority has been the acquisition and transfer of land to corporations; as well as attacks on organisations like Greenpeace, which has been actively taking up the issues of tribal families dependent on the Amelia forest (Mahan coal mining project) in Singrauli and raising critical questions concerning their lives and livelihood.

While NTPC and Reliance Power have been successful in establishing their projects in Singrauli, both developers have faced hurdles over the last ten years in acquiring land in Northern Karnpura in Jharkhand. In May 2015, the Anil Dhirubhai Ambani Group decided to pull out of their Tilaiya UMPP project due to the delay in land acquisitions and cost overrun. It is important to discuss why the same developers and similar projects are successful in one state and fail miserably in another state. It is not only governance that matters but also the social preparedness of the community that decides the fate of such huge investments. In comparing Hazaribagh in Jharkhand and Singrauli in Madhya Pradesh, one major contrast lies in the community’s awareness and ability to question the state and assert their rights. With Singrauli’s long history of displacement, people have been worn into submission, and are used to shifting homes. However, the MP government cannot afford to take people for granted.

Demands for resource sharing

In the context of mining, analysing the way federalism plays out in the natural resource sector is critical, especially given Mr. Modi’s stated commitment to more decentralisation. The resource bearing states have been consistently writing to the Central Finance Commission asking for a “just” resource revenue sharing mechanism between the Centre and States. They have also been demanding a national programme to compensate the states for the irreparable damage caused by mining activities; the royalty paid to state governments is inadequate. Jharkhand has been demanding special status for a decade already. Recently the government revised royalty rates for iron and bauxite, but has introduced no changes for coal and lignite. However, the question is not just devolution of funds to states, but how states translate that into the lives of their people.

More than the “clash of civilization”, clashes over land have the potential to radically alter the existing fault lines in politics and development policies. Almost all Maoist violence is sourced and concentrated on land, especially forest and mining land. The Centre’s approach of providing “development packages” to mining districts when there is a violent crisis is absurd. The question is why such spaces are kept deprived in the first place. No amount of compensation is enough when a robust and inalienable right to livelihood is not built into the idea of compensation. Power for all will be meaningless until the people of Singrauli are empowered.

Shashi Ratnaker Singh is a doctoral candidate at the Department of Geography, University of Cambridge

Is India Ready to Compete in a Post-Sanctions Iran?

Some opportunities have been missed and now, with a possible thaw with the west, Indian companies could be left out in the cold for Iran’s immense oil and gas reserves

Vienna’s august Palais Coberg Hotel, a grand palace built in 1845, is these days home to what could be one of the better diplomatic achievements of the global community as Iran and the P5+1 states, led by the US, enter the final stages of negotiations over the former’s nuclear program.

The journey till this juncture has not been easy and an extraordinary set of diplomatic maneuvers and compromises from both the Western powers and Iran, cautiously backed by Moscow and Beijing, have brought them to a place where a deal could be achieved. However, even now, both sides are trying not to sound over-optimistic, suggesting the negotiations could still go either way.

Iranian Foreign Minister Javad Zarif, American educated and a thorough statesmen, who has been leading the country’s delegation, in a recent opinion piece published in London’s The Financial Times said, “All that is clear about what will happen next is that things will not go back to the way they were”. However, other reports have also highlighted how heated the negotiations behind closed doors have become, with a Russian official being quoted by some sections of Iranian media as saying that Zarif at a point yelled towards his American counterparts to “never threaten an Iranian”.

Another account highlights that during negotiations over the weapons embargo enforced on Iran, Zarif “erupted again”, insinuating towards his counterparts that Iran should take “every one of you to international courts for supporting Saddam (Hussein)” over a debate on regional security measures, which the Iranian Foreign Minister had also addressed, in a much cooler tone, in his op-ed in FT.

As the negotiations get extended further through this week, and keeping the realpolitik aside for a minute, on the sidelines global oil and gas giants have been camping in and around Tehran for months, working quietly towards creating space and influence within the Iranian government for the expected sprint towards securing a piece of the country’s vast untapped hydrocarbon resources. Oil giants such as Shell, ExxonMobil, BP which was born from the belly of the erstwhile Anglo-Iranian Oil Company (AIOC) and others from China and Russia are looking to beat consortium-led competition for Iran’s natural wealth, which amounts to the world’s fourth largest proven oil reserves and second largest proven natural gas reserves.

