- Feb 16 2016
South Asia is at a critical juncture today. Development is the overriding priority for the region because of the high incidence of poverty but energy is proving to be a critical constraint. The entire region is suffering from an acute energy crisis. There are three major concerns with regard to the energy sector. Firstly, South Asian countries are confronted with the huge challenge of securing energy to sustain rapid economic growth and meeting the rising aspirations of the people. Secondly, the region is home to a huge population that lacks access to clean forms of energy. A large section of the population, particularly in rural areas lacks access to electricity and relies on the traditional use of biomass for cooking. With limited domestic energy sources, most South Asian countries are also highly dependent on energy imports, particularly crude oil, from other regions. The mismatch between energy demand and resource endowments in individual countries builds a strong case for energy cooperation.
Energy cooperation in South Asia has occurred at the bilateral as well as regional level. But bilateral energy cooperation has been more successful, particularly between India and Bhutan. India has provided technical and financial assistance to Bhutan in the development of hydro power and that form of energy is Bhutan’s main export to India. Bhutan exports about 1,000-1,200 megawatts (MW) surplus power to India. The first ever Clean Development Mechanism (CDM) benefits were realized by India-Bhutan hydro trade in 2010. Recently, India and Bangladesh have signed a memorandum of understanding (MoU) under which 100 MW power will be exported to Bangladesh. India and Nepal also have engaged in significant energy cooperation. Four hydroelectric schemes with an aggregated installed capacity of about 50 MW have been implemented in Nepal with assistance from India. The two countries have also signed an agreement worth US$ 1.04 billion under which a 900 MW plant will be built on the Arun River. There are possibilities of further expansion of electricity trade between India and Nepal as till date only 600 MW of hydro power has been developed against Nepal’s economically feasible hydropower potential of about 40,000 MW. However, tensions between Nepal and India endanger the possibility of greater energy cooperation between them. Further, India has emerged as a significant source of refined petroleum for the region. India currently supplies the entire demand for petroleum products in Nepal and Bhutan. India also exports petroleum products to Bangladesh.
Regional energy cooperation efforts began in 2005 when the SAARC energy centre was created. However, regional energy cooperation efforts have been less successful because of the overarching political differences between the SAARC member countries. The signing of the SAARC energy agreement last year provides a ray of hope but continuing tensions, particularly between India and Pakistan, cast a spell of doubt with regard to its implementation. In the absence of a strong political will, this initiative is also likely to fail like other SAARC proposals. South Asian leaders need to look at energy cooperation as a means of achieving peace in the region.
Mobilising financial resources to develop the necessary energy infrastructure is a major challenge to enhance energy security in the region. Therefore, South Asian countries need to develop policies that will attract investment in the region. The private sector can play an important role in this regard but given the volatile nature of South Asian politics, the private sector may be reluctant to invest in mega projects without the necessary legal regimes to protect investments.
One of the major defects of energy cooperation efforts in the South Asian region is the state-centered approach towards energy security that is based on government to government interactions and the use of public sector enterprises. Moreover, the regional cooperation efforts have paid limited attention towards the potential of renewable energy in meeting the present energy demand-supply gap. It is important to recognise that in South Asia, the issue of energy security goes well beyond the macro concerns to the challenge of providing the poorer sections of society with access to clean energy. Therefore, the scope of energy cooperation in South Asia must be widened and greater emphasis must be laid on renewable energy sources such as solar and wind. So far, there has been an overemphasis on facilitating electricity trade and pipeline projects in the region. India’s advantage in solar energy needs to be exploited effectively. Indian institutions are already engaged in providing solar powered lighting, water and space heating, and water pumping in countries such as Afghanistan and Pakistan. These initiatives need to be scaled up to meet the development needs in the region. Greater cooperation in providing decentralised energy solutions to neighbouring countries will also contribute towards peace and development in the region.
This commentary originally appeared in The SARCist.