India's energy sector has been receiving a great deal of attention in recent years, particularly since the signing of the Framework Convention on Climate Change (FCCC) in 1992. In almost every forum dealing with the mitigation of emissions of greenhouse gases (GHGs), reference is inevitably made to the worrisome prospect of China and India burning huge quantities of coal in the future, adding to the concentration of GHGs in the earth's atmosphere. There are those who feel that these two countries should be persuaded to reduce their dependence on coal by adopting a set of appropriate policies and harnessing technological developments that would encourage a shift toward less carbon-intensive energies in the future.
Yet developing countries still have very low levels of energy production and consumption per capita (see Figure 1), and a large percentage of their population still does not have the benefit of the goods and services that developed countries have been using for decades. A sudden shift from coal to other energy sources, such as renewable energy, would require extremely costly capital investments and, in the short to medium term, higher outflow of foreign exchange to finance oil imports. In other words, a reduction in dependence on coal would not favor the economic interests of countries like China and India for at least the next 15 to 20 years.
[Figure 1 ILLUSTRATION OMITTED]
While the path that India adopts in the development of its energy sector is a subject of growing interest, there is a lack of understanding and awareness within the international community about the dilemmas India faces in making its future energy choices.
The country as a whole has very low levels of energy consumption per capita--a function of widespread poverty and uneven development. Many of India's approximately one billion people still lack access to electricity in their homes, and the country's infrastructure with respect to energy supply, transportation, telecommunications and health care is very weak. Looking ahead, the economic well-being of the population will require significant increases in energy consumption in the near future.
When India attained independence in 1947, almost all its supply of electricity was confined to a few towns and cities, with a total installed electricity capacity of around 1300 megawatts (MW). None of the rural areas had access to any modern fuel except kerosene. This low capacity would have been barely adequate for lighting 100 watt bulbs in 13 million homes, scarcely 20 percent of the country's population at the time, and would have no energy left for industry or other end uses. Over the past five decades the largely government-owned energy supply industry has attempted to spread the supply of commercial energy throughout the country But while 80 percent of the country should in theory have access to grid-based power, less than 20 percent of rural households actually consume electricity. Since power is available only in limited quantities, priority is given to uses such as irrigation pumping for agriculture and most rural households cannot afford to invest in wiring their homes for electricity In terms of per capita energy consumption, India has a long way to go.(1) Energy policy must be targeted toward expanding the supply of all domestic resources, including coal.
In terms of commercial energy resources, India currently has approximately 84,000 MW of conventional hydroelectric potential, 5,000 MW of small hydro potential, approximately 700 million tons of crude oil, 0.7 billion cubic meters of natural gas and 70 billion tons of coal. Hence coal is by far India's most important commercial energy resource, providing nearly 93 percent of its total energy.(2) The problem is that processing coal has negative environmental effects, such as large-scale air pollution resulting from the accumulation of ash through burning. Accordingly, there are …