India’s energy diplomacy

During the peak period of sanctions against Iran, which specially intensified between 2012 and 2014, the Iranian oil and gas sector saw dwindling sales as buyers found it next to impossible to execute financial transactions with Iranian banks. While many of Iran’s overseas accounts were frozen, Tehran took to the age-old system of barter to try and get around this anomaly, in desperate attempts to keep its economy ticking.

Prior to these events, Iran was the second largest supplier of oil to India, a country that imports nearly 80% of its oil and around 50% of its natural gas demands. In 2013, Iran had fallen to seventh place on its exports of oil to India. Not just a mere buyer, India had even committed $1 billion to develop the Farzad B project in the natural gas Farsi block, a sign of Delhi’s growing energy diplomacy with Iran at that time. This opportunity offered both transportation and cost security due to its close proximity across the Arabian Sea, possibilities of an under-sea pipeline; most importantly the Iranian quality of heavy crude oil was most suited for Indian refineries such as those operated by MRPL in Mangalore, Karnataka and Essar in Jamnagar, Gujarat.

Energy ties started showing signs of strain between Delhi and Tehran after Iran was subjected to four resolutions (in 2006, ‘08, ‘09, ‘10) in the United Nations to pursue economic and political blockades against the country as a reaction to its nuclear program. The fact that India voted against the then Iranian government of former President Mahmoud Ahmadinejad in the UN resolution passed by the IAEA in 2009 did not help the diplomatic optics.

This meant not only did it become extremely arduous a task for India to conduct energy trade with Iran, but Delhi also found itself in a position where Washington was applying pressure on it to forego energy transactions with the country. Seeing this situation, Tehran also did not hold back, and pressured India to up its trade and investments which, knowingly or unknowingly, had actually provided Indian companies an open door at a time when most of its other more powerful competitors from the West were being kept out by their own governments.

However, even as Iran presented this opportunity, India balked. The reasons behind India’s safe stance were both legitimate and vigilant. First, any official financial transactions during that time with Iran would have seen Delhi violating a host of financial treaties that India was signatory to. Keeping this in mind, Iran advised India “alternate means” via middle-paths in Oman as far as the issue of financial transactions for energy products were concerned after the sole remaining official route, via a bank in Turkey, also became a victim of the sanctions.

India, avoiding to be seen as a country which was not against the Iranian nuclear program, instead decided to keep purchasing energy products in reduced amounts but deposited the payments in a UCO Bank branch in Kolkata while refusing permission for Iranian banks to open branches in Delhi and Mumbai. At its peak, this bank branch operated by Iran had nearly $5 billion worth of money, but to its immense frustration could not withdraw and move out of the country.

Tehran’s global foray

Now, as the situation changes and a thaw in Iran’s global isolation, which Zarif has called out as “the most indiscriminate (sanctions) imposed on any nation in human history”, Tehran is preparing to get back into global economics in a major way. It is imperative to remember here that Iran, in general, is seen as a tough customer when it comes to commercial and political negotiations. Its tendencies to change colors without warning, corrupt practices, not adhering to sovereign guarantees and other such misdemeanors have made it an infamous nation to deal with. However, commercial viability of its hydrocarbon reserves seemingly supersedes these risks.

Even throughout its period of sanctions, the Iranians did not make any significant cuts in the amount of oil they were producing in order to hold on to market share (though there were no dramatic increases either). In 2013, due to this, Tehran found itself in a dilemma as it started to run out of space to stash its reserve capacity and resorted in some instances to storing in oil tankers and anchoring them off its coast. While Asian economies such as China, India, Japan and South Korea continued to be significant buyers, the import numbers had indeed dropped and Iran’s import losses from Europe were hurting it significantly.

An Indian oil executive returning after a visit to Tehran recently exclaimed that he found almost all hotels in the city bustling with Western businessmen, who, if not camping, are now visiting very frequently and looking for that first mover advantage. In fact, a new report suggests that over the past year, Iranian shipping companies have amassed the world’s largest fleet of Very Large Crude Carrier (VLCC) oil tankers as it looks to link itself back to the global energy markets.

In the impending opening of Iran’s energy sector, Indian companies in fact, may have to rely on Delhi’s diplomatic maneuvering to gain any kind of significant foothold. As it stands currently, even the Farzad B project may not be seen as firmly in ONGC Videsh’s hands as in the past out of frustration, Tehran had threatened to open the field to a bidding process, which could mean it can be lost to bigger companies with more cash to throw around.

