“India Poised” is the tagline of a major Indian advertising campaign. It celebrates the country’s economic growth rate by showing the Bollywood icon Amitabh Bachchan almost walking off a bridge that has not yet gone far enough to reach the other side. It illustrates the precise challenge facing the Indian economy: it is poised at a point of take-off, but not all the pieces are yet in place.
One of the biggest constraints to India maintaining its current growth rate of more than 8 per cent is energy. India needs much more, but it is not confident that it can produce enough or secure supply from outside – or even whether it can afford what is on offer.
The bridge on which Amitabh stands is in Mumbai, the capital of Maharashtra, India’s most urbanised and industrialised state. But last summer, most of Maharashtra went without electricity for up to 15 hours per day. The Indian term is “load-shedding”, where the electricity utilities switch off the current in order to ensure that everyone gets some power, some of the time. What it actually means is that everyone goes without electricity a good deal of the time. This sits ill with the image of a country that aims to become a global economic giant in the near future.
Maharashtra is not an exception – the power situation in most of India is dismal, characterised by erratic and poor supply and by inequity. So while cities like Mumbai can afford to light up huge billboards all night, large parts of India remain in the dark. By the government’s own admission, 125,000 villages still have no electricity and roughly 23 million households, including some in cities, live without any electrical power. To bridge this gap between those who have access to a dependable energy source and the many who don’t, India will have to triple its electricity generation by 2030.
Coal-fired thermal power plants form the base of India’s electricity supply. This presents two problems. One is the supply of coal. Although the country has reserves, the coal is of poor quality. Increasingly, the government has had to import coal to run existing and new plants. But more coal-fired plants will also raise India’s contribution to greenhouse gases substantially. According to Greenpeace, India is likely to become one of the world’s top three emitters of carbon dioxide by 2030.
Cleaner alternatives do exist, principally hydroelectric power. But large dams are not easy to build. Apart from the costs, they have to overcome environmental challenges and the costs of resettling people. Nuclear power is an expensive option – the existing nuclear power stations generate only 2 per cent of India’s total energy. This could increase to at most 7 per cent now that India can access nuclear fuel supplies following the 2006 Indo-US nuclear agreement. Renewables such as solar and wind power, meanwhile, constitute a tiny percentage of the total energy package.
But India’s real Achilles heel is oil. In the 1980s, the country used 70 per cent of its own oil reserves and only 30 per cent imports. Today, those figures are reversed. India’s dependence on imported oil and gas is making planners anxious about the future. According to the finance minister, P Chidambaram, “India is being robbed of at least 1 per cent growth because of high oil prices.” A risk assessment study released at the World Economic Forum meeting in India last year suggests that “energy shortages would act as a major barrier to India’s development”.
India is also one of the world’s most inefficient users of energy. For every $1,000 increase of GDP, India adds 1.5 barrels to oil consumption, compared to 0.5 barrels in Italy, France and Germany and 0.75 barrels in the United States. Planners have long argued that India’s energy position could be transformed simply by conservation and efficient distribution.
Losses in electricity transmission, for instance, amount to 40 per cent, on average, of what is generated. Power theft is endemic. This ranges from the domestic – usually poor, urban slum-dwellers who steal by throwing a hook on to a high-tension wire – to small- and medium-scale factories that also tap in or avoid paying charges.
The picture that emerges is of a country determined to forge ahead economically, but caught between old styles of planning and functioning and new demands from a growing economy. Poised, but not really taking off.