2. Integrated Energy Policy
Report of the Expert Committee
Government of India
Planning Commission
New Delhi
August 2006

3. Integrated Energy Policy
ii

4. We, the Members of the “Expert Committee on Integrated Energy Policy”, hereby submit our Final Report.
Kirit S. Parikh
Chairman, Expert Committee
Member, Planning Commission, Government of India
T.L. Sankar Amit Mitra
Ex-Principal, Administrative Staff College of India Secretary General, FICCI
Leena Srivastava D.S. Rawat
Executive Director, TERI Secretary General, ASSOCHAM
J.L. Bajaj V. Raghuraman
Ex-Chairman, SERC Representative of Confederation of Indian Industry
Rangan Banerjee Urjit R. Patel
Professor, IIT, Mumbai Executive Director, IDFC
Ajit Kapadia Pradeep Chaturvedi
Vice Chairman, Centre for Fuel Studies & Research The Institution of Engineers (India)
Subimal Sen R.R. Shah
Member, West Bengal Planning Board Member Secretary, Planning Commission
R.V. Shahi M.S. Srinivasan
Secretary, Ministry of Power Secretary, Ministry of Petroleum & Natural Gas
Anil Kakodkar Prodipto Ghosh
Secretary, Deptt. of Atomic Energy Secretary, Ministry of Environment & Forests
V. Subramanian H.C. Gupta
Secretary, Ministry of Non-conventional Energy Secretary, Ministry of Coal
Sources
Convenor
Surya P. Sethi
Adviser (Power & Energy), Planning Commission
iii

5. Integrated Energy Policy
iv

6. ,e- ,l- vkgyqokfy;k mik/;{k
MONTEK SINGH AHLUWALIA ;kstuk vk;ksx
Hkkjr
DEPUTY CHAIRMAN
PLANNING COMMISSION
INDIA
Foreword
Energy is a vital input into production and this means that if India is to
move to the higher growth rate that is now feasible, we must ensure reliable
availability of energy, particularly electric power and petroleum products, at
internationally competitive prices. We cannot hope to compete effectively in
world markets unless these critical energy inputs are available in adequate quantities
and at appropriate prices.
The present energy scenario is not satisfactory. The power supply position
prevailing in the country is characterised by persistent shortages and unreliability
and also high prices for industrial consumer. There is also concern about the
position regarding petroleum products. We depend to the extent of 70 percent on
imported oil, and this naturally raises issues about energy security. These concerns
have been exacerbated by recent movements in international oil prices. Electricity
is domestically produced but its supply depends upon availability of coal,
exploitation of hydro power sources and the scope for expanding nuclear power,
and there are constraints affecting each source.
Achieving an efficient configuration of the various forms of energy
requires consistency in the policies governing each sector and consistency in the
pricing of different types of energy. There is also a need for clarity in the direction
in which we wish to move in aspects like energy security, research and development,
addressing environmental concerns, energy conservation, etc. To address these
issues in an integrated manner, the Prime Minister had directed that the Planning
Commission should constitute an Expert Committee to undertake a comprehensive
review and to make recommendation for policy on this basis. The Expert
Committee was constituted under the chairmanship of Dr. Kirit S. Parikh,
Member, Planning Commission and has finalised its report after an extensive
process of deliberation and consultation with various stakeholders. The draft
report was also placed on the web site of the Planning Commission and comments
were invited which have been taken into consideration in preparing the final
report.
;kstuk Hkou] laln ekxZ] ubZ fnYyh&110001 nwjHkk"k % 23096677] 23096688 QSDl % 23096699
Yojana Bhawan, Parliament Street, New Delhi-110001 Phones : 23096677, 23096688 Fax : 23096699
E-MAIL : dch@yojana.nic.in
v

7. Integrated Energy Policy
,e- ,l- vkgyqokfy;k mik/;{k
MONTEK SINGH AHLUWALIA ;kstuk vk;ksx
Hkkjr
DEPUTY CHAIRMAN
PLANNING COMMISSION
INDIA
The report of the Expert Committee provides a broad overarching
framework for guiding the policies governing the production and use of different
forms of energy from various sources. It makes specific recommendations on a
very large range of issues. The report is a valuable input into policy making and
will help shape our energy policy in the 11th Plan. Early implementation of the
recommendations in the report would contribute substantially to putting the
economy on a sustainable higher growth path.
(Montek S. Ahluwalia)
;kstuk Hkou] laln ekxZ] ubZ fnYyh&110001 nwjHkk"k % 23096677] 23096688 QSDl % 23096699
Yojana Bhawan, Parliament Street, New Delhi-110001 Phones : 23096677, 23096688 Fax : 23096699
E-MAIL : dch@yojana.nic.in
vi

8. Preface
The energy policies that we have adopted since independence to serve the socio-economic
priority of development have encouraged and sustained many inefficiencies in the use and
production of energy. We pay one of the highest prices for energy in purchasing power parity
terms. This has eroded the competitiveness of many sectors of the economy. The challenge is to
ensure adequate supply of energy at the least possible cost. Another important challenge is to
provide clean and convenient “lifeline” energy to the poor even when they cannot fully pay for
it, as it is critical to their well-being. Therein lies the importance of an effective and comprehensive
energy policy.
In this context, the Prime Minister had directed the Planning Commission, to setup an
Expert Committee to prepare an integrated energy policy linked with sustainable development
that covers all sources of energy and addresses all aspects of energy use and supply including
energy security, access and availability, affordability and pricing, as well as efficiency and
environmental concerns. The committee was constituted on August 12, 2004 and was to submit
its report within six months i.e., by February 11, 2005. Given the complexity involved and wider
consultation needed, the term of the committee was extended upto 11th October 2005. The draft
report of the Committee was put on the website of Planning Commission inviting comments. We
received a large number of them from individuals, groups and institutions some of whom had
organised special discussion meetings on the draft report. I thank them all. We have finalised the
report after taking these comments into account. While the finalisation of the report has taken
some time, it is worth noting that some of the policy suggestions made in the draft report have
been in the meanwhile taken up by the Government for implementation.
It is my pleasure and also my privilege to thank all the Members of the Committee for
their many important suggestions and for sparing their valuable time towards the finalisation of
this report.
I am also thankful to the officers and staff of the Power & Energy Division of the
Planning Commission for their contributions in the preparation of this report, particularly Shri
Surya Sethi, Convenor of the Committee, for his many ideas, contributions, help in drafting the
report and for ensuring consistency and clarity. S/Shri R.C. Mahajan, M. Satyamurty, R.K. Kaul,
I.A. Khan, B. Srinivasan, Dr. A. Mohan, D.N. Prasad, Rajnath Ram and Dr. M. Govinda Raj
provided many inputs and support.
I also thank Dr. Vivek Karandikar and Dr. Prasanna Dani of the Observer Research
Foundation for their help in developing energy supply scenarios.
Finally, I want to thank Shri Sanjay Vasnik for diligently, carefully and cheerfully typing
many drafts of the report.
(Dr. Kirit S. Parikh)
Member (Energy),
Planning Commission &
Chairman, Expert Committee on Integrated Energy Policy
Dated: 09.08.2006
vii

