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March 22, 2013

The 'What if's of our energy security

Ensuring energy security requires a holisitic view and concerted action by all branches of the government.

Uptil the 19th century, securing supplies of salt was of critical importance for the cold nations of the western world, as it was the only-known preservative of food. Food (being available only for a few months a year) needed to be stored and salt made this possible. Wars were fought over salt as not all countries had their own salt reserves. During the American Revolution, British loyalists tried the tactics of cutting off salt supplies to the revolting colonies, which would have led to the starvation of its people in a few days. Thus, salt security was an essential part of survival strategy then.

While we are no longer dependent on salt to preserve food, other sources such as electricity play that role. Production of electricity, in turn, needs to be secured by assured supplies of fuels such as oil, coal and gas. Important as the dimension of ensuring adequacy supplies is, “Energy Security” has other facets to it. India is almost completely dependent on imported oil for its transportation needs and is thus always vulnerable. Reserve capacity can provide some buffer, but in the absence of diversity of fuel options, the vulnerability will remain.

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Several countries have set up independent bodies to assess short-term and long-term risks to reliability of energy supplies. For example, the US Energy Security Council was formed with the mandate of diminishing the inordinate strategic importance of oil, which stems from its virtual monopoly over transportation fuel. The Council explains the point further: “Oil’s  status  as  a  strategic  commodity  –  a  product  whose  disruption  or extravagant cost could cause the collapse of our economy – poses significant economic, security and health vulnerabilities for the United States. These vulnerabilities drain pocket books, skew American foreign policy and burden our military.” The North American Electric Reliability Corporation (NERC) was set up to provide an independent review of the long-term reliability of the North American bulk power system while identifying trends, emerging issues and potential concerns. Its focus is on reliability and it does not concern itself with mundane aspects of energy pricing and efficiency.

With only 0.5 percent of the world’s oil resources and over 16 percent of the world’s population, India should be concerned about its energy security. We need to ask ourselves some critical questions and find some answers. How do we handle different situations related to this matter? What if there is a resurgence of Arab Spring and oil production is disrupted? What if Iran carries out its threat to block the Strait of Hormuz through which most ships that meet our crude oil requirement pass? What is the backup plan for the movement of fuel and essential commodities in case of a month long truckers strike? How are we going to run thermal plans if coal production doesn’t keep pace with electricity demand? What do we do if the coal-exporting countries form a cartel and hike the prices? What happens when our defence needs clash with our energy security needs? Can we afford to have a repeat of the incident of August last when the entire Northern grid including the capital and many defence establishments went without electricity for several hours? Are environmental considerations paramount, even at the cost of energy security? What if more thermal plants were to be shut down due to shortage of water? And many more. This war-gaming must be undertaken on priority.

The Integrated Energy Policy released by an Expert Committee of the Planning Commission in 2006 made a good beginning. It provided a definition for Energy Security when it said “We are energy secure when we can supply lifeline energy to all our citizens irrespective of their ability to pay for it as well as meet their effective demand for safe and convenient energy to satisfy their various needs at competitive prices at all times and with a prescribed confidence level considering shocks and disruptions that can be reasonably expected”. After this, the Expert Committee disbanded and the Integrated Energy Policy has not been revisited again.

Obviously, such deliberations cannot be left solely to the Planning Commission that submits its report once in a few years. Given the dynamics of energy supply and demand, and the frequent course-correction that is required, it requires constant vigilance and pro-active action.

An Energy Security Division was formed in 2007 in the Ministry of External Affairs (MEA) with a view to sensitise and assist our Missions abroad in identifying possible opportunities for Indian companies, in acquiring energy assets overseas, and in building strategic partnerships with foreign companies. This has evidently helped. GAIL and ONGC have been more aggressive and have succeeded in securing supplies from more diverse sources.

But keeping this division in the MEA limits its scope. Energy security lies at the confluence of geopolitics, geo-economics and social security. It requires a holistic view and ideally, there should be a Minister of Energy charged with that responsibility. If the current political system doesn’t offer that space, the next option would be to entrust the task to an independent agency reporting directly to the Prime Minister and engaging with various Ministries (petroleum, power, coal, railways, road transport, shipping, aviation, external affairs, defence) on all aspects that could affect the energy security of the nation. It should not be reduced to another toothless organisation that makes periodic recommendations with no powers to implement.

We need to realise that energy is what enables and drives our development. We need to do all we can to keep it flowing.

Photo: SoraZG


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