No. 54, June 2013

No. 54
(June 2013):

The External Crisis

Balance of Payments: The Political-Economic Background

Questioning the Official Power Policy

Whose Agenda? US Strategic Interests, India, and Sri Lankan War Crimes

Questioning the Official Power Policy

A Review of Integrated Power Policy by Shankar Sharma

-- Suvrat Raju[1]

Electricity occupies a peculiar place in the country’s political life. On the one hand, the capitalist class demands cheap and plentiful power. In its very second sentence, the World Bank’s economic outlook for South Asia in 2013 bemoans how “electricity shortages … contributed to subdued economic activity in the region” [2] — a sentiment that is commonly echoed in the business press.   On the other hand (and unrelated to the issue of capitalist profits) it is also true that electricity can effectively improve daily life. The stark disparities in its accessibility only serve to highlight this fact.

As a consequence of this dichotomy, the slogan “electricity for development” plays an important role as a propaganda-cover, in allowing the ruling elite to transfer valuable resources to capitalists, or pursue other agendas. For example, in a speech last year, while indicating a surrender to the demands made by Reliance on the pricing of gas from the Krishna-Godavari basin, the Prime Minister explained that “expanding the use of natural gas in India is one of the most important and immediate ways of responding to the challenges of energy security and the management of climate change.”  He then quickly clarified that his Government’s method of choice was to “[initiate] gas pricing policy reforms to incentivize production of natural gas” since it was “conscious that remunerative energy prices are needed to ensure expanded energy supply.” [3]

In the coal-block allocation scandal, where the Comptroller and Auditor General estimated a loss to the exchequer of Rs. 1.86 lakh crores (Rs. 1.86 trillion), Coal India Limited put out a clarification explaining that “To put the country on a path of higher growth, capacities in power, steel, cement sectors were required to be added expeditiously. This was one of the main reasons for continuation of allocation of the captive coal blocks.”  The Indo-US nuclear deal provides another excellent example of the propaganda-use of the promise of electricity. While the objective of the deal was to re-orient Indian foreign policy, and provide a veneer for the import of expensive technology, the deal was justified by the need for growth at the “grass root level”[4] while its critics were branded “enemies of progress and development.”[5]
The Planning Commission’s Integrated Energy Policy document of 2006 [6] is an attempt to further this agenda. It starts off with the banal observation that “India needs to sustain an 8% to 10% economic growth rate, over the next 25 years, if it is to eradicate poverty and meet its human development goals. To deliver a sustained growth rate of 8% through 2031-32 and to meet the lifeline energy needs of all citizens, India needs, at the very least, to increase … electricity generation capacity/supply by 5 to 6 times of their 2003-04 levels.” After articulating these disingenuous objectives, the document rapidly goes on to claim that “A competitive market without any entry barriers is theoretically the most efficient way to realise optimal fuel and technology choices for … energy. ” (emphasis added)

By “entry barriers” the Commission is referring to government regulations but excluding the far more important question of concentration of capital. Moreover, it is unclear which “theory” it was appealing to: given the tremendously skewed income distribution in the country, even in the framework of committee’s idealization, it is clear that theoretically large numbers of people would simply be dealt out of the power-market.

However, apart from these troubling motivations, there are purely technical issues with the Planning Commission document. Shankar Sharma’s book Integrated Power Policy[7] provides a critique of the document from this perspective, and then suggests how it could be reformed.
The book starts by questioning the large demand projections assumed by the Planning Commission. Sharma’s point of view is summarized well in the following paragraph:

The major concern with such a high electricity demand projection is that all the planning agencies of the Union government and state governments are likely to proceed with gusto to achieve that generation capacity target without the required due diligence process, as has already been noticed in the spurt in applications for additional power projects in recent years. The big question is: whether our society can afford such a huge additional demand on the grid, because all of such additional demand may not contribute to the economic development or may not lead to true welfare of our masses. But the social, economic and environmental impacts of such a huge addition to the installed capacity will be enormous, and may even defeat the very purpose of high GDP growth, which is the all round welfare of all sections of our society. In view of the fact that the fossil fuels, such as coal, natural gas and diesel, are fast running out and there is an inherent limit to the amount of energy we can draw from the nature, the inevitability of limiting the true electricity demand becomes clear. Hence there is a need to keep the overall power demand within manageable limits.

The Planning Commission estimates that India will require between 778 – 960 Gigawatts (GW) of installed capacity by 2030. Sharma challenges this estimate since it assumes a growth rate in installed capacity of 8-9 per cent over the next twenty years. He correctly points that this figure is arbitrary. However, in producing an alternative estimate, Sharma seems to make a similar error. He argues that the actual growth rate in the generation of electricity from 1999-2004 was only 4.3 per cent. He then extrapolates this into the future, on the basis that these are the “latest 5 year growth rates”. Using an assumed growth rate of between 4 to 5  per cent, he estimates that power production capacity needs to go up from about 180 GW[8] currently to between 388 to 497 GW in 2030.

The difficulty with this is that in the next five years from 2004 – 2009, the growth rate of electricity demand was 7 per cent (see Table 3.2 of the National Electricity Plan [9], and one could use this to arrive at a yet another figure. This shows that the very basis of these long term projections—assuming a certain rate of growth of the GDP, and then using an “energy elasticity” to estimate a long-term rate of growth for energy production—is flawed.

