According to reports, in the domain of public policy, the most promising development currently must surely be the increasingly attractive economics of solar power.
The prices of photovoltaic modules, for example, have reportedly dropped some 40% in about 18 months, and the easier trend seems very likely to continue in the medium term and beyond.
With the right policy vision, it should be possible to leverage the path-breaking improvements in tapping the power of the sun to vastly improve our public finances, greatly boost mobility across the board and purposefully bring down soot, smoke and indoor pollution as well.
Already, the expert view is that the cost of power using solar energy has dropped significantly in recent months, and is now almost comparable to that produced from conventional fossil fuels, which, in any case, is loaded with externalities like pollution.
In a couple of years, solar power is slated to be no dearer than that from the regular electricity grid. The policy process needs to anticipate the ‘grid parity’ on the cards, and chalk out innovative schemes that simply eliminate the need for runaway subsidies on key petroleum products like diesel and kerosene.
Consider, for instance, diesel, by far the most used petroproduct. The process of price-setting in diesel remains opaque, with retail price revision decided by fiat, never mind pricier crude oil that is mostly imported.
But the very process of policy dithering on revising the administered prices sends thoroughly wrong price signals and hugely misallocates resources, both budgetary and otherwise.
Now, the purported reason for populism in diesel is that the fuel operates a very large number of agricultural pumps, and what is averred is that it would be politically unacceptable to raise such input costs in the primary sector.
Hence the need for a national, focused programme to widely diffuse solar-powered pumpsets in the farm sector, to end the reliance on diesel. There is anyway the vital need to provide reliable rural power – for pumpsets, lights, factories et al – from the grid, complete with parallel phasing and metering for farm supply.
Given the higher initial costs for the paradigm shift required for solar-powered pumpsets, it would make sense to put in place a financing scheme using targeted subventions and multilateral funding, if required. The point is to move upfront on solar pumps and, in tandem, decontrol diesel prices.
We do need to put paid to open-ended consumption subsidies on oil products. Or, take kerosene, for example. As umpteen surveys indicate, kerosene is supposed to be mostly used for lighting, although much of it is diverted to adulterate automotive fuel.
What’s required is a workable plan to diffuse solar lanterns, in lieu of subsidised kerosene. Such lanterns and solar pumps could lead to massive saving in budgetary subsidies, amounting to about 1% of gross economic output, or nearly a tenth of the Centre’s total budget outlays.