India’s Energy Policy needs Balancing Economic Growth with Human Development

Rudra Narayan Mishra

India needs cheap but clean energy towards improving hygiene/sanitation, education, health care, and smoke free energy for cooking to reduce indoor air pollution which will improve living condition and well-being of all, especially women and children.

Use of clean energy is a pre-requisite for good health and well-being in the modern world. The greater per-capita energy consumption ensures a higher level of human and economic development. It is in this context United Nation’s sustainable development goals (SDG) 7 rightly advocates for affordable reliable, sustainable and modern energy for all by end of 2030. This goal is set on the premise that 3 billion of world population still depends upon wood, coal, char coal and animal waste for cooking and heating that results in indoor pollution and claims 4.3 million deaths worldwide for year 2012 with a disproportionate share (60% ) being women and girls.

State of Global Air Report 2019 by Health Effects Institute (HEI), USA makes an assessment of 846 million people in India being exposed to household air pollution, which is highest in the world.

India has the highest number of deaths attributable to household air pollution (482,000) in 2017 which is 30.3% of total 1.6 million deaths world-wide, where 60% of population is exposed to solid fuels for cooking.

China comes next with 271,000 deaths (16.9%) of all deaths attributed to in-house air pollution in same year, where 32% of the population are dependent on solid fuels. World Air Quality Report 2019 by IQAir, shows India has 21 out of 30 most polluted cities in the world.

The morbidities associated with indoor air pollution in terms of their share in global mortality for the year 2017 are chronic obstructive pulmonary disease (COPD) 41%, lower-respiratory infection (35%), type-2 diabetes (20%), lung cancer (19%), ischemic heart disease (16%) and stroke (16%). Recent clinical research suggest towards an association between spread of Covid-19 virus and associated morbidity/mortality in population living in urban centers with poor air-quality. While greater dependence on energy is crucial to drive economic growth, employment, improving agriculture, strengthening income and livelihood in non-agricultural activities, provision of health care, assuring food security and reducing drudgery for women in household works, it is equally important to ensure its universal access at an affordable cost as well as non-polluting character.

Energy Sector in India; Sources, Use and Efficiency

BP Statistical Review of World Energy, 2020 reports, use of fossil and solid fuels continues to dominate bulk of primary source of energy (commercially traded fuels) across the regions globally. In two most populous and energy hungry countries in the world, China and India, coal contributes to more than half of the total energy, one of the leading factor to air pollution. Share of renewable energy sources, despite phenomenal growth in recent years, only contribute to 3.6% of total commercial fuel in India which is one of the lowest in the world. India has the highest annual growth rate in energy consumption for years 2008-18 (at 5.2%), mostly attributable to a lower initial base, acceleration due to industrialisation, urbanisation and rising demand for household consumption.

By 2040, India’s share in global energy consumption is expected to reach 11% from the 5.8% at present. Per-capita energy Consumption (PEC) which represents ratio of the estimated total energy consumption during a given year to the mid-year population of that year shows, India has the lowest PEC in the world after African continent in 2019. China has 3.8 times higher PEC than that of India during the same period.

India brings out its own Energy Statistics since 1993 by the National Statistics Office (NSO) of Ministry of Statistics and Programme Implementation. According to its latest report, Energy Statistics 2020, the ‘industrial sector’ consumes a major share of the total energy in the country, followed by ‘other use’,  ‘transport’ and ‘non-energy’ use (56.4%, 31.1%, 10% and 3.3% respectively out of total energy consumption of 564548 in Kilo-tons of oil equivalent (KToe), for the year 2018-19. Agriculture uses another 3.3% of total energy consumption. The units for energy consumption in the report is different than that of global unit of exajoule presented in the table above as the unit of measurement for global energy use was changed to exajoules from 2020.

The PCE consumption according to NSO (measured in megajoules) was 24,453 in 2018-19, the latest year for which information is available. This is an increase of 24.3% over the period 2011-12. On the other hand energy intensity (EI) defined as the amount of energy consumed for generating one unit of Gross Domestic Product (GDP at constant prices), has come down by 18.3% during the same period (from 0.2747 megajoules to 0.2321 mega joules). This is a positive sign and mainly attributed to increasing share of services in growth of GDP over energy-intensive sectors like agriculture and manufacturing. The ministry’s report also acknowledges the lack of credible data on non-conventional energy sources.

