Jun 30, 2008

Weaning India away from Oil

Business Standard / New Delhi June 30, 2008, 0:50 IST
Six months ago, Israel decided to move towards an electric grid for vehicles. Shorn of the technicalities, the plan is to replace vehicles running on liquid fuels with electric vehicles and replace fuel vends with battery vends. Back in India, however, for a country that is staring at a possible bill of Rs 300,000 crore on fuel subsidies — which is more than double the officially stated fiscal deficit of Rs 133,000 crore — there is precious little to show in terms of strategic planning for oil at the prices projected for next year. All the debate on the oil economy in India centres on who is going to bear what subsidy burden. So it will be a little less for the upstream companies one year and a little more for the oil-marketing companies in another year. The central government's burden keeps rising as it tries to protect consumers in all categories from the oil shock, and hopes that it will translate into some votes. Whether the drag effect of an oil price hike on the economy is bigger than the drag effect of a larger fiscal deficit (including off-balance sheet items) is of course open to debate. However, proper price signalling is important in order to achieve progress on developing viable alternatives to vehicles propelled by liquid fuel.
Critics say India cannot look at electric vehicle options because it is already a power-deficit country with an average power shortfall of over 10 per cent. India, however, has abundant solar energy potential across the country. It should be looking at marrying solar power to mobility. Solar panels can be set up to charge vehicle batteries. Buses running on dedicated tracks can switch to power. More trains can be electrified. Many things can be done if there is cohesive thinking at the top of the pyramid of governance. Instead, what the country sees is stray measures — the Delhi state government announcing incentives for electric vehicles, and the Prime Minister's Energy Coordination Committee pushing for the use of solar lanterns across the country instead of kerosene ones. Such diffused non-measures are not going to have any meaningful impact on the oil challenge that the country faces. What is needed is an integrated and strategic approach to deal with both sticker shock as well as the possibility of oil supply constraints in the long run. For instance, can solar panels be mandated in townships where apartment costs have already soared, and where the additional cost will therefore be marginal? Can suitable incentives be given for the local manufacture of electric vehicles? Can there be incentives for saving liquid fuel, instead of encouraging its consumption by keeping prices down? What about investing more in public transport systems across the country. In short, every effort should be made to wean the economy away from oil, and in the process, to earn some green points too. And if oil at $140 per barrel does not prompt action in this direction, what will?

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