9. Integrated Energy Policy
viii

10. Contents
Contents
Page No.
Members of the Committee iii
Foreword v
Preface vii
Overview xiii
Abbreviations Used xxxi
Chapter I. The Challenges 1
1.1 The Energy Scene 1
1.2 The Issues 13
1.3 The Vision 14
1.4 Need for an Integrated Energy Policy 15
1.5 Approach 16
Chapter II. Energy Requirements 18
2.1 Commercial Energy Needs 18
2.2 Required Electricity Generation 19
2.3 India’s Oil Demand 22
2.4 India’s Coal Demand for Non-Power Use 23
2.5 India’s Non-Power Natural Gas Demand 23
2.6 Total Primary Commercial Energy Requirement 26
2.7 Non-Commercial Energy Requirement 28
2.8 Total Primary Energy Requirement 31
2.9 Summing Up 31
Chapter III. Supply Options 33
3.1 India’s Energy Reserves 33
3.2 Supply Scenarios 40
3.3 Implications of the Results of the Scenarios 41
3.3.1 Aggregate Energy Needs and Imports Dependence 45
3.3.2 Energy Supply Options 45
3.3.3 Energy Efficiency and Demand Side Management 48
3.3.4 Carbon Emissions 50
3.3.5 Implications for Investment Needs 50
3.3.6 The Main Actions Recommended 51
3.4 Energy Independence in an Energy Scarce World 51
Chapter IV. Energy Security 54
4.1 What is Energy Security? 54
4.2 The Nature of the Problem 55
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11. Integrated Energy Policy
4.3 Policy Options for Energy Security 57
4.3.1 Reduce Energy Requirements 57
4.3.2 Substitute Imported Energy by Domestic Alternatives 58
4.3.3 Diversify Supply Sources 60
4.3.4 Expand Resource Base and Develop Alternative Energy Sources 61
4.3.5 Increase Ability to Withstand Supply Shocks 64
4.3.6 Increase Ability to Import Energy and Face Market Risks 65
4.3.7 Increase Redundancy to Deal with Technical Risk 65
4.4 Energy Security for the Poor 66
4.5 Policies and Initiatives for Energy Security 66
Chapter V. Energy Policy Options/Initiatives 68
5.1 The Emerging Backdrop 68
5.2 Policies Covering Energy Markets, Pricing, Regulation, Taxation, Subsidies, 71
Externalities and Institutions
Chapter VI. Policy for Energy Efficiency and Demand Side Management 81
6.1 Large Potential for Saving Energy 81
Chapter VII. Policy for Renewable and Non-Conventional Energy Sources 89
Chapter VIII. Household Energy Security: Electricity and Clean Fuels for All 99
8.1 Electricity 100
8.2 Cooking Energy 101
8.3 Subsidy through Debit Cards/Smart Cards 102
Chapter IX. Energy R&D 103
Chapter X. Power Sector Policy 109
Chapter XI. Coal Sector Policy 115
Chapter XII. Oil and Gas Sector Policy 123
Chapter XIII. Energy-Environment Linkages 129
13.1 Energy Supply Side: Environment Concerns 129
13.1.1 Exploration, Production and Transformation of Fossil Fuels 129
13.1.2 Environmental Impacts of Nuclear Power 130
13.1.3 Environmental Impacts of Large-Scale Hydropower 130
13.1.4 Environmental Impacts of Renewable Energy 131
13.2 Environmental Dimensions of Demand Side Impacts 131
13.3 Understanding the Determinants of Air Quality 131
13.3.1 Levels and Trend Analysis of Urban air quality in five major Indian cities 132
13.4 Long-term Sustainability of India’s Energy Use 132
13.4.1 Local and Regional Impacts 132
13.4.2 India’s Approach to Climate Change 135
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12. Contents
Concluding Comment 137
Annexures 138
Annexure-I Order Constituting the Committee 138
Annexure-II Gist of Earlier Energy Policy Committees/Groups 141
Annexure-III Calorific Values, Units and Conversion Factors 147
List of Tables
Table 1.1 Selected Energy Indicators for 2003 1
Table 1.2 Household Energy Consumption in India (July 1999 – June 2000) 8
Table 1.3 Growth of Motorised Transport Vehicles 10
Table 2.1 Energy Use Elasticity w.r.t. GDP 18
Table 2.2 Elasticities Used for Projections 19
Table 2.3 Energy Use Elasticity w.r.t. GDP from Cross-Country Data of 2003 19
Table 2.4 Projections for Total Primary Commercial Energy Requirements 20
Table 2.5 Projections for Electricity Requirement 20
Table 2.6 Projections for Electricity Requirement by MOP 21
Table 2.7 Sources of Electricity Generation – One Possible Scenario 22
Table 2.8 Demand Scenario for Petroleum Products - India 24
Table 2.9 Demand Projection of Coal by Various Agencies in Mt 25
Table 2.10 Demand Scenario for Natural Gas - India 27
Table 2.11 Commercial Fuel Requirements for Non-Power Use in Physical Units 28
Table 2.12 Projected Primary Commercial Energy Requirements (One Possible Scenario) 28
Table 2.13 The Demand Scenario of Various Energy Items for Household 29
Consumption in India
Table 2.14 The Impact of Electrification on the Demand Scenario of Various Energy 30
Items for Household Consumption
Table 2.15 Total Primary Energy Requirement (Mtoe) 31
Table 2.16 Per Capita Energy Requirements in Selected Countries (2003) 32
Table 3.1 India’s Hydrocarbon Reserves 33
Table 3.2 Reserves/Production of Crude Oil & Natural Gas 35
Table 3.3 The Approximate Potential Available From Nuclear Energy 36
Table 3.4 Possible Development of Nuclear Power Installed Capacity in MW 37
Table 3.5 Renewable Energy Resources 37
Table 3.6 Some Energy Supply Scenarios for 8% GDP Growth 41
Table 3.7 Scenario Summaries for 8% GDP Growth — Fuel Mix in Year 2031-32 44
Table 3.8 Ranges of Commercial Energy Requirement, Domestic Production and 45
Imports for 8 percent Growth for year 2031-32
Table 3.9 Generation Capacities and Load Factors in Scenario 11 46
Table 3.10 Primary Energy Supply Sources (2003-04) 52
Table 4.1 Sources of India’s Oil Imports – 2004-05 59
Table 7.1 Capital Costs and the Typical Cost of Generated Electricity from 90
the Renewable Options
Table 7.2 International Feed-in Tariffs 91
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13. Integrated Energy Policy
Table 13.1 Environmental Impacts Associated with Energy Transformation 129
Based on Fossil Fuels
Table 13.2 Supply Side, Local and Regional Environmental Impacts 130
Table 13.3 India Approved CDM Projects 135
List of Figures
Figure 1.1 Total Primary Energy Supply (TOE) Per Capita (2003) vs. GDP Per Capita 2
(PPP US$2000)
Figure 1.2 Kilo Watt hours of Electricity Consumption Per Capita (2003) vs. 3
GDP Per Capita (PPP US$2000)
Figure 1.3 Human Development Index (HDI) vs. Electricity Consumption 3
Per Capita in 2002
Figure 1.4 Peak Power and Energy Shortages in States/UTs. 2004-05 4
Figure 1.5 Distribution of Households by Primary Source of Energy Used 6
for Cooking- India
Figure 1.6 Pattern of Household Energy Consumption
Figure 1.6(a) Monthly Per Capita Household Consumption 8
Pattern Urban India, 2000
Figure 1.6(b) Monthly Per Capita Household Consumption 8
Pattern Rural India, 2000
Figure 1.7 Domestic Consumption and Production of Crude Oil 9
Figure 1.8 Growth of Transport Vehicles and Two Wheelers 10
Figure 2.1 Projected Electricity Generation Growth (BkWh) 21
Figure 2.2 Plan-wise Projected Installed Capacity Addition (MW) 21
Figure 2.3 Percentage Share of Commercial Primary Energy Resources—2003-04 29
and 2031-32
Figure 2.4 Percentage of Households Using LPG 30
Figure 3.1 Fuel Mix Comparison in Year 2031-32 42
Figure 3.2 Coal Dominant Scenario 1 - Fuel Mix Year-Wise 42
Figure 3.3 Forced Hydro, Nuclear and Gas Scenario 5 - Fuel Mix Year-Wise 43
Figure 3.4 Forced Renewables Scenario 11 - Fuel Mix Year Wise 43
Figure 3.5 CO2 From Energy Use in Alternative Scenarios in Year 2031-32 50
Figure 4.1 India’s Growing Share in Global Energy Consumption (Higher Projections) 56
Figure 4.2 World Oil Prices 56
Figure 6.1 Reduction in the Energy Consumption of Refrigerators Sold in the 87
United States of America
Figure 7.1 Renewable Energy Options 89
Figure 13.1 Air Pollution in Residential Areas 133
Figure 13.2 Air Pollution in Industrial Areas 134
List of Boxes
Box 1.1 The Burden of Traditional Fuels in Rural India 7
Box 6.1 Bureau of Energy Efficiency (BEE) 82
Box 6.2 Initial Cost and Life Cycle Cost 86
Box 11.1 Delivered Cost of Domestic and Imported Thermal Coal 119
xii