A more productive estimate could be made by analyzing the production structure of the country. One could then ask meaningful questions about energy requirements if this structure were re-oriented to meet the genuine needs of people. In fact, a study of this sort (although not from a socialist perspective) was put forward in 1987 by a group of authors including Amulya Reddy.[10]

Sharma does start to pursue this line of thought. He argues, based on his personal experience and other estimates, that residential energy consumption may never need to exceed 240 Kwh per year per capita in rural areas and 600 Kwh in urban areas. (In comparison, the most recent consumption figures are 300 KwH per year per capita in urban areas, and 95 KwH per year per capita in rural areas.[11]  Sharma’s belief that this disparity will persist into the future makes assumptions about the needs of people living in different locales that are open to question.  

His estimates of electricity use for “non domestic purposes” seem a little arbitrary.  He states that “we should bear in mind that even with a low per capita national figure of 780 kWH (as compared to the world average), India is already recognized as a major economy indicating that its impact through industrial and commercial development is not insignificant.”

Following this line of argument, he concludes that electricity consumption of 1000 KwH per capita per year will suffice to meet all domestic and non-domestic needs. This is a separate estimate, different from, and not necessarily consistent with, the estimate above of a necessary installed capacity of 388 GW.

Sharma espouses a Gandhian model of development: “Sustainable living should not remain as a simple slogan to quote the famous words of Mahatma Gandhi. It should be the main deciding factor influencing India’s developmental and energy policies.”  It would have been very useful if Sharma had followed this thought, and furthered the analysis by Amulya Reddy and others, to make an ab initio estimate of the electricity consumption in a society organized along these lines.

Sharma then goes on to consider various sources of electricity, including coal, hydro power, and nuclear power. The book does a good job of pointing out various technical and environmental problems associated with all of these. On coal, he says that

There should be no doubts that coal supply situation in the country has become a major problem. Despite concerted efforts by the union govt. to dilute the existing environmental regulations to allow opening up of more coal mining, the coal supply situation is highly likely to go from bad to worse.

He also rejects “clean coal technologies” as economically untenable:

It seems reasonable to assume that if CCS [Carbon Capture and Storage] technology can be deployed cost effectively and be able to contain the GHG [Greenhouse Gas] emissions within the limits some of the coal power plants may be seen as acceptable. But on the basis of the information available it appears that they will never be viable because of the energy penalty [i.e., the reduction in energy output of a plant which adopts CCS]. Any finance for a coal power project based on CCS technology seems to be very risky, expensive, and unproven technology at commercial scale.

The chapter on nuclear power does contain several pertinent facts, but has too many lengthy quotes from other sources. As Sharma points out, India’s Department of Atomic Energy (DAE) has a miserable record of meeting its power projections. Its first head, Homi Bhabha, predicted in 1962 that installed capacity would be around 20 GW by 1987; the actual figure in that year was 1.06 GW, almost twenty times smaller. Sharma also notes that nuclear energy is expensive: even indigenous nuclear plants are not cost-competitive with other major sources of energy in India like coal.

What Sharma indicates but does not discuss explicitly is that the new imported reactors from France and the United States are in a category of their own in terms of lack of competitiveness. As we have shown elsewhere, even before distribution costs are taken into account, the cost of electricity from the planned European Pressurised Reactors at Jaitapur could be as high as Rs. 14 per unit.[12]

Sharma is right to raise concerns on the safety of Indian nuclear plants.  However, he seems to have mistakenly accepted a rather questionable claim (originally made by Mangano and Sherman[13]) that “Fukushima’s radioactive cloud may already have killed some 14,000 Americans” by the beginning of 2012. The impact of radioactive releases from Fukushima on other countries has not yet been completely quantified but estimates, using what is called the “Linear Impact No Threshold” hypothesis, lead to considerably lower figures.[14] Moreover, this excess mortality is relevant over the lifespan of the affected individuals and, especially in distant locations, is not noticeable in a few weeks or months.

Sharma is much more positive about renewable sources of energy, and he spends the bulk of a chapter discussing solar power. As he says “the true potential of various modes of solar power is so great that even if we can harness about 0.1% of it, all the energy needs of the country can be met.” Sharma is confident that solar energy will soon be economically competitive with other major sources of energy. (He even mentions his own experience of purchasing a solar photo-voltaic system for Rs. 80,000 that after three years is available for Rs. 35,000.)

Sharma concludes that “with adequate policy intervention the costs of renewables will go down further” and so “India … should have no hesitation … to get most of its electricity from renewable energy sources by 2040-50.”

This brings us to the primary lacuna in the book: Sharma fails to discuss the politics of Indian energy policy. To the contrary, the book starts with an “executive summary for the policy makers”. This presupposes that these “policy makers” are simply misguided and putting facts before them will lead to a change in policy.

Nothing could be further from the truth.  If anything, Indian energy policy is reasonably well planned; the reason it appears muddled is that its stated objectives have little to do with its true objectives.  Intellectual work, and technical analyses, can play a powerful role in exposing this false discourse.  The book, which adopts the tone of a good faith discussion with “policy makers”, does not really attempt to do so. As Sharma puts it, “The book is hoped to be of help to the students of & professionals in power sector, including the policy makers, and to all those who are interested in making our power sector highly efficient and accountable to the Civil Society.” Nevertheless, the facts and figures that Sharma has painstakingly marshaled will very useful for activists who are engaged in struggles on this front. Hopefully, through their agency, this book will strengthen the struggle for a “credible, people friendly and environmentally friendly power policy for the country.”

NEXT: Whose Agenda? US Strategic Interests, India, and Sri Lankan War Crimes

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