Strong energy sector can fuel economy

Energy is central to development. Traditionally in India, one per cent economic growth has been requiring more than one per cent growth in energy. However, the Indian economy’s energy intensity, that is amount of energy spent to generate one rupee of gross domestic product (GDP), has been improving since the late 1990s.

The major reasons have been — changing structure of the economy wherein service sector’s share has increased over the years, enhanced energy efficiency of industrial production, higher penetration of improved devices and appliances that consume lesser energy, and some fuel switching.

Private sector and entrepreneurship have played dominant roles in this transformation. Growth of service sector is a case in point where comparatively less energy is consumed to generate one rupee of GDP. The service sector has grown to contribute over 55% of India’s GDP in 2008-09 as compared to 43% in 1990-91.

Although service sectors contribute lower energy, the quality of energy and electricity required would be higher for these. For instance, the software industry would require very high quality of power as compared to a sugar mill. Election manifestos of no major political parties speak about enhancing the quality of power in India.  

However, India is still far below the energy intensity of developed countries. India also has almost 400 million people without access to modern forms of energy and in absence of concerted efforts to alleviate this energy poverty; this number is only expected to grow in future. Here again, the major political parties are silent in their election manifestos on a programmed approach or even a firm commitment.

Energy access and affordability are two important criteria for removing energy poverty. Energy and electricity have to be not only made available to the masses on demand, but also at affordable prices. The parties have to keep these as important aspects of inclusive growth. The nuclear deal is of course a positive for the present UPA government, which the Congress promises to enhance in the next 5 years, but this alone can not meet with the future energy needs of a fast growing nation.

BJP has promised to add 120 thousand mega watt of power generation capacity in the next five years, which is more than four-times that has been achieved in the past five years under the present UPA government as well as under its own NDA rule five years before that. This is also much beyond the 78.6 thousand capacity additions planned for 2007-2012 under the eleventh five-year plan. It would be excellent if BJP could fulfil this need, however resource mobilization and power sector reforms could be the big challenges. Congress is more practical in promising to add 12-15 thousand power each year which is closer to the 5-year plan target. 

Diversification of energy resources and promotion of renewable sources of energy are included in election manifestos of almost each national party. BJP has committed to have 20% share from renewable resources in all new power plants.

This is good news for climate change proponents. BJP has also specifically mentioned tackling climate change and global warming through non-polluting technologies as a priority area. Others are not so reticent about this arguably most important market failure of the 21st century. 

In a nutshell, energy issues still remain on periphery in this election promises. There is a talk of “bijli, paani aur sadak” to catch the votes, but election manifestos fall short in articulating the way forward to remove energy poverty from the country. Even if a vote is to be cast for development, it may lack energy.

Amit Garg is a professor at the Indian Institute of Management, Ahmedabad