Objectives, Strategy and Perspective of Development
Introduction || Objectives of Ninth Plan || Population Growth and Demographic Profile : Perspective || Growth Target for Full employment : Perspective || Growth Performance and Poverty : Perspective || Food Requirement and Agricultural growth : Perspective || Energy and Natural Resources : Perspective || Annexures

Energy and Natural Resources

1.111 Achievement of an average 7.4 per cent growth rate in GDP over the next 15 years will generate a high growth in demand for natural resources, particularly energy. The demand for total primary commercial energy increased from 25.5 MTOE in 1953-54 to 212.9 MTOE in 1994-95, representing an increase of more than 8 times over the 40 year period. It is likely to increase to 770 MTOE by 2011-12 representing over 3 fold increase in 17 years. In per capita terms, the demand for primary commercial energy was 67 KGOE in 1953-54. It increased to 234 KGOE in 1994-95. By 2011-12 the per capita primary commercial energy consumption is expected to increase to 648 KGOE. Despite the not inconsiderable growth, this level of per capita primary commercial energy consumption in 2011-12 is low when compared to the international average per capita energy consumption levels of 1433 KGOE in 1994-95, and over 5000 KGOE in the developed countries. The demand for electricity, in particular, is likely to increase by about 3.5 times by 2011-12 as compared to 1996-97. As a result, more installed generating capacity will have to be added over the next 15 years than what has been done in the last 50 years. The demand for petroleum products is likely to treble by 2011-12 than what it was in 1996-97. Similarly, the demand for coal is likely to increase by nearly 2.6 times. These will require increase in exploration activity, development of mines/oil fields, setting up of thermal and hydro-electric power stations which are not only highly capital intensive but also are likely to put great pressure on the quality of environment. Such large demand will also require transport facilities viz. railways, roads and ports to be expanded sufficiently so that these infrastructural facilities do not act as a constraint for achieving the desired growth in the economy in general and the availability of energy in particular.

1.112 In the long run, some of the important questions that the planners will have to themselves address to are: (a) how long will depletable resources, such as oil, last; (b) what sort of export strategy will have to be adopted so that growing requirement of imported energy is met without adversely affecting the balance of payments position; (c) what are the environmental consequences associated with intensive mining and use of the relatively abundant mineral resources such as coal, iron-ore, etc. In short, the question of sustainability of natural resources and the environment as well as that of strategic self-reliance are important in the long run and will need to inform the development strategy. This question of sustainability has to first take account of the domestic availability of these resources and the options that are available to the country. The domestic availability and the life indices of some of the important mineral resources is given in Table 1-18. Even though the size of certain primary commercial energy reserves appear fairly large, their per capita availability is modest on account of the large population of the country. If no significant additions are made in future, the per capita availability would worsen.

            Table 1-18 : Life Indices of some Important Minerals
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Sl. Mineral/Ore/   Recoverable Dep-   Recov-   Proj-  Balance life
No.    Metal       reserves    letion erable   ected  at 2001-02
                   as on       upto   reser-   prod-  level
                   1.4.1990    2001-  ves as   uction Production
                   (M.tonnes)  02 (m.  on      during  (Years)@
                               tonnes) 1.4.    2001-02
                                       2002   (m.tonnes)
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  1.                  2.       3.         4.       5.       6.
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1. Crude Oil        727.00    213.73    513.27    36.98   13.88
                 (1.1.1996)
2. Natural Gas      640.00    167.10    472.90    30.74   15.38
(B.Cu.M.)        (1.1.1996)
3. Coal
(i)Coking         15961.00    170.80  15790.20    50.20  314.50
                (1.1.1997)
(ii)Non-Coking    56772.00   1455.35  55316.65   324.85  170.28
                (1.1.1997)
4.Bauxite          2525.00     77.02   2448.00     9.54  256.60
5.Copper Metal        4.56      1.41      3.14     0.44    7.11
6.Zinc Metal         10.00      1.23      8.77     0.16   54.46
                                                 (1.4.94)
7.Lead Metal          2.50      0.52      1.98     0.08   25.25
                  (1.4.94)
8.Iron Ore        12745.00    871.31  11873.69   107.00  110.97
9.Chromite Ore       88.00     17.33     70.67     2.12   33.33
10.Magnesite        233.00      5.32    227.68     0.52  Adequate
                                                         Reserves
11.Limestone      76446.00   1239.92  75206.08   148.27  Adequate
                                                         Reserves
12.Dolomite        4967.00     42.61   4924.39     4.56  Adequate
                                                         Reserves
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1.113 As can be observed from the table, the hydrocarbon reserves of the country are unlikely to last beyond 2016 (oil reserves, in fact, will last only till 2014) at the projected production levels of 2001-02, and that of copper beyond 2009. The position regarding other minerals is comparatively better. However, mining is beset with environmental problems as it often leads to deforestation, diversion of land from agricultural to other purposes, etc. Greater use of energy would result in increased carbon emission and other pollutants. This coupled with denudation of forests (which act as sinks for emissions) is likely to worsen the environmental problems.

