ECONOMIC HIGHLIGHTS

New Delhi, 5 December 2007

Reduce Reliance On Fossil Fuels

NEW ENERGY POLICY NEEDED

By Dr. Vinod Mehta

(Former Research Director, ICSSR)

A year-and-half ago, the Finance Minister had said that the huge surge in the global price of crude was a matter of concern.  Since then the price of crude has been rising steadily and is currently hovering around US $100 a barrel. And, even as the rupee is getting stronger vis-à-vis the US dollar, meaning that we pay less for the crude in terms of dollars, the import of oil continues to cause concern.  

It is common knowledge that India does not produce enough of crude to meet its requirements and that 70 per cent our oil requirements are met by imports.  A large part of our export earnings go to meet our import requirements of crude and natural gas.  This means that we have less foreign exchange for import of other products and services. In addition, it needs to be constantly monitored. Thus, our major effort should be to reduce this dependence on imported crude for strategic reasons.

This can be tackled at various fronts. At the first level, we need to increase the domestic output of crude oil by improving the recoveries from existing oil fields and by exploring new oil wells. At the second level, we need to reduce the consumption of fossil fuel in a planned manner.

For the past few years, the Ministry of Petroleum has been actively pursuing a strategy not only to increase the recovery of oil from the Bombay High wells but allowing the Oil and Natural Gas Corp (ONGC)  to enter into deals with foreign companies for oil exploration outside India on production-sharing basis. 

The first such venture was 20 per cent participation in a Russian oil firm Roseneft.  The ONGC has invested about Rs 8,000 crore here along with oil companies from the US and Japan and is expected to get about 2 to 4 million metric tonnes of oil and 5 to 8 millions metric tonnes of gas. 

In fact, the ONGC is giving out places for oil exploration. The private sector company, Reliance, too is exploring oil in the country and has met with some success. This strategy is likely to go a long way in enhancing the oil security for the country.

At the same time, the Government has not yet completely written off the Iran-Pakistan-India gas pipeline deal and other gas sources in Central Asia and Myanmar (Burma) too are being tapped.  But all this will take time.

The previous NDA Government had taken up the development of ethanol, which could be blended with petrol and diesel to reduce the consumption of imported oil. Brazil is way ahead in the research in ethanol. Three projects on Gasohol (blend of petrol and ethanol) have been launched in Maharashtra and in Uttar Pradesh. 

Ethanol which is extracted from sugarcane bagasse can be successfully blended with petrol. It is estimated that a 5 per cent addition of ethanol would help save petrol to the tune of 3.3 lakh tonnes per annum.  If we could succeed in blending 10 per cent ethanol the savings in the use of petrol would be much more. 

Interestingly, the researches that have been done in Brazil show that the blend of petrol and ethanol was good for the environment.  However, it will take a few years before a reliable blend of petrol and ethanol and diesel and ethanol is devised for commercial use.

Moreover, the Central Government is also conscious of the bad effect of fossil fuel on our environment.  To fight the menace of pollution in metropolitan cities, unleaded petrol has been introduced. Apart from this, extra low-grade sulphur and low sulphur diesel have also been introduced in major cities. 

At the same time, effective steps are being taken to check the adulteration of diesel which is playing havoc not only on the environment but also reducing the effective life of diesel engines.  To top it all, the vehicle manufacturers have been asked to switch over to the production of vehicles which conform to Euro III emission norms. 

There is no gainsaying, that all this is going to have a salutary effect on our environment.  Most of the pollution-related diseases like asthma etc., which have increased in the past few years, will go down substantially.

It must be understood that India does not have large reserves of crude oil and that it would always be dependant upon imports to meet its requirements of petroleum products.  It must also be understood that whatever refinements are introduced in fossil fuels like petrol and diesel, they would continue to spread pollution and harm the environment. 

Therefore, one has to think of an energy policy that takes into account these two facts.  It then leads us to think that India should reduce its dependence on fossil fuel and switch over to the use of other sources of energy.  

Why we have not been able to think in these terms is because of the fact that the country has no integrated approach to energy requirements. We have separate Ministries and departments which deal with different kinds of sources of energy like coal, renewable sources of energy, nuclear energy and so on.

The users of these various sources of energy are also treated as separate identities with very little coordination among them. It is for this reason that instead of a coordinated energy policy we have separate policies for each of these sub-sectors which are contradictory at any point of time.

It is here that the Government needs to bring a strong coordination among the Ministries which are dealing with various kinds of fuels and the Ministries which oversee sectors which use those fuels.

If we look at it in an impartial manner, we should, in the next 10 to 20 years reduce our consumption of petroleum products and gas and switch over to use of other sources of energy. 

For instance India has large deposits of coal and water resources which are used for generation of electricity.  If we switch our public transport system from the use of fossil fuel to the use of electricity then in one stroke we would not only be reducing our consumption of petroleum products but also contributing to a cleaner environment and saving our import bill. The Metro rail in Delhi is the finest example of a clean fuel transport system leading to saving in the use of fossil fuel.

But, the Metro rail system may not be cost-effective in middle-level and small towns and cities. The answer could lie in a mono-rail, tram and trolley buses. Many developed countries use tram cars and trolley buses, which run on electric power for their urban transport system. 

This is the mode of transport which should be encouraged in small and middle-sized towns and to the extent possible in the large metropolitan areas, especially in the new districts which come up in these mega cities. 

However, to take a decision to run trams and trolley buses would require coordination among many Ministries. Clearly, it is high time the Government moves fast to develop a coordinated strategy to reduce the consumption of fossil fuels. ---- INFA

(Copyright India News & Feature Alliance)