NITI Aayog making a blueprint to tackle India’s energy woes

India has started work on a plan to ensure energy security that’s being shaped by a group at the newly established NITI Aayog think tank, energy minister Piyush Goyal said on Tuesday. The National Democratic Alliance (NDA) government is looking to supply adequate power at affordable prices and double electricity generation capacity to two trillion units by 2019, Goyal told delegates at a conference organized by the Confederation of Indian Industry (CII), a lobby group. “NITI Aayog has set up a group which is now looking at energy security plans for the next 100 years,” Goyal said.

India’s energy woes have meant the country has been hard-pressed to generate enough power to keep its economic engine running at a price that makes its manufacturing competitive. The government has also put special focus on the importance of energy diplomacy, specifically with reference to building India’s relationship with the energy-rich regions of West Asia, Central Asia and the South Asian energy corridor. The current regime is also focusing on renewable energy, aiming to boost it to 300 billion units by 2019 from 60 billion now, the minister said. In addition, Goyal also predicted India’s coal production would reach 1.5 billion tonne by then, effectively doing away with the need to import the fuel.

This comes in the backdrop of the government aiming for a 10% reduction in energy imports by 2022 and a 50% cut by 2030. India imports 77% of its energy needs. Its energy import bill of around $150 billion is expected to double to $300 billion by 2030.

To reduce tariff from renewable sources of energy such as solar and wind, Goyal said his government was looking at providing green power at less than Rs.4.50 a unit. The government was also trying to improve counter-party risk—bidding in dollar-denominated tariff and creating an escrow account to help the developers with hedging risk.

Foreign loans are cheaper than those offered by local banks and financial institutions. However, even though the interest costs of foreign loans are lower, project developers have to hedge their foreign currency exposure. The Narendra Modi government has pushed renewable energy to the top of its energy security agenda, seeking to reduce India’s overwhelming dependence on coal-fuelled electricity. An earlier target of installing 20,000 megawatts (MW) of solar energy capacity by 2022 has been raised fivefold to 100,000MW.

 

Concerns are beginning to be raised over India’s ambitious targets to crank up solar and wind energy production, thanks to the perilous finances at the primary customers—the state government-owned distribution utilities. The inability of these to effect necessary, but unpopular, tariff hikes are expected to impact their ability to purchase costlier green power. In consequence, the entire renewable energy industry is expected to add only 4,000-5,000 MW of capacity. “States are not willing to buy power,” said Goyal. “Discoms (distribution companies) are certainly a challenge.” The government is engaging with each state-owned distribution utility separately, he said.

The central government is holding a conference of the state power ministers on 9-10 April in Guwahati. The energy minister also spoke about the government’s divestment agenda and said the sale of stake in state-owned firms will start in the first week of April.

Finance minister Arun Jaitley has set an ambitious target to raise Rs.69,500 crore through divestment in 2015-16, despite the government missing the previous year’s target by more than half. In 2014-15, the government had set a target of Rs.63,425 crore through such sales, out of which it has so far garnered only Rs.31,350 crore, including Rs.5,000 crore from the sale of special drawing rights to the Reserve Bank of India.

(This news story is from Live Mint)