1.114 The demand for electricity (generation requirement) is likely to increase to 1473 Bkwh by the end of the Eleventh Plan, as against 394.5 Bkwh in the utilities in 1996-97 representing an average increase of 9.1% per annum. Much of the generation is likely to be thermal, through within thermal there is a possibility of greater share of hydro-carbon (oil and gas) based generation vis-a-vis coal based generation. Greater emphasis on hydro-electricity is important, particularly to meet the peak requirement. Hydro-electricity should also be preferred as it is a clean source of energy. However, much of the hydro-electric potential that remains to be tapped is located in the ecologically fragile Himalayan region and in more difficult locations. Tapping this source, therefore, is fraught not only with environmental hazards but is also much costlier as compared to thermal power. On the other hand, coal based thermal power plants lead to problems related to air pollution, ash disposal, etc. Dependence on oil based thermal power plants would result in less pollution, less pressure on railways and other infrastructure, but it would result in greater dependence on imports and the consequent reduction in self-reliance, and also increase balance of payments pressures. An important source of energy which has been neglected over the recent years is nuclear power. Although it is relatively expensive in terms of the capital costs, it is free from many of the problems discussed above. Consideration needs to be given to increasing the share of nuclear power as a viable alternative source of energy.

1.115 The rate of growth of nuclear power is currently limited by financial constraints while it is technologically poised for higher rates of growth. The availability of nuclear fuels in the country can sustain 350,000 MWe of power, and the industrial capability and R and D infrastructure can indeed support an accelerated programme. The nuclear power programme should grow to a minimum size of 20,000 MWe in the course of the next 25 years. The programme would be largely based on indigenous designs of Pressurised Heavy Water Reactors and Fast Breeder Reactors. Some Light Water Reactors may be inducted as a supplementary line to increase the nuclear power capacity at a faster pace, subject to such systems being available on political and commercial conditions acceptable to the country. A reasonable size Nuclear Power Programme based on fission systems will also enable the country to develop fusion based systems (using hydrogen as nuclear fuel) in due course of time. Such fusion based systems are expected to play a very important role in the long run in meeting the energy needs of mankind. Full benefits of this technology will not be available to the country unless its growth is adequately supported in the near term as a matter of policy. Nuclear power development is important to avoid excessive dependence on energy import, in the coming decades.

1.116 The major problem of the power sector is the optimum generation mix. In the short run, dependence on gas based and oil based plants seems to inevitable for meeting the power demand on account of the relatively shorter gestation periods of these sources. However, in the long run, the optimum mix has to be planned in such a manner that bulk of the base load requirements will have to be met from coal based thermal electricity, supplemented by nuclear electricity to the extent possible, while the peak requirement has to be met from hydro-electric stations and oil/gas based power. The use of oil for meeting base load requirements will have to be discouraged. The signing of PPAs in future should ensure that oil/gas fired stations are mainly configured for meeting peaking requirements. These fuels should not be used for meeting the base load requirements. Indeed, there is a case for converting existing oil/gas based power plants and those which are in the process of being established to peak-load plants at some point in time in the future. The agreements with the independent power producers may have to contain clauses which would permit such reassignments.