14. Overview
Overview
India faces formidable challenges in Considering the shocks and disruptions that
meeting its energy needs and in providing can be reasonably expected, assured supply of
adequate energy of desired quality in various such energy and technologies at all times is
forms in a sustainable manner and at essential to providing energy security for all.
competitive prices. India needs to sustain an Meeting this vision requires that India pursues
8% to 10% economic growth rate, over the all available fuel options and forms of energy,
next 25 years, if it is to eradicate poverty and both conventional and non-conventional.
meet its human development goals. To deliver Further, India must seek to expand its energy
a sustained growth rate of 8% through 2031-32 resource base and seek new and emerging
and to meet the lifeline energy needs of all energy sources. Finally, and most importantly,
citizens, India needs, at the very least, to increase India must pursue technologies that maximise
its primary energy supply by 3 to 4 times and, energy efficiency, demand side management
its electricity generation capacity/supply by 5 and conservation. Coal shall remain India’s
to 6 times of their 2003-04 levels. With 2003- most important energy source till 2031-32 and
04 as the base, India’s commercial energy supply possibly beyond. Thus, India must seek clean
would need to grow from 5.2% to 6.1% per coal combustion technologies and, given the
annum while its total primary energy supply growing demand for coal, also pursue new coal
would need to grow at 4.3% to 5.1% annually. extraction technologies such as in-situ
By 2031-32 power generation capacity must gasification to tap its vast coal reserves that are
increase to nearly 8,00,000 MW from the difficult to extract economically using
current capacity of around 1,60,000 MW conventional technologies.
inclusive of all captive plants. Similarly
requirement of coal, the dominant fuel in The approach of the Committee is
India’s energy mix will need to expand to over directed to realising a cost-effective energy
2 billion tonnes/annum based on domestic system. For this the following are needed:
quality of coal. Meeting the energy challenge is
of fundamental importance to India’s economic (i) Wherever possible, energy markets
growth imperatives and its efforts to raise its should be competitive. However,
level of human development. competition alone has been shown to
have its limitations in a number of
The broad vision behind the energy areas of the energy sector and
policy is to reliably meet the demand for independent regulation becomes even
energy services of all sectors at competitive more critical in such instances.
prices. Further, lifeline energy needs of all (ii) Pricing and resource allocations that
households must be met even if that entails are determined by market forces under
directed subsidies to vulnerable households. an effective and credible regulatory
The demand must be met through safe, clean oversight.
and convenient forms of energy at the least-
(iii) Transparent and targeted subsidies.
cost in a technically efficient, economically
viable and environmentally sustainable manner. (iv) Improved efficiencies across the energy
chain.
xiii

