A strategic analysis of India's multidimensional energy crisis

Frequent power failures, lack of cooking fuel supplies resulting in felling of trees, people going hungry because of kerosene shortages, failure to attract capital in power sector, rapid expansion of private transport despite a fully developed railway system, extensive corrupt practices while dealing with petroleum products are some of the obvious manifestations of India's energy crisis. It is more than five years since India's economy was liberalized and more than four years since power sector was opened up for both foreign and domestic private investment. Still not one KWH of power has been produced in the private sector as a result of the new economic policy. There are frequent power blackouts in every city and village in the country. Power supplies to the industries are cut to the extent of 75 %. But our politicians are playing politics with the power projects in the name of environmental protection or exposing corruption. Enron in Maharastra and Cogentrix in Karnataka are two good examples of this. Despite various rounds of inviting bids for oil exploration, India has singularly failed to attract foreign capital. Despite the generous subsidies given by the Government for biogas plants, smokeless chulhas, windmills, etc. to promote the use of non-conventional energy sources, their huge potential remains unexploited. The Government's failure to implement the privatization of the power sector policy properly and to attract capital in oil exploration are two significant reasons for India's continuing energy crisis. When oil companies especially in the free market economies of the developed world are forced to keep a lid on their product prices because of competition, in India where the petroleum industry is dominated by the public sector, petroleum prices are ruled by political considerations. More than Rs 7000 crores ($2 billion) are spent by the Government each year to subsidize kerosene, LPG, naphtha for fertilizers etc. knowing full well that most of that is shared by dealers, politicians, bureaucrats etc. Though investment in new refineries cannot be justified either from economic or strategic points of view, capital is readily available for building new refineries because of administered prices but not for building power plants which are essential. Wrong pricing signals, huge subsidies for some petroleum products and lack of proper policy to liberalize petroleum industry are some factors giving rise to India's energy crisis. The paper deals with the reasons for the failure of government policy to deal with the various dimensions of India's energy crisis by pointing out the absence of strategic thinking in each case and suggests solutions. It also brings out how planning has been a total failure. Findings of the study are not only useful for solving India's energy crisis but also for many other developing countries who face similar problems.