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`Mounting losses in the power sector cause for concern'

POWERFUL CALL: The Prime Minister, Dr Manmohan Singh, and the Minister for Power, Mr Sushil Kumar Shinde, at the Energy Conclave 2006 in the Capital on Wednesday. Dr Singh called for a review of the pricing policy in the energy sector in view of the country's long-term energy security. — Ramesh Sharma

New Delhi , July 26

The Prime Minister, Dr Manmohan Singh, on Wednesday called for a review of the pricing policy in the energy sector in view of the country's long-term energy security.

"The extreme volatility that we have seen in international oil markets, coupled with similar magnitudes of price increases in natural gas and imported coal, has put enormous pressure on domestic prices. We need to factor in the economic cost and the environment cost of alternative sources of energy while setting our prices. Only then will we be able to ensure that the energy security we desire gets translated into reality," Dr Singh said, addressing an Energy Conclave here. He said that the pricing policies played an important role in consumers' selection of energy sources.

He also said there was need for examining the relevance of existing taxes and subsidies in the energy sector. "We must examine the relevance of the entire gamut of taxes and subsidies on various energy forms and energy using devices," he said.

Dr Singh also expressed concern over the mounting losses in the power sector and called for a new management strategy. "There are transmission and distribution losses as high as 40-50 per cent in several parts of the country and the new management system will have to deal with this harsh reality," he said.

Looking at the country's energy requirement in the next 25 years, Dr Singh said the power sector alone would need Rs 60 lakh crore and such a magnitude of investment would come only when proper returns are assured.

"The figures for future requirements are gigantic. Electricity generation capacity would need to go up from our current installed capacity of around 1.31 lakh MW to 8 lakh-9.5 lakh MW. This would imply huge annual imports of oil — anywhere from 300 to 400 million tonnes and coal imports that could touch 800 million tonnes annually," he said.

"How can we ensure that such vast quantities of energy are available to us? What would be the investment and foreign exchange requirements? India urgently needs to define a new paradigm of development for its energy sector," he said, adding that this called for judicious use of available domestic resources and focus on efficiency at all levels.

Dr Singh said that the country was short on modern energy resources such as oil, gas and uranium and even coal is not as abundant as generally believed. "Thus we must use our energy resources optimally and efficiently," he added.

Least cost of supply

The exploration, production of fuels, electricity generation, T&D of power and setting up of a gas grid require large investment and this would happen only if the sectoral policies are consistent and there are reasonable returns on the investments. "Both the public and private sectors have to play important roles here," Dr Singh said adding, "we need to develop public-private partnerships in ways that attract the needed investment and provide energy services to the consumers at least cost."

He also called for developing all resources — coal, gas, oil, hydro and nuclear along with renewable sources such as wind and solar. On nuclear energy development, Dr Singh said, "the speed with which we can develop nuclear power is constrained by the availability of uranium. The civil nuclear agreement we have entered into with the United States, and our discussions with the Nuclear Suppliers' Group should help in accelerating the development of nuclear energy."

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