15. Integrated Energy Policy
(v) Policies that reflect externalities of commercial energy consumption and
energy consumption. about 78% of domestic coal production
(vi) Policies that rely on incentives/ is dedicated to power generation. This
disincentives to regulate market and dominance of coal in India’s energy
consumer behaviour. mix is not likely to change till 2031-32.
Since prices were de-controlled, the
(vii) Policies that are implementable.
sector has become profitable primarily
(viii) Management reforms that create as a result of price increases and the
accountability and incentives for rising share of open cast production.
efficiency. India would need to augment domestic
production and encourage thermal coal
A competitive market without any imports to meet its energy needs. The
entry barriers is theoretically the most efficient Committee has concluded that along
way to realise optimal fuel and technology the western and southern coasts of
choices for extraction, conversion, India imported coal is more cost
transportation, distribution and end use of competitive compared to domestic coal
energy. The tax structure and regulation across and further, imported coal is far more
energy sub-sectors should be consistent and cost competitive compared to imported
institutional arrangements should provide a gas at these coastal locations. Such a
level playing field to all players. Social objectives cost advantage of imported coal over
should ideally be met through direct transfers. imported gas is likely to continue for
Environmental externalities should be treated some time in the future. Thus:
uniformly and internalised. A consistent Domestic coal production should
application of “polluter pays” principle may be be stepped up by allotting coal
made to attain environmental objectives at blocks to central and state public
least-cost where prescribed environmental sector units and captive mines of
norms are either not applied consistently or notified end users. Coal blocks held
not being adhered to. An energy market with by Coal India Limited (CIL) that
the above features would minimise market cannot be brought into production
distortions and maximise efficiency gains. An by 2016-17, either directly or
integrated energy policy is needed to ensure through joint ventures, should be
that energy costs and availability do not made available to other eligible
constrain India’s economic growth and candidates for development and for
competitiveness. bringing into production by 2011-
12.
While the medium to long-term
At the same time the needed
challenges of ensuring competitive energy
infrastructure must be created to
markets are formidable, the immediate
facilitate thermal coal imports. This
problems of acute power shortages, adequate
will facilitate coastal power
supply of good coal, gas shortages, and concerns
generation capacity based on
of States rich in coal and hydro resources
imported thermal coal. Imports of
require immediate policy action. Our
thermal coal will also put
recommendations address immediate as well as
competitive pressure on the
the medium to long-term issues.
domestic coal industry to be more
efficient.
Key, high priority recommendations
are summarised below: A system of pricing coal on its
gross calorific value must replace
(i) Ensuring Adequate Supply of Coal the current system of pricing coal
with Consistent Quality: Coal on the basis of broad bands of its
accounts for over 50% of India’s useful heat value.
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16. Overview
Coal companies must be asked to allowing the state or its residents an
conform to international practice opportunity to invest in such projects
of preparing coal prior to its sale. on equal terms and appropriately
Washed coal must become the revising the royalty rate etc. are possible
norm and use of unwashed coal solutions to removing hurdles in
should become the exception. exploiting these domestic sources of
The current system of coal linkages primary energy. The NDC must take
should be replaced by long-term up this issue immediately in respect of
coal supply agreements with strict coal and hydro resources. Over the
penalties for not meeting contracted longer term, a National Policy on
supplies, quality and offtake Domestic Natural Resources should be
commitments. formulated and enacted through the
Parliament.
Coal must be brought under
independent regulation to improve (iii) Ensuring Availability of Gas for
exploitation and allocation of Power Generation: There is a total
available resources, and to regulate generation capacity of 12,604 MW based
e-auctions and coal prices and to on gas and liquid fuels. Bulk of it is
enable a competitive coal market base loaded under combined cycle
to take shape. operation. However, gas supplies have
been restricted and the overall
By the end of 2007-08 the quantity
utilisation remains at only 54.5%. A
of coal sold through e-auction must
significant part of this capacity was
reach 20% of domestic production.
realised under the earlier liquid fuel
Ideally, the Coal Mines policy while the rest has been built
(Nationalisation) Act, 1973, should based on unenforceable fuel supply
be amended to facilitate: (a) private agreements that would have been
participation in coal mining for unbankable in any other environment.
purposes other than those specified While requiring that no new gas
in the Act and (b) offering of future capacity be built without firm and
coal blocks to potential bankable gas supply agreements, effort
entrepreneurs. A consensus should should be made to allocate available
be built on the need to reform this domestic gas supplies to the fertiliser,
Act. petrochemicals, transport and power
(ii) Addressing Concern of Resource Rich sectors at prices that are regulated to
States: Both coal and hydro resources yield a fair return to domestic gas
are concentrated in a few states. producers. Such a practice should be
Increasingly states are becoming more enforced till a better demand-supply
assertive in demanding higher share of balance emerges and domestic gas
benefits that their local energy resources production achieves some of the
provide to the country as a whole. potential that is often cited. A more
Even though these are national competitive market can then function.
resources and should not be rendered (iv) Power Sector Reforms: These must
uncompetitive because of such focus on controlling the aggregate
demands, it is conceivable that technical and commercial losses of the
mechanisms can be put in place that state transmission and distribution
result in resource rich states reaping utilities. This is essential to creating a
more equitable benefits. Allowing financially robust power sector in each
resource rich States a share in the profits state. Only financially healthy state
of the enterprise tapping such local power distribution utilities can sustain
resources through what is called a the growing generation and
“carried equity interest” and further transmission of Central Power Sector
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17. Integrated Energy Policy
PSUs and State Power Sector Utilities network for a fee and thus can be
(SPSUs) and provide the needed realised even before AT&C losses
comfort on payment security to attract are reduced.
private investment in the power sector To achieve these objectives, the
at internationally competitive tariffs. Committee feels that it is essential
Our recommendations: to separate the cost of the pure
To control AT&C losses, the wires business (carriage) from the
Committee recommends that the energy business (content) in both
existing Accelerated Power transmission and distribution at
Development and Reform different voltages. The Electricity
Programme (APDRP) be Act 2003 recognises such separation
restructured to ensure energy flow for the transmission sub-segment.
auditing at the distribution Separation of content from carriage
transformer level through in the distribution sub-segment,
automated meter reading, a however, is considered only as a
Geographical Information System means to the provision of open
(GIS) mapping of the network and access. The wires business within
consumers and the separation of the distribution sub-segment is also
feeders for agricultural pumps. a natural monopoly and must be
Investment in developing a regulated. Further, introduction of
Management Information System Availability Based Tariffs (ABT) for
(MIS) that can support a full energy the intra-state sales and the
audit for each distribution upgrading of State Load Despatch
transformer is essential for Centres to the technological level
reduction in AT&C losses. This of Regional Load Despatch Centres
will also fix accountability and should be realised.
provide a baseline which is an Open access is resisted by
essential prerequisite to incumbents as they fear that all the
management reform and/or high value paying customers would
privatisation. The revised APDRP go away and they would be left
will provide incentives to State with small and subsidised
Electricity Boards (SEBs) that are agricultural and domestic
linked to performance outcomes customers. Since these customers
and will also include incentives to have strong political constituencies,
staff for reduction in AT&C losses. it may be difficult to raise their
The Committee also recommends tariffs when needed and the
that the liberal captive and group incumbent utilities would not
captive regime foreseen under the remain viable for long. These
Electricity Act 2003 be realised on concerns can be taken care of if the
the ground. India’s liberal captive cross-subsidy surcharge, wheeling
regime will not only derive charge and back-up charge are set
economic benefits from the properly. However, if these are set
availability of distributed generation too high, open access could be
but will also set competitive effectively thwarted. These charges
wheeling charges to supply power need to be periodically revised and
to group captive consumers. This independently regulated.
will pave the way for open access A robust and efficient inter-state
to distribution networks. It will and intra-state transmission system
also facilitate private generation that with adequate surplus capacity that
limits its interface with the host is capable of transferring power
utility to the use of the distribution from surplus regions to deficit
xvi

