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G. Srinivasan

NEW DELHI, May 4

THE Planning Commission Steering Committee on Energy has called for evolving an integrated approach to each sub-sector such as power, coal, petroleum, natural gas, atomic energy and renewable through the creation of a Cabinet Committee on Energy and making international benchmarking mandatory for all sub-sectors.

The Steering Committee, headed by Member, Planning Commission, Mr N.K. Singh, is understood to have underscored the need for such an integrated approach for the energy sector.

This is mainly because there are "overarching issues'' such as capital and operational efficiency, amount and nature of subsidies, environmental emissions, rehabilitation that need to be addressed across all sub-sectors.

A Cabinet Committee on Energy comprising the Ministries of Power, Coal, Petroleum and Natural Gas, Non-Conventional Energy Sources, Finance, External Affairs, Railways, the Department of Atomic Energy, Planning Commission as members is needed to approve policy and oversee implementation.

Official sources told Business Line here that a key role of the Cabinet Committee should be to manage the trade-offs between the divergent objectives that could supervene between the different sub-sectors, at all times ensuring consistency with the high-level policy goals concerning economic efficiency, energy security, access and the environment.

On the need for rendering global benchmarking mandatory for all sub-sectors, the Steering Committee is of the view that since the energy sector is not subject to competitive market forces and is dominated by the public sector, a near-term reduction in energy costs could be achieved only if these organisations are "incentivized'' to achieve globally acceptable benchmarks of economic efficiency.

It is of the view that such an attempt would enhance the market valuation of these PSUs and thus spur inflows when the Government divests its stake.

As part of an integrated approach, the Steering Committee is of the view that all subsidies be shifted explicitly to Central/State Budgets since such a targeted approach would preclude distorting market-based pricing mechanisms, which would ensure more optimal and economic resource allocation, sources said.

Alongside, it is understood to have plumped for fostering environmental standards and enactment of "a transparent Regulatory and Legislative framework that allows easy enforcement of these standards''.

Touching on private participation, the Steering Committee suggested measures such as according infrastructure status to coal mining, coal washing, pipelines, terminals and LNG facilities and phased withdrawal of Government ownership from PSUs dominating the energy sector, besides extending the tax concessions available to the power generating companies to transmission and distribution and selectively to other energy sub-sectors.

Underlining the need to quicken the pace of deregulation in the energy sector, the Committee is reported to have contended that even as the long-term emphasis on privatisation should be maintained, the Government might not have an option other than stepping up public investment during the Tenth Plan.

This is largely because of the continued bankruptcy of the State sector power utilities, the continued absence of an effective, transparent and independent regulatory regime that generates confidence among private investors in the power sector and continued delay in passing the electricity and the coal bills.

Pointing out that the stress in the energy front has so far been on supply side management and very little attention to demand side management, the N.K. Singh Committee's suggestion include tariff and price rationalisation, mandatory energy audit in industry, replacing energy inefficient pumps in the agricultural sector, improving end-use efficiency of traditional fuels, mandating energy efficiency levels in transport vehicles, and shifting traffic from road to rail mode.

The Committee, while deliberating the level of dependence on import energy, opined that the imported component of primary energy should be kept in the range of 20-25 per cent of the total primary energy requirement.

A higher level of import dependence was deemed as being detrimental to the country's energy security and balance of payments.

While it might be feasible to keep import reliance at or below 25 per cent during the Tenth Plan, it might rise to the 30-40 per cent range by the end of the Eleventh Plan unless the country manages to raise coal production by 75 per cent, more than double its hydro generation and more than triple the output from renewable sources over the next decade.

Though this assumes only marginal increases in oil and gas production over the next ten years, it is still a daunting task, the Committee said adding that slower than projected demand growth, major oil/gas discovery under National Exploration Licensing Policy II or NELP III, equity oil and continuing improvement in the country's hard currency reserves would be `mitigating factors'.

Apart from Mr N.K. Singh, the Steering Committee comprises Secretaries of the Union Government, besides experts like Mr T.L. Sankar, Dr R.K. Pachauri.

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