1.117 Sufficient reserves of coal are available in the country. The demand for coal is likely to increase from 296 million tonnes in 1996-97 to 776 million tonnes in 2011-12. The domestic production is likely to increase to 672 million tonnes in 2011-12 as against 286 million tonnes in 1996-97. Thus, the gap between demand and domestic production of coal is likely to be 104 million tonnes in 2011-12. Much of the coal mining in India is done by open cast mining techniques. Although it raises the productivity and recovery of coal from the mines, it leads to severe environmental problems viz. land degradation (including that of agricultural and forests), displacement of people, air pollution, etc. As per some studies done in the Planning Commission, the land requirement for open cast mining was about 513 hectares per million tonnes of coal, as compared to 235 hectares per million tonnes of coal by underground mining. According to the Working Group of Ninth Plan, nearly 790 hectares of land will be required per million tonne of additional coal production. On the other hand, the recovery and productivity in underground mining is lower, which increases the unit cost of production of coal. In the long run, new ways of mining coal, viz. coal slurry or coal bed methane, etc. are some of the technologies that will have to be adopted to reduce the environmental hazards as well as to improve the productivity. Greater dependence on imports of coal would also require massive expansion of port facilities, rail transport network (unless the end-use industries are set up close to ports), apart from putting pressure on the balance of payments. The utilisation rate of coal in all the end-use industries will have to improve in order to reduce the demand of coal and problems associated with its production and use.

1.118 The recoverable reserves of crude oil in the country are likely to be of the order of 513 million tonnes by 2001-02if no further accretion to reserves takes place. The production of crude oil is expected to be 37 million tonnes. With hardly any accretion in the reserves taking place in the last few years (in fact, there is a net deceleration in the reserves), the reserves to production ratio is likely to decline. The accretion to crude oil reserves was negative in each of the first three years of the Eighth Plan while in case of natural gas, the recoverable reserves declined from 735 billion cubic metres from 1992-93 to 707 billion cubic metres in 1994-95. Given a constant production level of 37 million tonnes from 2001-02 and the anticipated recoverable reserves of 513 million tonnes, the crude oil reserves are likely to last only till 2015-16. These reserves could be completely exhausted in 2011-12, if it is assumed that 30% of the demand of petroleum products will be met from domestic crude oil production. The situation for natural gas is marginally better. In addition, there also exist potential of coal bed methane, oil shale and methane gas hydrates in the country. As per the initial estimates available, the potential is placed at 850 billion cubic metres of coal bed methane, 600 million tonnes of oil shale and 6156 trillion cubic metres of gas hydrates. If these estimates are confirmed by detailed exploration, there will be a big improvement with regard to availability of energy sources for the growth of our country. It is thus, abundantly clear that until and unless these new hydrocarbon sources are proved and developed, the demand for petroleum products in the years to come will have to be increasingly met from imports. This will put pressure on the balance of payments. Therefore, exports will have to increase substantially. Efforts will have to be simultaneously made to reduce the oil intensity of the economy. This is particularly true of the transport sector. The share of railways in the total freight movement in the last few years has declined sharply vis-a-vis the roads sector. It is important to reverse this trend. The energy efficiency of movement by rail is better than of roads and steps will have to be taken to encourage it. Since the early 1980s, growing number of scooters (2-wheelers) and cars have been plying on the roads, particularly in the urban areas. This has resulted in greater energy (in particular oil) intensity, traffic jams and environmental hazards viz. air pollution. If unchecked, this problem could take serious dimensions in the years to come. It is, therefore, essential that these modes of transport are replaced by public modes of tranport, viz. buses and whenever feasible by suburban trains; including mass rapid transport system (MRTS).

1.119 So far as non-conventional energy sources are concerned, the development of wind generators in recent years has been quite impressive. Suitable policy measures to encourage the use of wind, solar, biomass and co-generation should be evolved. Consideration may be given to making use of solar water heating systems mandatory in residential buildings above a certain size. There is need to consider enacting a legislation to enforce energy conservation standards.

1.120 It is important that conservation of natural resources receives adequate priority, especially from environmental angle. The danger of further deterioration in the quality of air and water is not unreal and so is the case with the quality of soil. Greater demand for land resources for food, fodder, fuel, water as well as for mining and other activities will put pressure on the availability and quality of land. Therefore, it is essential that these resources are used with utmost care so that growth is sustainable.

1.121 One of the main problems in taking a rational decision on natural resource use is the lack of an appropriate information system and a methodology for natural resource accounting. As a result, the depletion of the national asset base is simply not taken into account while evaluating alternative strategies. The Ninth Plan will lay great stress on evolving such natural resource accounting methodologies so that decisions can be taken on the basis of the full cost to the Nation.

1.122 The most important methodology for preventing undue depletion of natural resources is by ensuring their efficient use at all levels. This has two important dimensions. First, exhaustible or vulnerable natural resources should be priced appropriately in order to prevent over-exploitation. In India, since a large proportion of natural resources are subjected to administered prices, there has been a tendency to under-price resources quite significantly. This approach needs to be changed urgently. Second, technologies which conserve the use of natural resources need to be developed and promoted vigorously.