18. Overview
regions is a must for ensuring utilities should be strongly opposed
optimal operation of the system. in the interest of strengthening fair
Rehabilitation of existing thermal competition which alone will bring
stations could raise capacity at least- down prices in the long-run.
cost in the short-run. Similarly Similarly differential payment
rehabilitation of hydro stations security structures for Central
could yield much needed peak Power Sector PSUs and the private
capacity at negligible cost. Both sector should be abolished.
these steps must be taken up Consumer prices for electricity are
urgently. currently set by State Electricity
(v) Reduction in Cost of Power: In terms Regulatory Commissions on cost
of purchasing power parity, power plus basis. Regulators should set
tariffs in India for industry, commerce multi-year tariffs and differentiate
and large households are among the them by time of day.
highest in the world. It is important to Government should seed the capital
reduce the cost of power to increase markets to develop market-based
both the competitiveness of the Indian instruments that effectively extend
economy and also to increase consumer the tenure of debt available to
welfare. A number of measures are power projects to, perhaps, 20
suggested for this. years. This will reduce the capacity
The Government Policy should charge in the earlier years and
ensure that all generation and spread it more evenly over the life
transmission projects should be of the project.
competitively built on the basis of Unit sizes should be standardised
tariff-based bidding. Public Sector and global tenders invited for a
Undertakings shall also be number of units to get substantial
encouraged to participate in such bulk discount.
bids even though the tariff policy Distribution should be bid out on
allows them a 5 year window the basis of a distribution margin
wherein projects undertaken by the or paid for by a regulated
public sector need not be bid distribution charge determined on
competitively. a cost plus basis including a profit
In cases where tariff continues to mark up similar to that paid for
be determined on the basis of costs generation as suggested above.
and norms, regulators may either (vi) Rationalisation of Fuel Prices:
adopt a return on equity approach Relative prices play the most important
or return on capital approach, role in choice of technology, fuel and
whichever is considered better in energy form. They are thus the most
the interest of consumers. In vital aspect of an Integrated Energy
deciding the level of return Policy that promotes efficient fuel
provided, the regulator should inter- choices and facilitates appropriate
alia take into account the return substitution. In a competitive set up,
available on long-term government the marginal use value of different fuels,
bonds and reasonable risk which are substitutes, should be equal
premiums associated with equity at a given place and time so that the
investments. prices of different fuels at different
The current practice of state places do not differ by more than the
regulators not allowing state public cost of transporting the fuels. The
sector power utilities the same resulting inter-fuel choices will then be
returns as the central public sector economically efficient. Further:
xvii

19. Integrated Energy Policy
Prices of different fuels should not GOI continues to control the
be set independently of each other. pricing of automotive fuels, LPG,
As a general rule, all commercial large part of domestic natural gas
primary energy sources must be and PDS kerosene. There is no real
priced at trade parity prices at the competition in the sector other
point of sale, namely the Free-on- than in some peripheral products
Board (FOB) price for products for such as lubricants, despite the
which the country is a net exporter presence of a large domestic private
and Cost, Insurance and Freight player in refining and the likely
(CIF) price for which it is a net emergence of other private players
importer. The price of a product in this field. In fact, the prevailing
for which the country is self- pricing and taxation policies and
sufficient in a competitive market the market structure provide
with many suppliers and buyers significant protection to the private
would fluctuate between the two refineries. The result is that India’s
depending upon the ease of import/ refining capacity exceeds the
export and reliability of supplies. demand by 18% already. There is
In a situation with a monopoly an urgent need to have an
supplier with exportable surplus at independent regulator for both
import parity price, the price would upstream and downstream sectors.
be in between the two depending The notification of the Petroleum
on the price elasticity of domestic & Natural Gas Regulatory Board
demand. This principle is extremely Act, 2006, is thus welcome.
relevant for the petroleum sector In the petroleum sector, full price
wherein bulk of the crude oil is competition at the refinery gate
imported and India has become a and the retail level would lead to
net exporter of petroleum products. trade parity prices as described
To cushion domestic prices against above. Thus instead of
short-term volatility of prices on administering prices, full price
the international market (FOB or competition should be introduced.
CIF) domestic prices can be set on Coal prices should ideally be left
the basis of median prices over the to the market and trading of coal,
previous month or a three month nationally and internationally,
period. should be free. Only a competitive
The petroleum and natural gas free market can do an efficient job
sector is, once again, devoid of any of price determination. A
competition and independent competitive market requires that
oversight of either upstream or there are multiple producers and
downstream activities. On the that there are no entry barriers to
upstream side, Directorate General new producers or to importers.
Hydrocarbons (DGH), an arm of Pending the creation of such a
the Ministry, oversees allocation competitive market, independent
and exploitation of oil & gas regulation of coal prices becomes
reserves and enforces profit sharing essential.
with exploration & production Apart from CIL’s virtual monopoly
companies. The current in coal supply, coal prices cannot
arrangement needs to be be determined in a competitive
strengthened and made market open to all users as long as
independent. On the downstream the largest coal consuming sector,
side, despite the dismantling of the i.e. power, has coal cost as a pass
Administered Price Mechanism, the through. However, since other
xviii

20. Overview
users of coal are numerous and Calorific Value (GCV) and
consume substantial quantities of other quality parameters.
coal, a strategy for competitive price Natural Gas is not an easily tradable
discovery is possible. We commodity. Making gas tradable
recommend as follows: requires significant investments in
• High quality coking and non- pipelines or, alternatively, in
coking coal which are liquefaction, cryogenic shipping &
exportable may be sold at regasification. Comparing local gas
export parity prices as prices to spot LNG prices in the
determined by import price international market is grossly
at the nearest port minus misleading. Again, linking gas prices
15%. This practise is to crude price movements is also
currently being adopted for misleading. Long-term supply
supply of good quality coking contracts such as those in Europe
coal to the steel industry. are more representative of natural
• 20% of the production may gas prices. Natural gas price can be
be sold through e-auction. determined through competition
Quantities to be sold through among different producers where
e-auction from different multiple sources and a competitive
mines must be determined supply-demand balance exist. As
annually with a monthly long as there is shortage of gas in
mine-wise schedule to be the country and the two major
independently monitored and users of gas, namely fertiliser and
enforced by a coal regulator. power, work in a regulated cost
plus environment, a competitive
• Remaining coal should be
market determined price would be
sold under long-term Fuel
highly distorted. Such distortions
Supply and Transport
would get further amplified by the
Agreements (FSTAs).
prevailing regime of fertiliser
Regulated utilities should be
subsidies & power sector subsidies
allowed upto 100% of their
and cross subsidies. In such a
certified requirements
situation price of domestic gas and
through FSTAs. Other bulk
its allocation should be
consumers could be allowed
independently regulated on a cost
partial FSTAs based on coal
plus basis including reasonable
availability. Any shortfalls
returns.
should be met through e-
auction supplies or imports. Another option could be to price
gas on a net-back basis. If gas
• Pithead price of coal under
becomes a key component in
FSTAs should be revised
India’s energy mix, it is pointed
annually by a coal regulator
out that beyond the level of gas
on a basis that inter-alia takes
consumption in the fertiliser,
into account prices obtained
petrochemical, automotive and
through e-auction, FOB price
domestic sectors, gas must compete
of imported coal (both
with coal as the key alternative for
adjusted for quality) and
power generation. This implies that
production cost, inclusive of
the cost of generating peak or base
return based on efficiency
electricity using gas cannot exceed
standards.
the cost of peak or base electricity
• Coal prices may be made from coal, the cheapest alternative.
fully variable based on Gross A competitive coal market is thus
xix