Energy Sector Reforms: A Balancing Act between Welfare and Economic Prudence

World Energy Issues Monitor 2020 by World Energy Council, highlights India’s critical uncertainties in energy sector due to climate uncertainty and geo-political dynamics in Middle East countries from where India sources its bulk of fossil fuel. According to India 2020 Energy Policy Review of International Energy Agency (IEA), India’s net import of energy has gone up by 11 times, between 1990-2018, from 31.6 to 347.6 Million tonnes oil equivalent (MToe). India imports 83% of its oil and 43% of its LNG requirements in 2018 as per the above report.

India has long way to go before attaining self-sufficiency in production of energy, partly due to lack of reserves and partly its limited infrastructure to harness alternative energy resources.

The action priorities for India in energy sector as per the above report are better energy efficiency and focus on renewable energy. IEA also observed, India’s CO2 emission for per-capita GDP (at PPP) has declined to 0.9 kg in 2018 compared to 1.1 kg in 1990, a decline of 18.2% in a period of three decades (1990-2018). In case of China this decline is 36.8%, from 1.9 kg to 0.7 kg during the same period. This highlights need for greater emphasis on sustainable and less polluting energy sources for India in coming years.

Often subsidies on fuel is a matter of intense debate in the country. The International Institute for Sustainable Development (IISD)’ in its report ‘Mapping India’s Energy Subsidies 2020; Fossil fuels, renewables, and electric vehicles’, observes India spends 11.29 billion USD as subsidy on fossil fuels, which is seven times higher than subsidies on alternative renewable energy sources (1.58 billion USD) in financial year 2019. India registered decline in total energy subsidies from 29.7 billion USD to 19.4 billion USD owing to falling world prices for fossil fuel and reforms in sectors like petrol, diesel, kerosene and LPG between 2014-2017 which has been reversed in subsequent years with a rise to 23.7 billion USD in 2019, owing to rising prices for crude and increased demand for subsidised LPG. The next major subsidy in energy sector is towards transmission and distribution of electricity which has almost doubled from 5.6 billion USD in 2014 to 10.8 billion USD in 2019. The subsidy on coal has more or less remained same during 2014-19 at little more than 2 billion USD. However the biggest looser is non-renewable energy sector with an allocation of 1.35 billion USD in 2019. This was 35% less than the allocation for 2014.

The Tata Energy and Resources Institute (TERI), New Delhi in its report titled ‘Analysing Rural Energy Transitions and Inequities (2014), observed, 57% of the rural population and 28% of the urban population in India are energy-poor based on end-use criteria of 3.4 kilogram of oil equivalent (KGoe). This report identifies Affordability, Availability and Accessibility, Perception and social factors along with other non-income determinants, shape the pattern of energy use at household level in India.

The Household Energy Poverty Index (HEPI) for India from 15 energy related indicators shows 65% Indians are energy poor.

This aggregate level of energy poverty has its own regional variation, with states in eastern and north-eastern region being more energy poor compared to other regions.

Economic Survey 2018-19, asserts that improving the HDI position of India from the current index value of 0.64 to 0.8, will require India to increase its per capita energy consumption by four times. A study of 15 developing countries by Nadia S. Ouedraogo, between 1998-2008, found a negative co-integration between per-capita energy consumption and HDI but positive co-integration between per capita electricity consumption and HDI. In case of the former the negative relation arises as the burning of fossil fuel itself has an adverse impact on HDI score in terms of air pollution. Due to a change in definition in 2012 by GoI, of considering a village 100% electrified if 10% of its habitants have access to electricity, most of the states in India now claim that there is no village without electricity in their states.

