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Greater education of public needed on energy pricing: Montek Singh Ahluwalia

According to reports, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission for a decade now, looks back with satisfaction that several of his recommendations, including those on energy pricing, are being implemented, although gradually. In conversation with Rajeev Jayaswal of ET, Ahluwalia said energy pricing is a sensitive issue and during the election such things become even more controversial than normal. He also said the online energy model, developed by the Plan panel to predict demand and supply scenarios, will be useful to the new government as well as researchers, industry bodies and even political parties. Excerpts:

You have ardently pursued an integrated approach to India’s energy security. But, ministries such as coal, power, petroleum and renewable energy remained fragmented in their approach. What is the road ahead?

Energy has traditionally been handled by several different ministries and we in the Planning Commission have consistently pushed for policy integration. This means policies in one energy sector must be based on the same principles as those in another. We prepared an Integrated Energy Policy which was adopted by the Cabinet in 2009, and the broad directions outlined were reiterated in the 12th Plan. I am happy to say that several of our recommendations, including those on energy pricing, are being implemented, but in a gradual manner. This is not surprising. Energy pricing is a sensitive issue, and we are a democracy currently in election mode when things become more controversial than normal. For example, the Integrated Energy Policy and the 12th Plan enunciates the principle that energy prices in areas where we are import dependent have to be aligned with global prices. This principle was not challenged when the plan was cleared by NDC (the National Development Council, presided over by the prime minister) and did not face hurdle when it was placed in Parliament. But following the recent decision to raise gas prices we suddenly hear people advocating cost-based pricing! I hope, with greater education of the public on the implications of alternative choices, we can make faster progress.

You have developed an energy calculator, which predicts various scenarios depending on country’s efforts towards energy security. How will it help?

The scenarios are generated by the energy pathways calculator, which was developed by a young and very motivated team of consultants in the Planning Commission. We got help from the UK government and we also interacted with several research institutions, notably Prayas, TERI, CSTEP and India Smartgrid Forum. The calculator helps us to explore ways of meeting energy demand in a way which keeps import dependence to a reasonable level, and also emissions at a reasonable level. Much of the action needed is on the demand side, to reduce the extent of energy demand for a given growth projection. More than 80% of energy demand is for industry, transport and for use in buildings for lighting, heating and appliances. We can explore different scenarios about the extent of improvement in each of these sectors. We also need to expand domestic supply as much as possible, but the composition of energy supply also matters. We can always reduce import dependence by expanding domestic coal supply, but that will lead to very high emissions. Hence the importance of shifting the supply mix towards clean energy.

According to the energy calculator, where does India stand?

Let me answer that with reference to the four scenarios – least effort, determined effort, aggressive effort and heroic effort. The least effort scenario is essentially a poorer outcome than envisaged in the 12th Plan, reflecting a situation where we are unable even to take the hard decisions mentioned in the plan. If this inability continues over time, import dependence rises from 31% in 2012 to an impossible high of 84.5% in 2047. Emissions increase from 1.4 tonnes of carbon dioxide per capita in 2012 to 7.7 tonnes per capita in 2047. By contrast, in the heroic effort case, the import dependence falls to 21% and emissions per capita increases to only 3.3 tonnes. We can even go below this level of emissions by a much bolder shift to using renewable energy.

Is it possible for India to gear itself to the heroic efforts scenario?

The scenario involves a major reduction in energy demand through multiple actions. The major energy using industries have to implement a shift to more energy efficient technology and also to greater reliance on greener energy. There must be a shift in transport from road to rail, and within road from private to public and to electric vehicles. The total demand for transport can also be reduced through better spatial planning, with greater reliance on clusters, which would reduce unnecessary transportation of goods to and fro. We can reasonably plan for big changes in the use of energy in buildings which require imposing higher energy efficiency standards on all electrical appliances. These actions on the demand side, need to be supplemented by equally strong action on the supply side, incentivising domestic exploration and development of energy sources.

Why have you developed the energy model at the fag end of the UPA government? Do you think it will remain relevant in the next government?

It will remain relevant well beyond the life of the government. It took about eight months to put all this together, and we are not presenting a specific projection made by the present Planning Commission on the basis of which specific policies are being recommended. We are presenting a tool, which can be used by the new government to explore options. I hope it will also be used by researchers, industry associations, and even political parties to produce a more informed debate.

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