Iran’s courting of global oil and gas leaders has also been steadily taking shape for more than a year. On the sidelines of the World Economic Forum in Davos, Switzerland, last year Iran’s President Hassan Rouhani convened a small conclave of global leaders of the hydrocarbons industry to invite them to prepare for investments in the country. Curiously, no Indian company was present at this event.

Indian companies, which could have built a stronghold in Iran during the period of sanctions had the realpolitik capacity allowed, may not fare well when the Iranian energy is opened up to everyone. The reason behind this is purely economics and competition. Currently, most of Iran’s energy fields are in a derelict state technology wise, and just to bring them up to speed with the ways of modern exploration and production would take billions of dollars’ worth of capital infusion and only after that recovering costs can be factored in.

Even as Indian companies such as ONGC Videsh, Oil India Ltd. and ONGC have got better budget infusions this year, it will almost certainly not be enough to ward of competition by the likes of ExxonMobil, BP, Shell, ENI and so on.

So, what is India’s best path forward? Other than making absolutely sure that Farzad B remains with India as the biggest player in the block, participating in consortiums with others as has been done before in Sudan, Russia, Syria would be ideal. This would guarantee both commercial market penetration in a region that can be very fruitful for the country’s energy security and also regain lost political and economic mileage between India and Iran.

Modi Arrives in Russia to Attend BRICS, SCO Summits

Ufa (Russia): After visiting two Central Asian countries, Prime Minister Narendra Modi arrived here today on a three-day trip during which he will attend the BRICS and Shanghai Cooperation Organisation summits.

Modi flew here from Kazakhstan, which was his second stop after Uzbekistan in his six-nation week-long tour.

He will first attend the summit of five-nation BRICS (Brazil, Russia, India, China and South Africa), which is expected to be dominated by discussions on enhancing cooperation in the economic area.

With the BRICS Development Bank already set up, the summit could also look at the possibility of starting trade and credit facility in local currency. The first head of the bank is noted Indian banker K.V. Kamath.

Besides Modi and Xi, the BRICS Summit is being attended by Russian President Vladimir Putin, Brazilian President Dilma Rousseff and South African President Jacob Zuma.

“I expect positive outcomes in economic cooperation and cultural ties among the BRICS nations. The (BRICS) Summit in 2014 was productive and I am sure we will build on the ground covered during the last Summit,” Modi had said in a statement prior to his departure from Delhi on Monday.

He had also said that he will be meeting the leaders of BRICS nations individually and will be a part of the various interactions of BRICS leaders with captains of industry and leaders of other invited countries.

“India attaches high importance to BRICS. It is a great forum that can contribute effectively to mitigate global challenges. BRICS also has a very crucial role to play in furthering world peace and security and ensuring we leave behind a better planet for our future generations,” the Prime Minister had said.

An announcement with regard to India’s membership of the six-nation grouping of China, Russia, Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan is expected during the SCO summit on July 9-10.

A top Russian official yesterday said the process of India’s membership will be completed by next year, along with that of Pakistan, to make it an eight-member body.

As of now, India has observer status in the 19-year-old grouping whose focus is on boosting connectivity, counter-terrorism cooperation, bolstering cooperation in energy sector, enhancing trade and dealing with drug trafficking.

India was made an observer in 2005 and it applied for membership last year. Pakistan also is an observer and is likely to be made a member.

On the sidelines of the SCO Summit, Modi and Pakistan Prime Minister Nawaz Sharif are expected to have a meeting to discuss bilateral relations.

It Won’t Be Easy for India to Log in to Central Asia’s Energy Story

Any new investor in the region must have deep pockets, the confidence to deal with dodgy political, legal and tax regimes and a sense of desperation to access the energy whatever the costs. As of today, only China fits the bill.

Any new investor in the region must have deep pockets, the confidence to deal with dodgy political, legal and tax regimes and a sense of desperation to access the energy whatever the costs. As of today, only China fits the bill.

Prime Minister Narendra Modi during a welcome ceremony at the Presidential complex in Tashkent, Uzbekistan on Monday. PTI Photo by Manvender Vashist

SQUEEZING IN: Prime Minister Narendra Modi during a welcome ceremony at the Presidential complex in Tashkent, Uzbekistan on Monday.
PTI Photo by Manvender Vashist

Prime Minister Narendra Modi’s visit to the Central Asian Republics has evoked much interest in India. Civilisational links and cultural commonalities apart, the prospect of a seat for India at the Shanghai Cooperation Organisation high table does warrants excitement. After all, being at the high table is protection against ending up on the menu.