21. Integrated Energy Policy
important for setting a proper price applied consistently or not being
of natural gas on a net-back basis. adhered to.
An alternative for a gas producers (vii) Energy Efficiency and Demand Side
is to export gas, in which case the Management: Lowering the energy
domestic gas price could be the net intensity of GDP growth through
realisation of the domestic natural higher energy efficiency is important
gas producer after investing and for meeting India’s energy challenge
getting a return on the investment and ensuring its energy security. The
needed to make the natural gas energy intensity of India’s growth has
tradable across borders in either a been falling and is about half of what
trans-border pipeline or through it used to be in the early seventies.
liquefaction and shipping facilities. Currently, we consume 0.16 kg of oil
For the foreseeable future, domestic equivalent (kgoe) per dollar of GDP
gas supplies to both the fertiliser expressed in purchasing power parity
and the power sector, that together terms. India’s energy intensity is lower
account for about 80% of the than the 0.23 kgoe of China, 0.22 kgoe
current gas usage, would need to of the US and a World average of 0.21
be allocated based on availability kgoe. India’s energy intensity is even
and charged at regulated price that marginally lower than that of Germany
reflects cost of production and a & OECD at 0.17 kgoe. However,
reasonable profit. Denmark at 0.13 kgoe, UK at 0.14
Central and State taxes on kgoe and Brazil & Japan at 0.15 kgoe
commercial energy supplies need are ahead of India. These figures and
to be rationalised to yield optimal many sectoral studies confirm that there
fuel choices and investment is room to improve and energy
decisions. Relative prices of fuels intensity can be brought down
can be distorted if taxes and significantly in India with current
subsidies are not equivalent across commercially available technologies.
fuels. This equivalence should be Lowering energy intensity through
in effective calorie terms. In other higher efficiency is equivalent to
words they should be such that creating a virtual source of untapped
producer and consumer choices as domestic energy. It may be noted that
to which fuel and which technology a unit of energy saved by a user is
to use are not affected by the taxes greater than a unit produced, as it saves
and subsidies. Socio-economic on production losses as well as
benefits such as employment transport, transmission and distribution
generation and positive impact on losses. Thus a “Negawatt”, produced
energy security may support by a reduction of energy need has
differential taxes on alternate fuels. more value than a Megawatt generated.
Environmental taxes and subsidies, The Committee feels that with an
however, are levied precisely to aggressive pursuit of energy efficiency
affect choices. Differential taxes can and conservation, it is possible to reduce
be justified here if they India’s energy intensity by up to 25%
appropriately reflect environmental from current levels.
externalities. A consistent Efficiency can be increased in energy
application of the “polluter pays” extraction, conversion, transportation,
principle or “consumer-pays” as well as in consumption. Further, the
principle should be made to attain same level of output or service can be
environmental objectives at least- obtained by alternate means requiring
cost where prescribed less energy. The major areas where
environmental norms are either not
xx

22. Overview
efficiency in energy use can make a • Establish benchmarks of
substantial impact are mining, energy consumption for all
electricity generation, electricity energy intensive sectors.
transmission, electricity distribution, • Disseminate information,
water pumping, industrial production support training and reward
processes, haulage, mass transport, best practices with national
building design, construction, heating, level honours in energy
ventilation, air conditioning, lighting efficiency and energy
and household appliances. As the Indian conservation.
economy opens up to international
Increase the gross efficiency in
competition, it will have to become
power generation from the current
more energy efficient. This is well
average of 30.5% to 34%. All new
demonstrated by India’s steel and
plants should adopt technologies
cement industry. However, the
that improve their gross efficiency
Committee recommends the following
from the prevailing 36% to at least
policies for raising energy efficiency.
38-40%.
Some of these policies can be
implemented through voluntary targets Require a least-cost planning
undertaken by industry associations as approach to provide a level playing
opposed to external dictates and field, to Negawatts and Megawatts
enforcement. so that regulators permit the same
return on the investment needed
Merge Petroleum Conservation
to save a watt as to supply an
Research Association (PCRA) with
additional watt.
Bureau of Energy Efficiency (BEE).
The merged entity should be an Promote minimum life cycle cost
autonomous statutory body under purchase instead of minimum initial
the Energy Conservation Act, be cost procurement by the
independent of all the energy government and the public sector.
ministries and be funded by the Promote urban mass transport,
Central Government. It must: energy efficient vehicles and freight
• Force the pace of movement by railways through
improvement in energy scheduled freight trains with
efficiency of energy using guaranteed, safe and timely
appliances, equipment and deliveries. Enforce minimum fuel
vehicles, and create “golden efficiency standards for all vehicles.
carrot” incentives in the form Institute specialisations in energy
of substantial rewards to the efficiency/conservation in technical
firm which first colleges and commence certification
commercialises equipment of such experts.
that exceeds a prescribed (viii) Augmenting of Resources for
energy efficiency target. Increased Energy Security: India’s
• Enforce truthful labelling on energy resources can be augmented by
equipment, and impose major exploration to find more coal, oil and
financial penalties if the gas, or by recovering a higher
equipment fails to deliver percentage of the in-place reserves.
stated efficiencies. In extreme Developing the thorium cycle for
cases, resort to black listing nuclear power and exploiting non-
of errant suppliers on conventional energy, especially solar
consumer information web power, offer possibilities for India’s
sites and in government energy independence beyond 2050.
procurement.
xxi

23. Integrated Energy Policy
At a growth rate of 5% in domestic in the primary energy mix comes out
production, currently extractable coal lower because of the way oil
resources will be exhausted in about 45 equivalence of hydro electricity is
years. However, only about 45% of calculated. A hydroelectric plant
the potential coal bearing area has converts a unit of primary energy in
currently been covered by regional the form of potential energy to almost
surveys. It is also felt that both regional one unit of electricity. The fossil fuel
as well as detailed drilling can be made route or the nuclear route needs almost
more comprehensive. Several possible 3 units of a primary energy source to
options are recommended: produce the same unit of electricity.
Covering all coal bearing areas with Thus while hydro’s share in primary
comprehensive regional and detailed energy mix is lower than that of
drilling could make a significant nuclear, the kWh produced from hydro
difference to the estimated life of is higher. Similarly, even if a 20-fold
India’s coal reserves. increase takes place in India’s nuclear
power capacity by 2031-32, the
India’s extractable coal resources
contribution of nuclear energy to
could be augmented through in-
India’s energy mix is also, at best,
situ coal gasification which makes
expected to be 4.0-6.4%. If the recent
use of those coal deposits which
agreement with the US translates into
are at greater depth and cannot be
a removal of sanctions by the nuclear
extracted economically by
suppliers’ group, possibilities of imports
conventional methods.
of nuclear fuels as well as power plants
Extracting coal bed methane before should be actively considered so that
and during mining could augment nuclear development takes place at a
the country’s energy resources. faster pace.
Enhanced oil recovery and Nuclear energy theoretically offers
incremental oil recovery India the most potent means to long-
technologies could improve the term energy security. India has to
proportion of in-place reserves that succeed in realising the three-stage
could be economically recovered development process described in the
from abandoned/depleted fields. main report and thereby tap its vast
Isolated deposits of all hydro thorium resource to become truly
carbons including coal may be energy independent beyond 2050.
tapped economically through sub Continuing support to the three-stage
leases to the private sector. development of India’s nuclear potential
(ix) Using Energy Abroad: In case India is essential.
can access cheap natural gas overseas Though its contribution to energy
under long-term (25-30 years) requirement is limited, hydro
arrangements, it should consider setting electricity’s flexibility and suitability
up captive fertiliser and/or gas to meet peak demand makes it valuable.
liquefaction facilities in such countries. Moreover, the development of
This would essentially augment energy hydropower, especially storage schemes,
availability for India. are critical for India as our per capita
(x) Role of Nuclear and Hydro Power: water storage is the lowest among other
Even if India succeeds in exploiting its comparable countries. Creating such
full hydro potential of 1,50,000 MW, storages is critical to India’s water
the contribution of hydro energy to security, flood control and drought
the energy mix will only be around control. The environmental concerns
1.9-2.2%. It is clarified that hydro share and the problem of resettlement and
rehabilitation of project affected people
xxii

