Lydia Powell, Akhilesh Sati and Ashish Gupta, Observer Research Foundation
December was dominated by news on negotiations in Paris and post Paris analysis. India’s call for a just and equitable agreement that takes aim at lifestyle emissions rather than livelihood emissions failed but few in the media thought that this was important enough to be reported. The Paris Agreement was more about the power and tastes of western civil society organisations than about democratic responsibilities and choices of nation states. The influence of civil society organisations such as 350.org that see fossil fuels as the biggest enemy of mankind was much stronger than democratic preferences of large nation states such as India. The media which the civil society trusts as the final arbiter of policy hailed the agreement as historic. Thanks to the simplifying powers of the media the world is now convinced that the complex phenomena of climate change has been conquered by man.
Oil & Gas
Oil prices continued to fall in December. This was both good and bad for India. One of the many reasons why oil prices are low is that global economy has not revived as anticipated. Obviously this has not been good for India as export markets are shrinking.
This is taking a toll on employment in the manufacturing sector as well as the service sector. Tax take from the petroleum sector is falling and this has led to calls for an increase in ad valorem levy on oil cess. On the other hand low oil prices have enabled higher consumption. This is good for India as higher energy consumption can potentially contribute to higher levels of economic activity. Demand for oil products grew by 6 percent in November but demand growth was not uniform along all products. Petrol consumption continued to show double digit growth while consumption of most other petroleum products including diesel has slowed down substantially. The growth in petrol consumption signals growth in use of personal vehicles. On the other hand the decline in consumption of diesel signals a decline in economic activity. It will not be a good sign if the latter catches up with the former.
The other big headline in December was the ground breaking ceremony for the TAPI pipeline in which the Hon’ble Vice President of India participated. The speed with which announcements of progress are being made on TAPI defiles logic. The world is awash with cheap natural gas and yet this has had little or no impact on consumption levels in India. In this light, it is not clear why India would rush to consume gas delivered through a cross border pipeline.
There were reports of an alternative undersea gas pipeline from Iran as well. Only one of the many pipeline options can succeed, even in theory. GAIL was reported to be promoting gas as an alternative to coal based power generation in and around cities. The idea has not worked in Delhi and it is unlikely that it will work in any other city.
The nuclear sector got back on the news in December with the visit of the India Prime Minister to Japan and Russia. India and Japan signed an MoU on peaceful use of nuclear energy. There were announcements of many more nuclear plants from Russia. There was also talk of a policy to fast track nuclear plants. Whether it is promoting natural gas or nuclear energy as fuel for power generation the real problem has been the absence of a clear economic case. The economic case will strengthen only when demand takes off.
The lime light was on coal as the climate deal was being negotiated in Paris. Notwithstanding the article in the Paris agreement that seeks to limit funding for non-green energy sources, India stressed on efficient utilisation of coal resources with minimum damage to the environment. To take the commitment forward, the government announced a plan to bring in a new regime for sampling and testing of dry coal from 1 January 2016 to ensure supplying quality coal to consumers. The decision was the outcome of controversies between NTPC and CIL on the quality of coal. Coal India Ltd (CIL) has roped in additional thirdparty agencies such as Allied (India), Shree Coal Research LLP, Mitra SK Pvt Ltd, R V Briggs & Company Pvt Ltd. As per the new rules, the authorized representatives of NTPC and CIL shall jointly witness the process of sample collection as per Bureau of Indian Standard regulation. It has also been decided that coal will be crushed before supplying to the consumers from 1 January 2016 onwards. This decision can be seen as an endeavour towards efficiency wherein the customers pays for the quality that is determined independently.
In another major development, the Cabinet Committee on Economic Affairs (CCEA) approved the allotment of coal blocks to PSUs for sale of coal mainly to medium, small and cottage industries under the provisions of the Coal Mines (Special Provisions) Act, 2015 keeping in mind the interest of small and medium enterprises. This is a step towards commercial mining as state utilities will be allowed to sell coal to private companies. This could put an end to the Centre’s monopoly over mining and sale of coal. This will also enhance domestic production of coal and eventually reduce imports.
Apart from this, the Union Cabinet also has approved a policy framework for development of Underground Coal Gasification (UCG) in coal and lignite bearing areas in the country. Central Mine Planning and Design Institute Limited (CMPDIL) has been selected as the nodal agency for development of bid documents, work programme, conducting the bidding process, evaluation of bids, monitoring and process protocols etc. An Inter-Ministerial Committee under the Ministry of Coal with members from concerned Ministries has been entrusted with the task of identification of the areas, deciding blocks to be put to bidding or awarding them to Public Sector Units (PSUs) on nomination basis. Given the limited coal reserves, UGC is a way forward towards securing energy security as the method allows extracting of energy from coal/lignite resources which are otherwise regarded as uneconomical to work through conventional mining methods.
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