India aims to be a five trillion-dollar economy by 2024. As the economic survey this year stated that India’s per capita energy consumption should touch for it to grow to the expected levels.
Energy sector includes coal, petroleum and allied products, natural gas and electricity generated from sources like thermal, hydro and renewable energy. Energy is the most basic thing for domestic and industrial use without which no economic development is possible.
The statistics of India’s energy sector were released recently. The trends that the data shows converge with the policy reforms taken by Modi government. It is a confirmation of the effectiveness of the government’s policies.
Per Capita Energy Consumption (PEC)
PEC means the amount of energy consumed per head in a nation. The Economic Survey has acknowledged that for India to grow from a low income nation to a medium income nation, the per capita energy consumption should increase. It means that after people consume energy in the form of electricity, coal, petroleum, etc., their quality of life improves and has a positive impact on their skills and income.
The graph shows how PEC was moderately increasing but saw a sudden jump after 2014-15 and continues to grow in the years ahead.
The data corroborates the increased focus on energy consumption policies by the Narendra Modi government-
- Use of LPG increased after more than 8 crore connections were set up under Ujjwala
- Saubhagya scheme ensured 2.5 crore unelectrified houses get power
- Reforms in coal sector ensured regular supply
- International pacts with Mozambique, Oman and Turkmenistan ensured regular supply of natural gas
Fall in Energy Intensity
Energy Intensity is defined as amount of energy required to produce one unit of GDP. Thus, if lesser amount of energy is required to generate one unit of GDP, it means the economy is becoming energy efficient.
Falling energy intensity basically indicates the efforts being made by the government to use energy more efficiently, curb the waste and raise demand for energy. The graph shows the energy intensity was plateauing till 2014-15 and them began falling later.
Building sustainable production facilities for electricity was always a big challenge. Before 2014, for thermal electricity, coal mining was in a mess. For big hydel projects, forest clearances were an issue. Renewables didn’t have credit support. This not only stagnated the installed capacity but landed the power sector into NPAs.
The picture changed after 2014. The installed capacity registered a healthy growth in las few years. The installed capacity has increased from 174639 MW in 2009 to 399000 MW in 2018, registering a compound annual growth rate (CAGR) of 8.61%.
Increased Share of Renewables
If the installed capacity has increased, a logical question arises that which type of electricity is being generated more- thermal, hydel, renewable?
The largest (20.58%) growth has been registered in the Renewable Energy since 2008-09, showing the focus on cleaner energy by Modi government.
The strategy of increased use of renewable energy has been a hallmark of Modi government-
- The aim is to achieve 200 GW installed capacity of renewable energy by 2022
- In its INDC submitted during the Paris agreement of 2015, India aims to have 40% of the energy mix to be renewable by 2030
- The National Solar Mission, the auctions for solar plants leading to fall in price of solar power, focus on wind and tidal energy are all showing in the data.
From Coal Gate Scam to Coal Reforms
Coal is the most important source of energy given its need in thermal power plants and utility industries like iron and steel. Indira Gandhi government in 1974 nationalized all coal mines, restricted end-use of coal and killed the private coal mining.
The result was clear. India has one of the highest coal deposits in the world yet we import coal, chiefly due to absence of proper mining of coal within India. The Coal gate scam and subsequent cancelling of coal block allocations by courts added to the problems.
The Modi government has ensured reforms in the coal sector-
- An amendment passed in 2015 paved way for formal auction of more than 200 coal blocks, thus regularizing coal production
- The government has permitted 100% FDI in coal sector
- It allowed commercial mining of coal in 2018
- In the recent cabinet decision, government has opened up coal mining for all non-mining companies and also put an end to the end-use restrictions, thus facilitating widespread use of coal.
The results of these reforms are supported by the data. The production of coal in India has gone up. The graph below shows how coal production stagnated between 2010 and 2013 chiefly due to Coal gate scam and how it zoomed after 2014 following the reforms.
If the coal production was not enough domestically, the natural outcome would be more reliance on imported coal. India’s net coal imports began increasing rapidly after 2009. The net imports finally plateaued after 2015 since domestic production of coal caught up.
The installed capacity of thermal power plants running on steam (coal) has also gone up manifold given the availability of coal.
In essence, the energy sector of India grew rapidly after 2014, as a growing nation needs to meet the increased energy requirement. The decisive action of removing age old remnants of License Raj, reforming the system and ensuring timely clearances have all resulted in increase in energy consumption in India.