As absurd as it gets

Gadkari's statement on petroleum is reminiscent of the worst mistakes of the licence raj days

The minister for roads, Nitin Gadkari, made an absurd statement last week at a NITI Aayog conference for promotion of methanol. He said India could become "a zero petroleum import nation" since "we are promoting alternative fuels like ethanol, methanol, bio-CNG...this will boost rural - agriculture and create huge employment".

As he said, "We can make ethanol from biomass, that is, cotton straw, wheat straw, rice straw and bagasse." It is indeed possible to extract energy from biomass. Generating energy from alternative fuels such as ethanol, methanol and bio-gas could indeed, offer alternative employment. This is in addition to solar and wind energy, also being promoted in a major way.

But, all these initiatives taken together will not result in India becoming a "zero petro-import" nation. Not in the next 30 years at least. In fact, India's dependency on imported fuels - not only crude but also gas and coal will grow.

The simplest explanation: Energy consumption is directly linked to economic growth. India is growing quite quickly and, short of nuclear war, will continue to grow reasonably fast. As it grows, energy consumption will rise.

Although new sources will contribute more, there is no way the troika of fossil fuels will be replaced. The most aggressive targets envisage India's electricity mix containing a maximum of 40 per cent generation capacity from renewable sources by 2030. However, by then, the energy demand (which includes transport, cooking fuels, etc, in addition to electricity) will have more than doubled. This means India will actually be importing more fuel.

NITI Aayog has done a report on energy scenarios. That envisages gross domestic product (GDP) will grow at a 7.4 per cent compound annual growth rate (CAGR) until 2047. Urbanisation is assumed to increase to 51 per cent of population in 2047, up from 31 per cent at present. Per capita energy consumption will grow at a CAGR of 3.3 per cent. The CAGR of energy supply will grow at 4.4 per cent.

Using these base assumptions, the report considers scenarios of rising transport demand, cooking demand, electrification demand, etc. Even though energy efficiency will grow, a richer, more industrialised society will use more energy.

The base level taken is the energy mix in 2012, which consisted of 27 per cent oil, eight per cent gas and 46 per cent coal. By 2030, in the 'Level 2 scenario' of the report, coal will contribute 52 per cent, while oil contributes 28 per cent and gas contributes 8.5 per cent. In absolute terms, energy consumption in 2030 will be 117 per cent higher than in 2012, which means oil, gas and coal consumption will all more than double.

The 'Level 2' scenario assumes continuity of the current energy policies, along with "determined effort" to bring positive changes. Import dependency for the three fossil fuels taken together will rise, from 32 per cent in 2012 to 45 per cent in 2030.

Another fallacy: While fossil fuels are polluting, it is also wrong to assume that the alternatives are all clean. Most energy sources involve some environmental damage. Large parts of the Amazon rainforest have been devastated by Brazil's drive to derive alcohol-based fuels. Wind turbines kill birds and require quantities of steel and fibre-reinforced plastics, which are made via "dirty" processes. Solar requires water to clean and rare earth metals as well.

India doesn't possess sufficient domestic reserves of gas and crude oil and doesn't have enough high-grade coal. This means import dependencies, like it or not. That means exposure to global tradewinds. The inward-looking attitude of 1955-1990 kept India poor because it ignored the import compulsions and pursued the "jumla" of self sufficiency. Things changed only when the sharp rise in fuel prices during the 1991 Gulf War triggered near-bankruptcy.

Since India must, willy-nilly import fuels, it has to have the ability to pay for imports. That means developing of exports. For example, India's export of refined petro-fuels is a healthy signal. A sustained revival of other exports is also necessary to maintain growth momentum.

Most of Western Europe, Japan, China and the US have been fuel-import dependent for long periods. So, this is no barrier to prosperity. But, the dependency must be acknowledged and catered for. Presumably Mr Gadkari's remarks will be ignored, or dismissed as "jumla". But, it is scary when a senior minister displays an attitude reminiscent of the worst mistakes of the licence raj days.