24. Overview
(PAPs) can and must be satisfactorily Even when a capital subsidy is
handled. The PAPs should benefit from needed, it should be linked to
the project as much as other outcomes. For example, capital
beneficiaries. This can be accomplished, subsidy could also be given in the
for example, as follows: form of a Tradable Tax Rebate
Require compulsory land Certificate (TTRC) that could be
consolidation and impose a based on actual energy generated.
betterment levy in kind of (say) 5 The rebate claim would become
percent of land on the command payable depending upon the
area farmers. Use this land to amount of electricity/energy
resettle and compensate all PAPs. certified as having been actually
supplied.
(xi) Role of Renewables: From a longer-
term perspective and keeping in mind Power Regulators must create
the need to maximally develop domestic alternative incentive structures such
supply options as well as the need to as mandated feed-in-laws or
diversify energy sources, renewables differential tariffs to encourage
remain important to India’s energy utilities to integrate wind, small
sector. It would not be out of place to hydro, cogeneration etc. into their
mention that solar power could be an systems.
important player in India attaining An annual renewable energy report
energy independence in the long run. should be published providing
With a concerted push and a 40-fold details of actual performance of
increase in their contribution to different renewable technologies at
primary energy, renewables may the state and national levels. This
account for only 5 to 6% of India’s should include actual energy
energy mix by 2031-32. While this supplied from different renewable
figure appears small, the distributed options, availability, actual costs,
nature of renewables can provide many operating and maintenance
socio-economic benefits. problems etc. It should also report
Subsidies for renewables may be on social benefits, employment
justified on several grounds. A created, and women’s participation
renewable energy source may be and empowerment.
environmentally friendly. It may be Policies for promoting specific
locally available thereby making it alternatives are suggested in the
possible to supply energy earlier than main text. These include fuel wood
in a centralised system. Grid connected plantations, bio-gas plants, wood
renewables could improve the quality gasifier based power plants, solar
of supply and provide system benefits thermal, solar water heaters, solar
by generating energy at the ends of the photovoltaics, bio-diesel and
grid where otherwise supply would ethanol.
have been lax. Further, renewables may It is also recommended that the
provide employment and livelihood to Indian Renewable Energy
the poor. However, the subsidies should Development Agency Ltd (IREDA)
be given for a well-defined period or be converted into a national
upto a well-defined limit. refinancing institution on the lines
The Committee recommends that of NABARD/National Housing
for promoting renewables, Bank (NHB) for the renewable
incentives should be linked to energy sector. IREDA’s own equity
outcomes (energy generated) and base can be expanded by the
not just outlays (capacity installed). financial institutions of the country
xxiii

25. Integrated Energy Policy
instead of continuing the current increase in energy price. Even when
system of GOI support. the country has adequate energy
(xii) Ensuring Energy Security: India’s resources, technical failures may disrupt
energy security, at its broadest level, is the supply of energy to some people.
primarily about ensuring the Generators could fail, transmission lines
continuous availability of commercial may trip or oil pipelines may spring a
energy at competitive prices to support leak. One needs to provide security
its economic growth and meet the against such technical risks. Risks can
lifeline energy needs of its households be reduced by lowering the requirement
with safe, clean and convenient forms of energy by increasing efficiency in
of energy even if that entails directed production and use; by substituting
subsidies. Reducing energy imported fuels with domestic fuels; by
requirements and increasing efficiency diversifying fuel choices (gas, ethanol,
are two very important measures to orimulsion tar sands etc.) and supply
increase energy security. However, it sources; and by expanding the domestic
is also necessary to recognise that India’s energy resource base. Risks can also be
growing dependence on energy imports dealt with by increasing the ability to
exposes its energy needs to external withstand supply shocks through
price shocks. Hence, domestic energy creation of strategic reserves, the ability
resources must be expanded. For India to import energy and face market risk
it is not a question of choosing among by building hard currency reserves and
alternate domestic energy resources but by providing redundancy to address
exploiting all available domestic energy technical risks. We recommend as
resources to the maximum as long as follows:
they are competitive. Maintain a reserve, equivalent to
The Committee, however, felt that 90 days of oil imports for strategic-
obtaining equity oil, coal and gas abroad cum-buffer stock purposes and/or
do not represent adequate strategies for buy options for emergency supplies
enhancing energy security beyond from neighbouring large storages
diversifying supply sources. In contrast, such as those available in Singapore.
pipelines for importing gas do enhance The buffer stocks could be used to
security of supply if the supplying address short-term price volatility.
country makes a major investment in Operating the strategic/buffer
the pipeline. The most critical elements reserves in cooperation with other
of our energy security, however, remain countries who maintain such
the measures suggested herein to reserves could also increase their
increase efficiency, reduce requirements effectiveness.
and augment the domestic energy Since 80 percent of global
resource base. hydrocarbon reserves are controlled
Ensuring energy security requires by national oil companies
dealing with various risks. The threat controlled by respective
to energy security arises not just from governments, oil diplomacy
supply risks and the uncertainty of establishing bilateral economic,
availability of imported energy, but social and cultural ties can reduce
also from possible disruptions or supply risk.
shortfalls in domestic production. (xiii) Boosting Energy Related R&D: India
Supply risks from domestic sources, will find it increasingly harder to
such as from a strike in CIL or the import its required quantities of
Railways, also need to be addressed. commercial energy as her share of the
Even if there is no disruption of supply, incremental world supply of fossil fuels
there can be the market risk of a sudden could rise from a low of 13% in the
xxiv