Jokes apart, what seems to fire up the public imagination in energy-starved India are the possible energy ties that might emerge from this visit.

Next to the Middle East-Persian Gulf, the Central Asian Republics, virtually in India’s backyard as distances go, hold out alluring possibilities of satisfying India’s growing quest for energy. Even more importantly, this region could play a vital role in enabling India to diversify its hydrocarbon supply sources, so essential for energy security in our times.

All the five Central Asian Republics have their respective strengths. Kazakhstan, the ninth-ranking oil power in the world, is home to some 30 billion barrels of proven crude reserves, much of it yet to be tapped. It also has sizeable gas reserves. Turkmenistan is the world’s fourth largest gas giant, home to the Galkynysh gas field containing 26 trillion cubic meters of the fuel. Uzbekistan too has substantial gas deposits of its own apart from being a valuable transit territory. Tajikistan, sitting astride the Amu and Syr Darya basins, is Asia’s water giant. The country’s untapped rivers can generate more than 500 terawatt hours of electricity every year, enough to meet the entire electricity needs of all the five CARs as well as Pakistan, Afghanistan and even India, to a large extent – all this, without burning a single barrel of oil or cubic foot of gas. Kyrgyzstan has similar, if somewhat lower hydel potential. It is therefore natural that our expectations from the prime ministerial visit focus on energy relationships which will enable India to partake of the bounty in our backyard.

Tough geography, tougher geopolitics

Yet, when it comes to monetising Central Asia’s sizeable energy potential, what geology giveth, geography taketh away. Landlocked, in some cases, doubly so, and guarded by forbidding mountain ranges and impenetrable deserts, ferrying Central Asian Republics’ abundant energy resources to markets has been, for centuries, a formidable challenge. All world powers – the UK, Russia, China and in recent times, the United States, have invested much time, resources and effort in grappling with this challenge, to limited success.

In recent times, technology has come to the rescue, holding out the tantalising promise of pumping Kazakh oil and Turkmen gas through pipelines as far afield as Berlin, Beijing or Bombay. After all, we live in an era where the Blue Stream and Nordstream pipelines dredge the depths of the Black and Baltic Seas respectively, to bring Russian gas to Europe; where the Baku-Tbilisi-Ceyhan and the Baku-Tbilisi-Erzurum pipelines wind through a political maze dodging both Iran and Russia to flow Caspian oil and gas to the Mediterranean; where some of the planet’s longest oil and gas pipelines ferry Kazakh oil and Turkmen gas all the way to the Atlantic coast and the Pearl River Delta, traveling nearly 10,000 kilometres – almost a third of the circumference of our planet.

Map of Central Asia.Credit: Google Maps

All this has inspired us in India to think of ways of sinking our teeth into this pie before it is swallowed up by China, Russia and the other powers that have already tasted it.

We are hoping that the Turkmenistan-Afghanistan-Pakistan-India pipeline would miraculously snake its way through war-torn Afghanistan and a restive and politically intractable Balochistan to bring us that much-needed gas so we can crank up our stranded turbines. We believe we can coax Caspian oil to flow into our refineries in Gujarat and Central Asian gas into our domestic pipeline networks on the west coast through undersea pipelines from Chabahar, Iran or in the form of liquefied natural gas. For many years, we have been talking of high voltage direct current (HVDC) lines from Tajikistan and Kyrgyzstan which would light up our homes and run our industries in northern India. We are looking at an inclusive Eurasian region shrunk by technology, one in which Iran, Russia and the Central Asian Republics join hands to form an energy ring around South Asia.

But in today’s world, the obstacles to bringing Central Asian energy to India have less to do with geography than geopolitics. We would like to believe that the republics, free from Russia’s political yoke for a quarter of a century now, would be anxious to extend their freedom to the economic domain as well; that the beleaguered Central Asian Republics would be anxious to diversify their markets and right the tilt in the balance.

Perhaps they would be, had it been that easy to achieve. Burdened by history and trapped by geography, the Central Asian Republics have very little freedom to manoeuvre. Historically, all the oil and gas pipelines emanating from the republics travelled north into Russia, whence the fuel flowed to Europe on Russian terms. This arrangement still persists and provides the major outlets for energy flows from the region. At best, all that the ‘stans’ can do is to bargain for better terms with their erstwhile ruler. The other factor favouring northward orientation of the republics is the shared ethnicity with Russia, one that receives much less appreciation than it deserves. Especially the Kazakhs see themselves as Eurasians rather than Asians and gravitate naturally towards Russia.

