INTEGRATED ENERGY POLICY TOWARDS ENERGY DEVELOPMENT

[priyanka bhutani]

India needs to sustain an economic growth of at least 9 percent over the next 25 years if it is to eradicate poverty and meet its larger human development goals. The primary energy supply (including gathered non-commercial such as wood and dung) must increase at the rate of 5.8% annually for fuelling the growth. Meeting this requirement is a challenge which needs to be addressed through an Integrated Energy Policy. The broad vision behind the Integrated Energy Policy is to reliably meet the demand for energy services of all sectors including the lifeline energy needs of vulnerable households in all parts of the country with safe, clean and convenient energy at the least-cost.

India adopted the Integrated Energy Policy. This is a comprehensive policy on energy for India. The integrated policy is expected to explore alternative technologies and possible synergies that would increase energy system efficiency and meet requirement for energy services.

It would allow for relative pricing of different fuels taking into account both their efficiency in use and convenience as well as the amount of pollution they generate. An integrated policy is also expected to bring in a level playing field for all energy players large or small, public or private, domestic or foreign.

The policy envisages a competitive energy market and market-determined energy pricing. Today, the price is decided by the government and which increases burden on public sector oil companies. To reduce this burden a policy is formed.

Allocation of energy resources shall be based on competition. This policy of pricing and allocation will reduce amount of POL subsidies and thus bring down fiscal deficit.

Though there will be subsidies, but they will be based on transparent and target oriented system. Policy seeks to reduce black-marketing of subsidised petroleum products.

The policy seeks optimal exploitation of domestic energy resources and also vigorous exploration and acquisition of energy assets abroad, so that energy security can be attained effectively.

The policy aims to meet energy demands of all sectors. Therefore, not only production of energy will be increased but also its transfer will be made cost-effective. Consideration of environment is also taken into account.

The Integrated Energy Policy is formed under the expert panel of Planning Commission. The IEP was need of the hour because if India wants to continue its economic growth trajectory at high rate, it must have sufficient energy sources to meet demands of economic as well as non-economic activities. Again, according to the IEP, energy should be sustainable and reasonably cost-effective.

Salient features of the Policy:

• Provide appropriate fiscal policies to take care of externalities and independent regulation to take care of anti-competitive market behaviour.
• Both the tax structure and regulatory philosophy applied in each energy sector should be consistent with the overall energy policy should provide a level playing field to all players whether public or private.
• Taxes should be neutral across energy sources except where differentials in taxation across energy sources are specifically intended to counter differential externalities, such as those reflecting environmental externalities.
• Subsidies must be transparent and targeted. Consideration should be given to alternative means of achieving the social objectives sought to be achieved by energy subsidies.
• Promote energy-efficiency by enforcing energy standards effectively.
• PSUs operating in the energy sector must operate with autonomy and also full accountability to ensure incentives for adequate investment through their own resources and improvements in efficiency in energy production and distribution.
• India will have to pursue all available fuel options and forms of energy and must seek to acquire new energy sources abroad.
• India must actively promote technologies that maximise energy efficiency; demand side management, conservation and energy security and this must be done by encouraging domestic research into such technologies and free access to suitable energy related technologies available abroad.
• For economic efficiency and for promoting optimal investment in energy, energy markets should be competitive wherever possible. Competitive markets would lead to trade parity prices ensuring that energy use and inter-fuel choices would be economically rational. But a truly competitive market requires that there are multiple producers and that there are no entry barriers to new producers or to imports.