However large scale household surveys like the National Family Health Surveys (NFHS), NSSO household consumer expenditure surveys, Indian Human Development Surveys (IHDS) and Consumer Pyramid Surveys of Centre for Monitoring Indian Economy (CMIE), do indicate the genuine levels of electricity and fuel consumption in Indian households by rural and urban residence and across states. But these survey results appear with a greater time lag, like for NSSO the last large scale consumption expenditure survey available is for 2011-12, for NFHS it is 2015-16 and for IHDS surveys its 2011-12. So we lack real time data on household expenditure on fuel, electricity and other sources of energy in Indian households. This limitation in household level data is a major drawback in shaping comprehensive and inclusive energy policy in India.

The household consumption expenditure data for 2011-12 shows that, average per capita expenditure on electricity and fuel among poor households was around 12.0% of their total household expenditure in both rural and urban areas. The corresponding figure for all non-poor stands at 9.0% in rural areas and 7.0% in urban areas for the above reference year (computed by author from above unit record data). This indicates poor households in India, despite the subsidised electricity programme spends higher share of their expenditure on electricity and fuel compared to non-poor households. The use of energy saving appliances for cooking/heating/lighting purposes, cost higher than appliances consuming higher amount of electricity and fuel, which also perhaps contribute for higher expenditure by poor households on electricity and fuel. 

Bloomberg Law’s environment and energy report 2019, states, 40 million households in India are still without electricity and 100 million households still depend on biomass for cooking and heating.

With introduction of schemes like Saubhagya and Ujjwala where rural households were provided with electricity connection and LPG connection, India proposes to address energy poverty for vast majority of Indians. However the quality of these services and its sustained affordability will determine the optimum use of these facilities by the beneficiaries. The ongoing pandemic has impacted livelihood of millions in India, both in rural and urban areas, and its impact on power/energy/fuel consumption besides food and health care are yet to be scientifically mapped at household level but at macro level the declines are apparent with a double digit count for consumption of all energy sources.

Since the removal of price regulation and subsidy for diesel, an important input for farming in India the price of the diesel has shoot up by USD 30 cents or more and is almost comparable to price of petrol now. The Kisan Urja Suraksha Evam Utthan Mahaabhiyan (KUSUM) scheme 2019 only takes care of irrigation through solar pumps but farmers use diesel for draught and transport as well, where higher diesel prices may affect the revenue from the agriculture. Even in case of irrigation India needs to replace 30 million diesel/electric pump sets with solar enable pumps which require huge financial resources and time bound action plan. India could save 3 billion USD in energy subsidy if its replace all diesel/electric pump sets used in irrigation at present.

Path Ahead

India still spends relatively a smaller amount on promotion of renewable energy sources compared to other energy heads. As observed by Indiaspends, the country needs an investment of 250 billion dollars in renewable energy over the next decade starting 2018-19 to comply with its commitment to United Nations Framework Convention on Climate Change’s (UNFCCC) to generate 40% of its electricity requirement from non-fossil fuel-based energy resources by 2030. This translates into 25 billion USD, the budget allocation in the first year was 93% less at 1.74 billion USD.

We need an urgent and focused emphasis on renewable energy sources given our commitment to economic growth and fostering human development that has its own implication for rising energy demand, which otherwise will compel use of more fossil fuels that will affect our air quality and its consequent ill health. It is not merely the quantum demand for energy but also its affordability for all poses a challenge for us.

India needs cheap but clean energy towards improving hygiene/sanitation, education, health care, reducing drudgery (through use of automated/electrical home appliances) and smoke free energy for cooking to reduce indoor air pollution which will improve living condition and well-being of all, especially women and children. Sustained dependence on coal/oil based energy sources may do more harm than good. India needs to keep searching for technology, innovations, product solutions, management and business models that create conducive atmosphere for growth of readily available, reliable, affordable energy from renewable sources. Renewable sources of energy at low cost remains the key to the India’s quest for sustainable growth in future.

Disclaimer: Author’s own views.

Author’s note: The Author is grateful to Professor Udaya Shankar Mishra, who teaches at the Centre for Development Studies, Trivandrum, for his suggestions.

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Rudra Narayan Mishra is Assistant Professor at the Gujarat Institute of Development Research (GIDR), Ahmedabad and has obtained PhD in Economics from Jawaharlal Nehru University (JNU), New Delhi via the Centre for Development Studies, Trivandrum. His research interests arerelated to health and nutrition, human development, livelihood, management of natural resources and public policy.