Needed, a strong stomach

What does it take to make an ingress into this cosy relationship cemented by history and fostered by ethnicity? The Central Asian Republics desperately need investments to monetise their full energy potential. Russia is no longer in a position to make these investments. Any potential investor in Central Asia has to reckon with their still evolving political and legal systems and their tax and contract regimes which are yet to stabilise. In short, any new investor in the republics must have the following attributes: deep pockets, supreme confidence in one’s own ability to deal with dodgy political, legal and tax regimes and a sense of desperation to access the energy whatever the costs.

Only China seems to fit the bill on all these counts. China has time and again paid little heed to the enormous costs involved in building incredibly long pipelines through difficult terrain to link Central Asian oil and gas to its eastern seaboard. Not only has China invested and constructed pipelines from Kazakhstan and Turkmenistan to Xinjiang, where demand is limited, it has embarked upon a five-phase trans-China connectivity project to its eastern seaboard. Two phases are already functional and the other three are under construction. The level of investments required for such a venture would have scared off any commercially prudent competitor seeking to lead the gas flows in any other direction. Chinese companies do not deem it irrational to buy gas dear, transport it thousands of miles and sell cheap in their domestic markets. Chinese national oil companies willingly go along with these schemes even as their political leadership deals with geopolitical maze to clear the way. In short, China is a risk taker par excellence. Finally, unlike India, China has the locational advantage of not having to transit through unstable Afghanistan or hostile Pakistan.

Can India match China in this regard? Will our national pipeline companies invest their own resources and build gas pipelines and electricity grids without waiting to spread the risks among a consortium of investors? Does democratic, if fractious India have the stomach to navigate the geopolitical maze and overcome our locational disadvantages to bring pipelines and electric grids to our borders and ensure their continued security? Will our domestic consumers be willing to pay the costs involved in these risky enterprises?

Even the United States, with its keen interest in the region, does not seem to support the construction of a BTC-type pipeline to bring Turkmen gas to South Asia, leaving the ADB to figure a way out of this complex labyrinth. CASA-1000, part of the US-sponsored ‘New Silk Road’ and a brainchild of Hillary Clinton, proposes to tap the electricity potential of Tajikistan to the benefit of South Asia but its fruition hinges on the active financial and physical commitment of the participating countries along the way. It is unlikely to see light of the day.

India’s options

This is not to say that India will have no energy opportunities in Central Asia. Investing in Central Asian oil and gas fields as part of an international consortium is one way of being part of the Central Asian growth story, even if these fields end up supplying China. After all, in Myanmar’s Shwe A1, Indian national oil companies have a stake in the gas field as well as the pipeline carrying the gas to Yunnan in China. Being equity partners in Central Asia will enable India to enter into swap arrangements elsewhere in the world, in regions which are much less explosive, geopolitically. Indian oil companies with their unmatched expertise in setting up refineries can help the Central Asian Republics establish refineries to add value to their crude before it is exported. India can also consider setting up fertilizer plants in Central Asia, whose output can be exported to our shores without having to build complex pipelines. After all, nearly a third of all gas consumed in India goes to make fertilisers.

India’s strategies in Central Asia should leverage the country’s strengths and find innovative ways to log in to the region’s growth story.

Sudha Mahalingam is an Independent energy analyst and former energy regulator

When the NDA Promised Power for All, it Took on its Greatest Challenge

For the Union government to convince and help states move to a more rational tariff regime perhaps is the leap that could help NDA reach its 2019 deadline of power for all

This piece was originally published in Business Standard.

Part 1: The government’s promise of power for all

Piyush Goyal. Credit: piyushgoyal.in

The National Democratic Alliance (NDA) government’s ambitious plan to provide 24×7 power to households by 2019 was announced well before the Union government could even prepare a detailed blueprint or tot up an estimate of the costs involved.

More than six months after the NDA government announced it would electrify entire India by 2019, plans for only three geographies are ready – Delhi, Rajasthan and Andhra Pradesh.

The scale of the challenge the government has set itself to achieve in four years is nothing short of astonishing. It will have to provide an electricity connection to roughly 80 million households that are still not connected to the grid (2011 Census). Then it will have to ensure the connections actually buzz with uninterrupted power that reaches 246.7 million households.The government can take some solace from the fact that substantial connections provided between 2011-14 will lower the targets to be met in four years.

