Economic Survey 2021-22: Directions for energy

This article is part of the series Comprehensive Energy Monitor: India and the World

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According to the preface to the Economic Survey 2021-22, its central theme is the “agile” approach that relies on real-time monitoring of actual outcomes, feed-back loops, and flexible responses. This contrasts with the traditional “waterfall” approach that depended on analysis, planning, and implementation. Though the 2021-22 survey says that planning mattered in the “agile” approach, “it is mostly used for scenario analysis, identifying vulnerable sections, and understanding policy options”. The use of real-time data is critical in the “agile” approach and in this context, energy-related indicators such as electricity production and mobility data are amongst the many real-time indicators that the survey presents. Though there is no separate section on energy in the survey, there is a section on energy transition and climate change that covers newer forms of clean energy while the discussion on traditional forms of energy is relegated to the section on industry and infrastructure.

The use of real-time data is critical in the “agile” approach and in this context, energy-related indicators such as electricity production and mobility data are amongst the many real-time indicators that the survey presents.

Traditional Energy Sources

The survey does not reveal a clear future for traditional energy sources mainly fossil fuels. It reiterates information and data that are familiar to those who follow the energy industry. As one of the eight core industries that constitute over 40 percent of the index of industrial production (IIP), coal is amongst sectors that have IIPs higher than pre-COVID lockdown levels. The survey observes that coal is “the most important and abundant” fossil fuel in India and that demand for coal will remain in the range of 1.3-1.5 billion tonnes (BT) by 2030, quoting the draft national energy policy of the Niti Aayog. The demand for coal in 2019-20 was over 979 million tonnes (MT). Between 2011-12 and 2019-20, demand for coal grew by over 5 percent. Projection of a demand of 1.3-1.5 BT by 2030 implies that growth will be slower at 2.6-3.9 percent annually. The survey credits the state-owned coal producers for bringing 56,000 hectares (Ha) of land under green cover creating a carbon sink of 500,000 tonnes of carbon-di-oxide (CO₂) each year and for investing in over 1496 MW (megawatts) of renewable energy (RE) capacity. State-owned coal companies are expected to bring an additional 30,000 Ha of land under green cover by planting 75 million trees by 2030 and possibly also invest in over 5560 MW of RE capacity. The survey is optimistic that opening of coal mining to the private sector will bring efficiency and competition in coal production, attract investment, and create more jobs in the coal sector. This observation runs counter to the predominant narrative of phasing down coal production and employment in coal mining paving the way for a just transition away from coal.

State-owned coal companies are expected to bring an additional 30,000 Ha of land under green cover by planting 75 million trees by 2030 and possibly also invest in over 5560 MW of RE capacity.

In the context of petroleum, the survey rightly observes that high international crude oil prices and high taxes on petroleum products contributed significantly to inflation. But the rest of the discussion on the petroleum sector is devoted mostly to the celebration of schemes such as “Ujjwala Yojana” rather than to critical issues such as the impact of high oil prices on the Indian economy. Ujjwala Yojana offered free or subsidised liquid petroleum gas (LPG) connections to poor households mostly in poll bound Northern states. As poor households are not able to sustain use of LPG by purchasing unsubsidised refills has meant that ujjwala yojana is more effective as a means to influence electoral outcomes rather than transform energy outcomes. The survey reiterates the widely reported claim that LPG coverage is 99.8 percent. The source of this information is the PPAC (petroleum planning and analysis cell) that acknowledges that the methodology used for calculating LPG coverage is under review. The methodology only involves estimating the number of current households by extrapolating the number of households, according to Census 2011. Adjusting the extrapolated number of households to the number of domestic connections can give the desired LPG coverage. Going by the data in the survey, only 0.2 percent of households (or just over 65,000 assuming that the number of households is about 33 million) do not have access to LPG. If so, the release of an additional 10 million LPG connections under Ujjwala 2.0 would mean multiple LPG connections in many households. The survey observes that there is no subsidy for domestic connections since 2020 but confusingly qualifies the statement with “in the Delhi market” in the parenthesis. The survey highlights the opening of up to 100 percent foreign direct investment in the petroleum and natural gas sector in July 2021 suggesting the possibility of divestments in the sector.  In the natural gas segment, the survey states that consistent progress in increasing the reach of the national gas grid could potentially assist in achieving uniform economic and social progress.

The methodology only involves estimating the number of current households by extrapolating the number of households, according to Census 2011.

The coal stock crisis that reduced power generation resulting in blackouts in many parts of the country in late 2021 does not merit a discussion in the survey. There is little that is new in the details of capacity addition in the power sector based on traditional fuels such as coal and RE that the survey presents.

Renewable Energy Sources

The discussion on RE is dominated by reiteration of targets set for RE by the government and achievement so far. The survey highlights how RE companies have used the liberalised external commercial borrowings (ECB) norms of the RBI (reserve bank of India) to raise finance through green bonds. RBI is a member of the task force on climate-related financial risks set up by the Basel committee on banking supervision. It is also a member if the international platform on sustainable finance, a forum of public authorities from 17 countries that is working on environmental, social, and governance (ESG) disclosures and a sustainable finance taxonomy. This will ease access to low-cost finance. In a box item on transitioning to clean energy, the survey comments that the pace at which the shift from conventional fossil-fuel-based sources is made will determine the extent and mix of investment in RE sources. The survey cautions that India should avoid the risk of being a latecomer to implementation of net zero emission plans as the price of critical minerals required for the energy transition is likely to increase substantially in the future. Citing the surge in the price of natural gas in Europe, the survey notes the importance of having a diversified mix of energy sources and states categorically that fossil fuels will remain an important part of this mix. The preface to the economic survey 2021-22 raised expectations over the “agile” approach, especially the use of scenario analysis. But the survey does not meet expectations and offers few clues on the direction the energy sector should take.

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• Ujjwala Yojana

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