26. Overview
most energy efficient scenario to a high as of today provides less than 3
of 21% in the coal dominant scenario percent of our total electrical energy
by 2031-32. This assumes that the supply, is miniscule compared to
world’s supply of fossil fuels grows by what industry and governments
only 2% per annum till 2031-32. spend in developed countries. In
Research and Development (R&D) in the latter, firms generally spend
the energy sector is critical to augment more than 2 percent of their
our energy resources, to meet our long- turnover for R&D. The total
term energy needs and to promote expenditure on R&D in 2004-05
energy efficiency. Such R&D would was Rs.610 crores* for Atomic
go a long way in raising our energy Energy and Rs.70 crores for
security and delivering energy Ministry of Power, Coal and Non-
independence over the long-term. R&D Conventional Energy Sources. Even
requires sustained and continued at one-tenth of the rate at which
support over a long period of time. firms in developed countries spend
Energy related R&D has not been on R&D, i.e. 0.2% of the turnover
allotted the resources that it needs. of all energy firms whose turnover
India needs to substantially augment exceeds Rs.100 crores a year, we
the resources made available for energy end up with Rs.1000 to Rs.1200
related R&D and to allocate these crores per year which will increase
strategically. To take an innovative idea overtime. We should be spending
to its commercial application involves much more than this on R&D.
many steps. Basic research leading to a Much of R&D can be considered a
fundamental breakthrough may open public good. It is thus better
up possibilities of applications. R&D is financed by the Government.
needed to develop conceptual Initially an allocation of Rs.1000
breakthroughs and prove their crores should be made for energy
feasibility. This needs to be followed R&D excluding atomic energy. To
up by a working, laboratory scale begin with, individuals, academic
model. Projects that shows economic research institutions, consulting
potential could then be scaled up as firms, private and public sector
pilot projects, while keeping in mind enterprise, should all compete for
cost reductions that could be achieved this fund. Firms may also be
through better engineering and mass encouraged to enhance their
production. Demonstrations of such expenditure on R&D through tax
projects, economic assessments and incentives.
further R&D to make the new • The resources devoted to
technology acceptable and attractive to research in different areas
customers could follow, before finally depend on the economic
leading to commercialisation and importance of that particular
diffusion. Some key policy initiatives area, the availability of
relevant to energy related R&D are technology and the likelihood
detailed below: of success. The latter changes
A National Energy Fund (NEF) with time as new
should be set-up to finance energy developments in science and
R&D. Our expenditure on R&D technology take place and
excepting for atomic energy, which uncertainties reduce. R&D
* Only about 15% of this amount or about Rs.90 crores, was for R&D on nuclear power. The rest of the
expenditure is for R&D on non-electricity applications of Radiation Technology and Fundamental
Research.
xxv

27. Integrated Energy Policy
priorities have to be based hybrid cars, super batteries,
on a dynamic strategic vision nuclear technologies related
which is frequently updated. to thorium and fusion, gas
Of critical importance is hydrates, and hydrogen
research and analysis for the production, storage, transport
energy policy to outline and distribution.
technology road maps. The • The NEF could provide
NEF should encourage and R&D funding in support of
fund such studies on a regular applications, innovative new
basis in a number of ideas, fundamental research
institutions and should also etc. to researchers in different
commission them from institutions, universities,
experienced and qualified organisations and even
individuals. individuals working
• The NEF should support independently.
energy policy modelling • A number of academic
activities in a number of institutions should be
institutions on a long-term developed as centres of
basis. The different modellers excellence in energy research.
should be brought together
(xiv) Household Energy Security -
periodically in a forum to
Electricity and Clean Fuels for All:
address specific policy issues.
One of the toughest challenges is to
• A number of technology provide electricity and clean fuels to
missions should be mounted all, particularly rural populations given
for developing near- their poor paying capacity, the limited
commercial technologies and availability of local resources for clean
rolling out new technologies cooking energy, and the size of the
in a time bound manner. country and its population. The
These include coal considerable effort spent on gathering
technologies (where India biomass and cow-dung and then
should focus) for efficiency preparing them for use is not priced
improvement; in-situ into the cost of such energy. These
gasification; IGCC and fuels create smoke and indoor air
carbon sequestration; solar pollution, are inconvenient to use, and
technologies covering solar- adversely affect the health of people,
thermal and photovoltaics; particularly women and children. Yet,
bio-fuels such as bio-diesel given the fact that women and girls
and ethanol; bio-mass carry most of the burden of the
plantation and wood drudgery and also bear the brunt of
gasification, and community indoor air pollution, the urgency to
based bio-gas plants. meet the challenge should be high.
• Coordinated research and Such steps are needed for our broader
development in all stages of need to achieve universal primary
the innovation chain to reach education for girls, promote gender
a targeted goal (such as that equality and empower women. Easy
in place in the departments availability of a certain amount of clean
of atomic energy and space energy that is required to maintain life
research) should be used to should be considered as a basic
develop more efficient necessity. Energy security at the
industrial plant, machinery & individual level implies ensuring supply
processes, efficient appliances, of such a lifeline energy need. India
xxvi

28. Overview
cannot be energy secure if her people the poverty line may not seek such
remain without secure supply of energy connectivity on their own.
for lifeline needs. Ensuring this would To make RGGVY sustainable, a
require targeted subsidies as many business plan with a viable revenue
households would be unable to pay for model needs to be elaborated. A clear
safe, clean and convenient commercial pricing and subsidy policy and the
energy to meet lifeline needs. This means of targeting the subsidy need to
requires: be announced soon. Local bodies,
Electrification of All Households: The panchayati raj institutions, NGOs or
government has announced its even local entrepreneurs can take the
commitment to ensure this by 2009- franchise to run the local network.
10. Women’s self-help groups can also be
Provision of Cooking Energy: We empowered to do so.
may set a goal to provide clean The consumer pays about 40% of the
cooking energy such as LPG, NG, import parity price for kerosene sold
biogas or kerosene to all within 10 through the Public Distribution System
years. It may be noted that the (PDS). The balance 60% of the price is
requirement of cooking energy does being funded largely by oil sector PSUs
not increase indefinitely with and to a small extent by the
income. Thus the total amount of Government through the budget.
LPG required to provide cooking However, subsidies do not reach the
energy to 1.5 billion persons is intended beneficiaries due to poor
around 55 Mtoe. targeting. The real issue is to improve
Other Sources: We may provide fuel targeting within the subsidy programme
wood plantations within one well and ensure that those falling
kilometre of all habitations. Those outside the subsidy net pay the full
who do not have access or cannot cost of supply. Additionally, a well-
afford even subsidised clean fuels, targeted subsidy regime may only
rely on gathering wood. marginally raise the current subsidy
Neighbourhood plantations can burden.
ease their burden and the time The best way for providing subsidy
taken to gather and transport wood. for electricity and cleaner fuels,
The Rajiv Gandhi Grameen kerosene or LPG, is to entitle
Vidyutikaran Yojana (RGGVY) was targeted households to 30 units of
launched to achieve electrification of electricity per month and LPG,
all households. By 2009-2010 the kerosene or bio-gas purchased from
RGGVY aims to electrify the 1,25,000 a local community size plant
villages, still without electricity; to equivalent to 6 kg of LPG per
connect all the estimated 2.34 crore un- month. A system of debit cards
electrified households below the may be introduced to deliver such
poverty line with a 90% subsidy on a subsidy. The entitlements can
connecting costs; and finally, to only be used for purchase of these
augment the backbone network in all products. With modern ICT, debit
the electrified 4.62 lakh villages. The card readers operated on battery
5.46 crore households above the and feeding data using mobile
poverty line which are currently technology, can work in rural areas
unelectrified, are expected to get of the country as well.
electricity connection on their own In addition to the above subsidy, other
without any subsidy. Going by current actions are also needed that create
experience, all these households above energy secure villages. We suggest:
xxvii