Ensure energy security instead of self-sufficiency

Sushma Ramachandran

Senior Financial Journalist

ENERGY independence is an ambitious goal. Few countries in the world have achieved it, barring those who have unlimited supplies of fossil fuels beneath their land. In any case, this form of self-sufficiency or atmanirbharta is not ideal for the globalised world of the 21st century. The exchange of commodities and manufactured goods through global logistic chains has become a norm. Every country need not produce each raw material or product within its borders. Self-sufficiency in the Nehruvian sense is an obsolete concept. At the same time, energy independence can also be viewed as a situation in which adequate energy resources can be accessed easily at reasonable rates. It is also imperative for strategic reasons to ensure the country has enough fuel reserves to meet any emergency that could disrupt supplies.

The call for energy independence made by Prime Minister Narendra Modi in his Independence Day speech is probably a reflection of the insecurity on this score. For this country, energy dependence has always been a harsh reality as domestic hydrocarbon resources have never been sufficient to meet the demand. This is barring a short period in the 1980s after the Bombay High oilfields were discovered in the mid-seventies. At that time, domestic oil availability rose to about 70 per cent of the demand. Declining output from these fields later meant the country reverted again to meeting most of its needs through imports. Lately the cost of these imports has been rising as world oil markets are responding to increasing demand and reduced inventory levels as the Covid pandemic is receding in many regions.

Even so, India is comfortably placed in terms of foreign exchange reserves which have recently touched record levels crossing $600 billion. There is no immediate crisis. In fact, some economists have in the past even urged this country to drop ideas of exploring for oil in prospective geological areas. Instead, they suggested it should utilise the clout as a major oil importer to influence the international market. Currently, India is the world’s third largest oil importer after China and the US. But such plans are often not workable in the real world. This is evident as efforts made so far by this country to get price concessions have not met with much success, especially as far as the key oil cartel, OPEC is concerned. It is another matter that India has managed to tie up long-term purchase contracts with several major oil producers in West Asia at preferential terms, ensuring sustainability and continuity of supplies.

The country’s energy mix currently revolves around carbon-based fuels, whether it is coal, crude oil or liquefied natural gas. Coal is the most easily available yet highly polluting for the environment and thus needs to be gradually phased out. But given its abundant presence, moving away from it will probably be the hardest job in years to come. As for crude oil and natural gas, the heavy reliance on imports is bound to be worrying from a strategic perspective. As much as 85 per cent of the country’s demand for oil is met from abroad while imports comprise 50 per cent of total natural gas consumption. A drive toward renewable energy has managed to raise its share in the overall energy mix but it still plays only a marginal role. For instance, solar power has a mere seven per cent share in electricity generation as against 70 per cent for coal. In case the push now being given to solar continues, however, its share is expected to rise to 30 per cent by 2040, with coal equally reducing to the same level.

In this context, the Prime Minister’s proposal for moving towards green hydrogen as a way of achieving energy independence over the next 25 years is in the right direction. Green hydrogen, as the name denotes, is created from renewable energy sources rather than the traditional natural hydrogen gas emerging from fossil fuels. This is indeed one of the fuels of the future, being environment-friendly. But it will take a long time and sustained efforts to improve availability so that industry shifts to renewable fuels such as this one. Currently all hydrogen used in the country, whether from domestic sources or imported comes from fossil fuels.

The plan to expand natural gas usage is also a long overdue objective. Schemes for a countrywide natural gas pipeline grid have been under way for quite some time but the progress in implementation has been tardy. Pipelines have been created in parts of the country but the nationwide grid is still a far cry. With the lack of an efficient distribution network, the share of natural gas in overall energy usage remains a paltry 7 per cent right now.

The one element of the energy independence project that is likely to fructify earliest is the promotion of electric vehicles (EVs). The government’s enthusiasm in pushing for EVs has alarmed domestic car manufacturers, even leading to complaints that this has affected sales in recent times. Fossil fuels are not likely to bow out so quickly in the case of passenger or commercial vehicles, but the process is being accelerated in many other countries. This gives hope that automobile manufacturers here too will see the writing on the wall and move towards large-scale development of EVs sooner than later. The biggest growth area for EVs is two-wheelers and three-wheelers. One can only hope this will pave the way for larger vehicles to take a bigger share of the market.

Energy security is needed more than energy independence even by the goal of 25 years from now. It will be virtually impossible to ensure that the country is entirely self-sufficient in various types of energy sources. What would be more viable is to create a scenario in which the energy economy is kept afloat even during a crisis. This can be done by creating fossil fuel reserves in the short run and investing heavily in renewable energy sources in the long run. The ultimate result should be the greening of the energy economy and the strengthening of energy security.

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