To put this in perspective, between 2001 and 2011, an additional 61.6 million households got access to electricity. The government will have to more than double the rate of electrification to cover the remaining by 2019.

Fiscal implications

This is not just a logistical challenge. It has large fiscal implications. Andhra Pradesh, for example, has to provide connections to only 1.6 million additional households in four years – it is already 92 per cent electrified. It requires an investment of Rs.54,332 crore to connect these households and provide 24×7 power to all. By contrast, Rajasthan, which has to provide connection to an additional 3 million households, requires approximately Rs.78,500 crore. Costs for just these two states add up to Rs.1.33 lakh crore. But Rajasthan envisages adding more renewable power than the state will need (9,615 MW) at an additional cost of Rs.67,000 crore.

The government’s promise is to provide reliable supply to all consumers, except agriculture, which according to the two states’ plans will get 6.5 to nine hours of power a day by 2019.

Then there are states such as Uttar Pradesh and Bihar. The connections previous governments added in the entire country in five years will have to be added in just these two states in four years. Put together, 36 million houses in these two states were without power, according to the 2011 Census.

Ramp up CIL production

A coal-fired power plant. Credit: Wikimedia Commons

To map out reaching the national target, sources in the power ministry say, CRISIL, Mecon and Deloitte have been hired as consultants to draft the remaining 26 states’ plans. In three months, these consultants will finalise three states’ plans each. The officials insist that the remaining states will be ready by December, leaving the government with about three-and-a-half years to fulfill the promise before the general elections in 2019. The total investment required by all states, along with the additional central funding and private investment needs, would give an indication of the cumulative costs of achieving the 24×7 target. That will take at least another six months to be put together.

The power ministry did not reply to a detailed questionnaire from Business Standard, which included queries on the total cost calculations and estimations, if any, done so far to achieve the 24×7 electricity supply target.

Over the past few months, the government had announced some estimates of how much the grand scheme would cost and what it would entail.

Coal India (CIL) would have to increase its production to one billion tonnes annually from 494 million tonnes in 2014-15 – requiring a 15% annual rate of growth. Last year, CIL ramped up production by about 6.9%, though in the previous five years the average annual growth has been only 3.5%. CIL would need to more than double the growth it achieved last year to achieve the target set by the government. For this, Coal Minister Piyush Goyal had estimated investments of Rs.1.27 lakh crore.

Reconciliation with state plans

Goyal has also suggested that an investment of Rs.10 lakh crore would be required in the renewable energy sector to ramp up solar power from to 100 GW by 2022 and wind to 60 GW – at a growth rate that no country has achieved so far. At the beginning of 2014, India had installed 2,631.93 MW of solar power projects and 21,136.40 MW of wind power.

To upgrade the transmission and distribution systems, he has said Rs.1 lakh crore is needed over four years. In contrast, the Central Electricity Authority had prepared a 20-year plan to ensure a country-wide transmission network as the backbone of the 24×7 power supply system. This, the authority assessed, would cost Rs.2.6 lakh crore. Goyal and the government have assured funds should not be a problem.

Considering the power sector is one of the most indebted today, the government has its task cut out. The total debt burden on the power sector is pegged at Rs.4.70 lakh crore, according to Business Standard‘s analysis. Accumulated losses of the distributors – state electricity boards – are Rs.3 lakh crore, according to the government.

These macro numbers will eventually have to be reconciled with the state-specific plans still being fleshed out.

In a three-part series, Business Standard looks at how the government is gearing up to meet its promise of power for all. The second part will look at the two plans that are ready and available publicly – those of Andhra Pradesh and Rajasthan – and how generation of power will have to be dramatically ramped up in four years.

Part 2: How power generation will have to be ramped up

A deserted coal mine during CPI-Maoists’ strike in Latehar. Credit: PTI Photo

The government has not announced how much power is required to ensure 24 x 7 supply to all Indian households by 2019. But in its reports it talks of an addition of more than 200,000 Mw of power capacity in eight years by 2022. This is more than three-fourths of the power capacity added by the country over six decades.

To put this 200,000-Mw target in perspective: In the 11th Five-Year Plan, India added only about one-fourth of it. The addition in 2007-12 was 54,964 Mw, against a target of 78,700 Mw.

The 12th Five-Year Plan (2012-17), prepared under the United Progressive Alliance (UPA) government, had planned to add 118,536 Mw. Of this, 51,795 Mw was added in the first two years of the Plan, while the remaining 66,740 Mw was to be added by 2017 . But the current government hopes to double this and add 115,603 Mw by 2017. From 2017 to 2022, the government aims to add 101,745 Mw.