Technology

1.123 In order to strengthen the technological capabilities of the Indian industries, both for meeting the national needs and for providing global competitiveness, a number of new initiatives have been launched. A Technology Development Board has been established in 1996 with a mandate to facilitate development of new technologies and assimilation and adaptation of imported technologies by providing catalytic support to industries and R and D institutions to work in partnership. Matching grants to R and D institutions showing commercial earnings through technology services was also introduced in 1996. Such initiatives will need to be carried forward and broadened.

1.124 Issues of natural resource conservation and agricultural growth cannot be effectively tackled in the absence of an appropriate technological base. In addition, technology is essential for increasing the competitiveness of the Indian economy in international markets. Indigenous development of technology is therefore of the highest importance and deliberate planned steps need to be taken to increase technological self-sufficiency of the Nation.

1.125 Rapid technical progress is altering fundamentally the skills, knowledge, infrastructure and institutions needed for the efficient production and delivery of goods and services. So broad and far-reaching are current technological developments that many see the emergence of another industrial revolution driven by a new technological "paradigm". This paradigm involves, not only new technologies and skills in the traditional sense, but also different work methods, management techniques and organisational relations within firms. As new transport and communications technologies shrink international ‘economic space’, it also implies a significant reordering of comparative advantage, and trade and investment relations, between countries.

1.126 In India also, there is considerable technological activity in a wide spectrum of firms. What is most impressive is the number of small and medium sized enterprises that are investing in new technology based ventures, and often striking out in world market as exporters. However, the rest of the industrial sector still needs to invest on technology upgrading. Experience of many developing and industrialised countries suggests that a rapid acceleration of industrial technology development calls for a deliberate ‘strategy’, in the sense that it requires the government to coordinate and guide an essentially market-driven process. Free markets suffer from various kinds of ‘market failures’, they may not throw up the appropriate amounts of infrastructure, skill, information and institutional support, and mere exposure to market forces, while getting rid of inefficient policies, may not suffice to create the technological dynamism that continued industrial growth needs.

1.127 Indian technology policies are undergoing significant changes, and on the whole have improved greatly in recent years. They are not, however, ideal. A coherent technology strategy in India must address a number of interconnected elements in the incentive regime and the relevant factor markets and institutions. The following approach should guide future policies in technology:

Skills : Technology development calls for both general and specific forms of human capital, and emerging technologies are highly skill intensive in both technical and managerial terms. While India is endowed at present with large amounts of high-level human capital, investments in the creation of new skills (as measured by enrolment levels in technical subjects at all levels) are low. In addition, firm level investments in training are highly variable, and large parts of industry invest very little in training. The SME sector in particular suffers from very low levels of skill, while industrial training institutes are often unresponsive to their needs.

Technological effort : R and D in Indian industry has been rising, but the overall level is still low and over three-quarters of research effort originates in the public sector. This is in contrast to Taiwan and Korea, where most of R and D is undertaken by industrial enterprises. It is important for the Government to analyse current technological trends in industry in order to formulate appropriate policies to encourage R and D.

Technology access : Technology upgrading requires that Indian enterprises of all types have information on relevant technologies in international markets and also within the country. Many countries have well-developed systems of computerised on-line technology information and dissemination services, often backed up with consultancy and financial assistance for small and medium enterprises to enable them to know about, test, and implement new technologies. The availability of similar facilities are weak in India. Note needs to be taken of the emerging trends of restrictions on access to technology through stringent intellectual property restrictions and on "dual use" technologies by certain groups of industrially advanced countries. Special efforts have to be made both at national as well as at international levels, to ensure that such restrictions do not inhibit progress in high technology sectors.

Technology institutions : India has a large infrastructure of technology support institutions, some of which are undergoing reform to make them more relevant to industrial needs. A number of universities, especially the IITs, are interacting increasingly with industry on technological matters, while others are outside this circle. There is a need to strengthen ‘Technology Foresight Programmes’ to analyse the implications of emerging technologies, analyse domestic strengths and weaknesses and target future technologies for local development.

Other infrastructure : Technology development generally requires the setting up of clusters of industries that can share information and skills, as in ‘science parks’ or dedicated industrial estates. Some such facilities exist in India, but their efficacy and functioning need to be strengthened.