Economic Highlights

New Delhi, 3 August 2012

Energy Security Past Borders

SUPERIOR SAFETY= QUALITY POWER

By Shivaji Sarkar

The failure of three major electric grids --- Northern, Eastern and North-Eastern underscores the under-achievement in the electricity and energy sector. Significantly, the problem goes beyond the Indian borders as New Delhi is finding it difficult to build a chain of energy supply from abroad.

Shockingly, only 40 per cent people get electricity. On top of this, the frequency and quality of supplied power is a big headache. In fact, many areas of UP, MP and Rajasthan do not get power for less than 12 hours daily. While small businesses depend on generators, big industries have captive power plants which in turn add to production costs.

Notably, a major difficulty faced by power sector is lining up its fuel supply as coal reserves are not only dwindling but some 400 million tons are blocked in environmental disputes. Even if coal mining is allowed it could barely last over a decade. Thus, the country is in the throes of a critical situation.

Making matters worse, while power demands are increasing, our leaders have slipped in adding to the country power generating capacity. Already, over Rs 12 lakh crores of public money lent by banks to the power sector remains blocked. This is compounded by rising inflation which has resulted in power becoming more and more expensive.

Pertinently, faced with this power quandary, the government formed the ONGC Videsh to prospect oil in Russia and Vietnam’s South China Sea. Recall, last year ONGC applied to purchase 2000 acres of land at Dahanu to process offshore gas while ONGC Videsh, along-with Norway’s Statoil ASA and Spain’s Repsol SA engaged in deep-water drilling off Cuba’s Northern coast early this year. So far so good.

Sadly, the country is losing its battle in Vietnams’ South China Sea wherein China has declared the block India is exploring for oil as its own, thereby causing uncertainties. The matter does not end here.

The ASEAN Summit at Phnom Penh has been unable to reach any solution. Rather, for the first time in 45 years the Summit concluded without a joint declaration in the face of relentless Chinese blitzkrieg that issues like South China Sea were bilateral and multi-lateral organisations should not interfere.

Asia fears that China with its strong naval power is trying to capture the oil-rich South China Sea which is estimated to have about 213 billion barrels of oil. Also, there are apprehensions that Beijing would control the Indian Ocean naval routes.

Interestingly, Philippines and Vietnam are the most vociferous in protesting against the Chinese domination. Manila is protesting because Beijing is preventing Filipinos from fishing and has even asked the US to interfere.

Moreover, China has also entered Afghanistan to prevent India from gaining any advantage. Notwithstanding, India is the largest donor of aid to Afghanistan, ahead of both Japan and US. Alongside China, the US’s Exxon Mobil boasting a turnover larger than many big nations, are bidding for oil exploration in Afghanistan.

Recently, Kabul awarded the Chinese Metallurgical Group Corporation a $3 billion contract in its copper mines while Steel Authority of India (SAIL) has made a $10 billion bid for investment in iron ore in the war-torn country.

Besides, Pakistan Petroleum and ONGC are bidding for six exploratory blocks north of Mazar-e-Sharif which have about a billion barrels of oil. As many suspect that China has withdrawn in favour of Pakistan.

As t stands, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline driven by US interests to keep Russia, China and Iran out of the equation is a non-starter. Instead, the Chinese could get a deal for an onshore natural gas field in Turkmenistan and built a pipeline by 2009.

Additionally, the ONGC and China National Petroleum Corporation (CNPC) agreement for joint exploration in Sudan, Syria and Myanmar is being viewed with scepticism.  Raising a moot point: Is India succumbing to China?

Importantly, while China is entering Africa in a big way, India tried but has been unable to gain an edge. Today, nearly a million Chinese are spread across Africa thereby creating new interest and investment zones for the country.

Compounding matters, Beijing is increasing its navy presence in the neigbourhood. Already, it has a base at Coco Islands, 300 kms from Andaman and its navy aggressively sails in Indian Ocean and is in a position to intercept any ship. With the US remaining confined to the Persian Gulf, Afghanistan and the Arab World, China has almost a free run. True, the Indian Navy is not weak but it would not like to engage the Chinese navy.

Undeniably, India is faced with a Hobson’s choice. It needs to import 185 million tonnes of coal by 2017 for its power plants to meet the increasing gap between demand and supply and achieve its energy generation targets.

As pointed out by the Planning Commission, “the importation requirement could move even higher than the projection if domestic production did not increase by at least some 7.5 per cent a year. Challenging to say the least, when faced with the fact that international coal trade is estimated at one-billion tonnes a year against a total global consumption of six-billion tonnes annually year.

More. The country has also set an additional power generation target of 88,425 MW by 2017 against a capacity addition of 54,964 MW achieved between 2007-12. However, all these plans to meet energy needs through coal imports could derail due to infrastructure deficiencies. According to the Coal Ministry, the total handling capacity of the country’s 12 major ports was 575-million tonnes a year with coal handling capacity at about 54-million tonnes a year.

Clearly, this is ominous. Given that we have not taken into account the increase in belligerent capacity China would have during the corresponding period. Thus, India would have to create a safe sea route. With Europe in economic turmoil, US engaged in a conflict situation in Asia and China armed to the teeth in Tibet either which way India would bear the first brunt.

Consequently, New Delhi must ensure its energy security for growth. Towards that end, it might have to seek assistance from US, Australia and Japan to secure the Indian Ocean. Also, India needs Iran to make certain its presence in Central Asia and Afghanistan. Remember, quality power supply needs quality and stable power at sea. ---- INFA

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