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Energy shortage blocking India's growth?
Wed, 4 Jul Pre-Open

Energy security is the backbone of economic development of any country. And India is no exception. But unfortunately, the energy sector in the country seems to have been hit on multiple fronts. Right from shortage of raw materials to pricing of the final fuels, the sector is a victim of poor and irrational policies. And the macro economic conditions are only making it worse. The country is falling short in all energy sources be it coal, natural gas or crude oil and becoming more and more dependent on imports. With a depreciation in rupee, the import bill is sky rocketing and has ballooned up the fiscal deficit. On the top of it, regulated pricing and subsidy regime have brought the sector to a standstill. The half baked measures taken by the Government like increasing prices of petrol while keeping diesel prices untouched are only distorting the fuel usage patterns and doing little to tackle the problem.

The scenario in the gas sector looks equally bleak with domestic gas supply shrinking and cost of imports going up. In the state of Gujarat alone that accounts for more than a third of India's total energy consumption, a third of the production has been shut down on account shortage of power and high cost of fuels. Coal supply that happens to be the backbone of the power sector is way below the required levels and is crippling the nation's economy.

However, we have a tendency not to act till problems turn into a full blown crisis. Unless these concerns are addressed, there is no point in framing unrealistic five year plans. The core of the problem lies in ridiculously low prices of the fuel products that kill incentive to invest in energy assets. The delays in getting approvals make the situation worse. It is time that the Government bites the bullet and undertakes critical energy reforms in phases. The other option will be to become increasingly dependent on imports making the country more vulnerable to external shocks. The solution lies in aligning domestic fuel prices with those of the market prices to ensure long term energy security.

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