This means the power added in three years from 2014-17 will be more than what will be added in the five years after.

Rs.55,000 crore for two states

Even this unprecedented target may not be sufficient to meet the requirements for a 24×7 target, as the government report acknowledges, noting, “these assessments have been for the purpose of transmission planning, and not for assessing generation capacity required for meeting the demands.”

The UPA government had planned to provide power access to all. But the current National Democratic Alliance (NDA) government promises much more – electricity all through the day. This, obviously, requires an unparalleled increase in generation capacities, given the short deadline of 2019. Precise estimates of total energy requirement will be ready at the earliest by December this year when all state Plans are finalised.

This massive addition of power capacity would make India the second-largest consumer of coal-based energy. Alongside, the government wants to increase solar and wind power at rates that no country has so far achieved . Not even China.

A look at the power-generation plans of the two states that are ready gives an insight into the costs. Together, Andhra Pradesh and Rajasthan require Rs 55,000 crore.

Andhra Pradesh looks to invest Rs 21,593 crore to shore up generation capacity. Rajasthan requires Rs 34,772.19 crore to generate 6,570 Mw of conventional power. While its requirement is only an additional 625 Mw of renewable energy, it talks about generating more than 10,000 Mw at Rs 50,000 crore. The two states have also asked for 37.5 million tonnes of additional coal over five years. This still might not be enough for Andhra Pradesh to run thermal power plants at peak efficiency.

Since the Supreme Court cancelled allocations of 206 coal blocks, the government has conducted two rounds of auctions. The third is on the cards. But most of these will require time, of a year or more, to come online. The government also faces a slew of litigation against the auctions.

“The numbers are truly ambitious. The highest growth achieved in 10 years from 2004-05 to 2013-14 was 6.8 per cent. The target growth rate is more than double that figure,” says a coal sector expert. “Central to achieving the target is the addition of three railway lines and ensuring greater rake availability.”

Dependence on coal

Key to easing this constraint is building three railway lines – in Chhattisgarh, Jharkhand and Odisha – which could potentially help move up to 200 million tonnes annually.

“Of the three lines, movement is seen only in the Jharsuguda-Barpalli-Sardega railway line in Odisha. The deadline for this line is December 2017. The other two projects are yet to take off,” says the expert. The cost of setting up the lines, pegged at Rs 7,045 crore, is an underestimation, he adds.

India’s dependence on coal could have been reduced if there was clarity on how gas production would ramp up. But the state Plans reflect uncertainty on this front. The Andhra Pradesh Plan notes that 2.5 mscmd of gas is being supplied against a requirement of 13 mscmd, just enough for 500 Mw, leaving 2,270 Mw of capacity stranded. It does not clarify how much gas supply it will get in the future. The power ministry calculated that 14,305 Mw of gas-based plants were left stranded in the April 2014-January 2015 period . The government has formulated a new scheme for import of gas to ease the mess in the sector.

The other potential source of energy, large hydropower, locked up in issues of litigation, displacement and environment, has grown at a much lower rate than expected . Only 5,544 Mw of hydro power was installed during the 11th Five-Year Plan, against a target of 15,627 Mw. The government is pushing states in the Northeast to cancel memoranda of association with private players and hand over hydropower projects to the public sector.

Even as the NDA government disentangles the hydropower sector out of the mess, it has given a thrust to the emerging renewable energy sectors, setting a 100-GW target for solar power and a 60-GW one for wind power. The rate of growth it desires is unprecedented. But the government is not inclined to formally announce these numbers as official targets under the UN climate change agreement, to be signed in December 2015 – an indication that these may be more aspirational than real.

Part 3: Distribution and connectivity lag behind

Credit: Wikimedia Commons

In its first year the National Democratic Alliance (NDA) government was able to electrify only 0.2 per cent of census villages, according to the Central Electricity Authority (CEA). About 1,100 census villages were put on the power grid map. In contrast in the previous five years under the United Progressive Alliance (UPA), the percentage of villages electrified had risen from 84.4 per cent to 96.5 per cent, reports the authority.

Of the 5.97 lakh villages, 19,766 are still grid connected. The remaining ones are more difficult to reach. The numbers on census villages also hide underneath the hamlets and habitations within that are alsohooked up individually to the grid. If one looked at these as well the NDA’s performance would seem better. The government could easily ramp up its efforts as the UPA record shows.

