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Risk |
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- The gap between demand and supply has worsened in the last years. Energy demand increases as the population grows and the country develops; energy supply has increased at a slower pace. Over
one-third of the power generated fails to reach consumers.
- Energy subsidy schemes discourage efficient use of energy and diminish the incentives to increase the use of clean energy sources.
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Important Trends
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- Energy demand: The ReFossil fuel energy sources – oil and gas – constitute 45% of total energy consumption
in India. Total energy demand is projected to increase fivefold in the next 25 years, accounting for 12% of
world energy demand. To maintain an average growth rate of 8%, an almost tenfold increase in energy
capacity is required.
- Energy resources: India’s endowment of exhaustible and renewable energy resources is relatively good. The energy sector in India has been receiving special attention in the planning process. Indian industries are proactive and supported by the government, and are adopting cost-effective and environmentallyfriendly energy sources. Under-performance of the energy sector would be an important limitation to India’s growth potential.
- Electricity: Inexpensive and reliable electricity supply is vital to India’s prosperity. More than 40% of India’s population (over 400 million people), mostly in rural areas, lacks access to electricity. The country has made significant progress towards the augmentation of its power infrastructure; still, the quality of its
electricity supply is low and electricity generation is not used at a maximum capacity. Private companies and households use their own electricity generators, which are both expensive and polluting, to cover power shortfalls.
- Nuclear: New sources of energy will be needed in the medium to long term to cover rising energy
demand in India. Nuclear energy will play an important role in India’s energy mix. Nuclear agreements with
foreign countries strengthen the geo-strategic position of India in the world. An India-US civil nuclear deal
is expected to produce ample energy resources, help India meet its growing energy needs and deepen
the strategic partnership between India and other nations.
- Energy and climate change: India is the fourth largest economy in installed wind energy capacity. Many initiatives supported by the government and private corporations are being implemented to mitigate and adapt to climate change consequences and move towards a carbon-efficient economy. Investment choices that factor in the environmental impact are a first step to move towards a neutral carbon economy.
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Impacts |
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- Import dependency: The production of crude oil has been stagnant and has boosted the dependency
on crude oil imports. India imports more than 70% of its oil. The government has initiated several policies to cover the increasing demand and has intensified foreign relations with world energy suppliers in South and Central Asia, Russia and the Middle East. Energy supply is vulnerable to geopolitical tensions with energy suppliers and energy transit countries. Increasing consumption and increases in oil price would add more pressure to the current account deficit
- Electricity distribution losses: Corporations and society at large are willing to increase their energy bill to benefit from a reliable energy supply, but generation and distribution infrastructures need to be in place and extraordinary investment is required. According to the World Bank, transmission and distribution losses account for 27% of the generated power and are the highest in the world. Various government agencies report losses between 30% and 40%. Those losses are associated with technical inefficiencies and mismanagement.
- Energy subsidies prevail: Liquid petroleum gas (LPG) subsidies in India are widespread; US$ 1.7 billion was spent in the first half of the current financial year on supplying fuel to poorer households. Nearly 40% of the subsidy expenses benefit only 7% of the population. Energy subsidies encourage consumption and waste, which generate harmful effects on the environment and represent an important liability to the government budget.
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