As the nation recovers from the pandemic, growth should not be derailed by any crippling shortage of power.
We cannot do without the dirty stuff, not yet. A coal shortage is threatening to undermine growth in India, as thermal plants that account for 70% of the power produced in the country run out of stocks of the fuel. Resolute steps must be taken to increase supplies – fromCoal IndiaNSE -2.58 %‘s mines, captive mines allotted to various companies and imports. Let captive miners sell coal at import-parity prices, and free up imports. Pass on the cost of imported coal as higher electricity tariffs. Lower duties and cesses on petro-fuels, to moderate the impact on inflation. Hold interest rates, focus on growth.
No power is the most expensive power. As the nation recovers from the pandemic, growth should not be derailed by any crippling shortage of power. Let the price of power go up, induce higher supplies and curtail demand. Regulators should allow the higher, shortage-induced prices to feed through to consumers. The poor should be supported through subsidy transfers, while energy prices reflect scarcity and do their job. In this period of energy transition to a low- and eventually zero-carbon economy, investment in hydrocarbons can be expected to shrink. And it has, from 2014 onwards. Natural gas has played an ever-increasing role. A very cold winter followed by a hot summer have used up a lot of the gas saved during the pandemic slowdown. Drought in South America has pushed hydel power output down and increased the demand for gas. Opec must be persuaded to increase output, so as not to kill global recovery that creates the demand for their output. Repressed oil output raises prices, including of gas.
Hydroelectric plants must be run at full capacity, as rains have been plentiful and storage levels, high. Lignite plants must run at full capacity, installing electrostatic precipitators and other equipment to curtail emissions. Coal India must try harder to raise output. Increasing blue and green hydrogen capacity must be accelerated. Flexible energy prices are essential to switch energy sources and optimise production and consumption.
( Originally published on Oct 06, 2021 )