It’s the last-mile connectivity that lags behind at the moment; 96.7 per cent villages are connected but 33 per cent households – around eight crore out of 24 crore (according to 2011 census) – do not have electricity. This too could be fixed with just a little more effort. In just three years (2011-14), Andhra Pradesh provided connections to roughly 11 lakh households. Rajasthan added five lakh over the same period. Thus, cumulatively all states put together would have added substantial numbers in the period from 2011-14. The RGVY scheme for BPL households alone added over 55 lakh households between 2011-14. By the time the NDA government took over, the target would have been reduced substantially. Merely working at the pace that AP has, could add roughly four crore households by 2019.

Non-financial interventions

Ensuring household connectivity could be relatively easy. The real test is twofold: One, to spread the transmission grid widely and efficiently from power producers to distributors by 2019. Two, the more difficult test to pass is to ensure that debt-ridden distributors bounce back to health and are able to set progressive tariffs that reflect the true cost of power. This is where politics could trump even a very determined government.

The current transmission system is insufficient to transfer power from surplus parts of the country to deficit parts. A former head of Central Electricity Regulatory Commission says, “States are not being able to buy cheaper power because of transmission bottlenecks.” With lack of grid connectivity, states get locked in to buying power from costly but linked up generators in the vicinity.

At the end of the 11th Plan, the inter-regional transmission lines capacity stood at 27,750 Mw. The target for the 12th Plan was 65,550 Mw. As on May 2015, 46,450 Mw was achieved, leaving a balance of 19,100 Mw for the remaining two years of 2015-17. But the NDA hopes to achieve a target of 27,400 Mw in these remaining two years. Then, in the 13th Plan period (2017-22), it plans to add another 52,800 Mw of inter-regional transmission lines to cater to power generation capacity of 4.6 lakh Mw. For this, the CEA estimates in its perspective plan that another Rs 2.6 lakh crore would be required in the 13th Plan. The power minister has suggested the transmission sector needs Rs 1 lakh crore, for now.

The perspective plan by CEA, which includes targets to be reached by 2022, was developed before the AP plan for 24/7 power was ready. So there is some mismatch in deadlines. The AP plan looks at creating the full transmission capacities by 2019. It estimates the inter-state transmission network strengthening, which includes building a green energy corridor, to cost about Rs 23,284 crore. The AP plan also notes the crucial role the center would have to play. It says “Apart from financial assistance, non-financial interventions, some as directions to public sector companies are requested from the government of India”.

Upward restructuring of tariffs

A mechanical electricity meter. Credit: Wikimedia Commons

A greater financial commitment from the union government bundled with political heft would be needed to fix the most trenchant of problems the Indian power sector faces – the mounting losses of state distribution companies. The burgeoning fiscal burden leaves them with no choice but to manage their finances by curbing power purchase and limiting supply to consumers. Power minister Piyush Goyal writes, “Annual operating losses of distribution companies are at around Rs 70,000 crore every year, with accumulated losses of Rs 2,52,000 crore and total debt of Rs 3,04,000 crore.”

Goyal adds, “This situation persists largely due to rampant and unbridled power theft. The national average for Annual Technical & Commercial losses is around 25 per cent.” Competition in the distribution sector could bring down these losses but could increase the burden on state-owned companies unless their tariff structures are also freed.

Sorting out problems of distribution to provide 24×7 supply will depend on how well Prime Minister Narendra Modi can implement his mantra of ‘cooperative and competitive federalism’.

While issues of fuel supply, logistics, generation and transmission fall under the central government’s domain, distribution is under state governments. All the reforms proposed in the distribution sector such as open access, privatisation of distribution networks, tariff increases fall in the domain of the state. Rationalising tariffs is the toughest task. But it is must, as the former head of CERC explains: “Many states are simply not purchasing power. This is because of a complete mismatch between the cost of buying power and the tariff charged from the consumers.”

Any upward restructuring in tariffs is, quite naturally, a political minefield that few states can afford to tackle. Take the case of Rajasthan, where an analysis was carried out to look at distributors would fare under different tariff regimes. Only when tariffs were projected to increase at a high rate of 16 per cent for three years consecutively did the distributor cross the red line.

With the agricultural sector in deep stress, charging farmers for power at higher rates looks politically unfeasible. For the Union government to convince and help states move to a more rational tariff regime perhaps is the leap that could help NDA reach its 2019 deadline of power for all.

Read the original pieces of the three-part series in Business Standard here, here and here.