INTEGRATED ENERGY POLICY

New Delhi, 17 November 2006

NEW DELHI, November 18 (INFA): The Expert Committee on Integrated Energy Policy (IEP) of the Planning Commission has in its final report highlighted the excessive dependence on fossil fuels, nuclear and large hydro, taking minimum cognizance of climate change.

The Committee has acknowledged the limitations of mere market mechanisms and points out the critical need for independent regulation in the energy sector. It also asks for management reforms that create accountability and incentives for efficiency.

The Committee continues to recommend an amendment of the Coal Mines (Nationalisation) Act, 1973, to facilitate private participation in coal mining.  This in spite of the Bill pending in Parliament since 2000 with no consensus on the issue.

On top of that, Coal India Limited also received criticism from the Parliamentary Committee for outsourcing its activities, while its own men and machinery were lying idle.

Though the report mentions that domestic coal is likely to exhaust in 45 years and that the quality of Indian coal is deteriorating, it does not talk about the peak in domestic coal production and its likely impact on new investments and on existing projects and its likely impact on new investments and on existing projects beyond 2031. 

The report also fails to study the impact that coal-to-liquids will have on coal for power production.

The policy talks about ensuring availability of gas for power generation.  It also talks about not building any new gas capacity without long-term gas supply agreements and property allocating and pricing domestic gas, so as to earn a fair return to the gas producers.  It recommends the above practice till better demand-supply of gas and higher domestic production is realized.

This discussion entirely misses out on the national and international limitations and shortages of gas production.  There is just not enough gas to meet the insatiable demand of the entire world.

The report further recommends the setting up of captive fertilizer and liquefaction facilities in other countries if India can access cheap gas under long-term agreements abroad. With Iran not ready to offer gas below $7-8/mmbtu, the suggestion seems unlikely to be ever realized. Even if realized, the coast of power production would be prohibitive.

Gas power project have been dropped from the 11^th five year plan, considering the non-availability of gas.

Considering that gas prices can only go up much faster than coal prices, the report’s, optimism on gas generation seems out of place. Taking into account the full development of the 150,000 MW large hydro potential, the 2005 draft policy says that contribution of hydro to the energy mix would be 5 per cent to 6 per cent. ---INFA