India: India's Great Vulnerability - Energy Insecurity

2006

Rakesh Ahuja

President Kalam's Independence Day Address in 2005 took an unprecedented form. Instead of mouthing homilies, as Heads of State are wont to do on such occasions, he delivered a power point presentation to his vast Indian audience on the country's energy concerns.

Energy deficit is India's greatest economic vulnerability. It stems from pressures of accelerating economic growth, scarcity of domestic energy resources, increasing population and an expanding cohort of the high-energy-consuming class. Populist offerings to the rural population and urban have-nots, who together comprise a majority of the electorate, are adding to the energy crunch.

With 17% of the world's population, India has just 0.8% of known hydrocarbon reserves. Over the past five years, only China has exceeded India's growth in the consumption of primary energy. India is the 6th largest consumer of oil and the third largest of coal. For the foreseeable future, 75% of its primary energy needs must be met by imports. According to Prime Minister Singh, an investment of $130bn is necessary in the power sector alone to achieve the 8% annual GDP growth rate target.

Meanwhile, the galloping oil bill is costing the exchequer around US$35bn per annum. Bringing more domestic hydrocarbon and renewable resources on stream will not only take time, but even in a best case scenario, will not achieve self-sufficiency. An urgent reconfiguration of the energy mix is necessary to avoid mounting environmental costs of coal fired power generation (67% of the total).

The outlook for India's energy security will depend on how nimbly it navigates the shoals of the new Great Game: suppliers and consumers, industrial and industrialising countries, are all manoeuvring for advantage through a web of bilateral and multilateral deals to obtain stable access to energy resources.

Indian resource diplomacy is now in overdrive in pursuit of long-term energy supplies. Its objectives range from participation in trans-national gas pipeline grids to equity buy-outs and joint ventures in oil and gas fields stretching from Siberia to Sudan.

But proposed pipelines will remain pipedreams until conflicting national interests of the participating countries can be melded into viable joint ventures. As for acquiring energy assets abroad, India has only had a modest success in the face of slick, relentless competition from China.

India faces an inescapable conclusion. Geo-political constraints make quick fixes on the hydrocarbon game board an unrealistic option. Nuclear energy holds the key to feeding its booming economy in the short to medium term.

The Singh Government's projections call for increasing the share of nuclear power in the country's installed generation capacity from the current 2.8% to 26% by 2030; and, more immediately, for a tripling of nuclear power output to 10,000MW by 2012. It calculates that if the restrictive international nuclear transfer and trade regime were lifted, India could realistically set a target of 20,000MW for 2020.

India has a home-grown advantage in absorbing new nuclear technological and resource inputs. Forced into a corner by fatwas from non-proliferation ayatollahs over the past 32 years, it has developed an impressive indigenous infrastructure of nuclear facilities. Fifteen reactors are in operation, nine are under construction and twenty-four more are planned by 2020. The industry employs over 50,000 highly qualified scientists and technicians.

Still, after years of international sanctions, domestic nuclear technology is no state-of-the-art, and a desperate shortage of uranium has severely restricted power output of civilian reactors.

It is against this background that the Bush-Singh 'grand bargain' on nuclear cooperation is of singular significance to India. The US is now willing to extend India full civil nuclear energy cooperation in return for India's placing its civilian nuclear facilities under permanent international safeguards. The accord also enjoins the US to convince the 44-nation Nuclear Suppliers Group (NSG), including Australia, to loosen the nuclear supply chain.

This bold deal will enable India to acquire nuclear hardware and fuel, even though it is not a signatory to the Nuclear Non-Proliferation Treaty (NPT). However, before the gateway can open, the accord must pass US Congressional musters for dismantling the firewalls accreted over the years against nuclear cooperation with India. It will also be essential for Indian access to the global nuclear energy market for the NSG to acquiesce in the American dispensation to India as an 'exception' to the NPT.

On this issue, Australia's attitude will be critical. Belying its middle power status, it has a disproportionately strong voice on nuclear matters, underpinned by its 40% of the world's reserves of low cost uranium. The Howard Government has welcomed the US-India deal, but remains ambivalent over opening its yellow paddock to India.

Arguably, apart from its role during the heyday of the non-alignment movement, India has never engaged so intensely in broader geo-political plays as it is doing now on energy security. This reflects the commitment of the new breed of technocratic, quasi-politicians, who form the core of the Federal Cabinet, to be more strategic in advancing India's economic interests.

WATCHPOINT: The outcome of the enabling legislation tabled in the US Congress by the White House will determine the fate of the Bush-Singh accord. The NSG will be monitoring the proceedings very closely.

 

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