How India’s Energy System Is Structured
India’s energy policy-making is highly fragmented and decentralized, which is reflective of a tradition of federalism. The country’s energy laws can be broadly placed under two categories, one dealing with laws relating to coal, petrol and gas, which are derived from minerals, and the other with laws relating to electricity. The federal government has control over mineral and oil resources, nuclear energy, and some taxes. States have jurisdiction over water and land rights, natural gas infrastructure, taxation of mineral rights, and the consumption and sale of electricity. In some of the other areas, such as electricity, forestry, and economic planning, the federal government and state governments share decision-making powers. There is no institutional body that has complete authority over a national energy policy.
Several ministries share power over various aspects of energy policy and energy infrastructure, which can result in fragmented decision-making. Similarly, the power sector in the country is placed under the dual responsibility of the states and the federal government. Power produced and sold in the same state is subject to the oversight of the State Electricity Board and the State Electricity Regulatory Commission, whereas power sold between states is subject to federal oversight and regulation. This division of decision making powers in the broad energy sector has at times been beneficial in certain ways, like the promotion of locally available energy sources, manpower expertise, local participation by state governments, etc., whereas at times this has also led to many problems, like overlap and contest in decision formulation, etc.
All of the major energy producers in India are primarily into fossil business, i.e. oil, gas and coal. The top seven among them are: Oil and Natural Gas Corporation of India, Reliance Industries, Indian Oil Corp, NTPC, GAIL, Bharat Petroleum Corp, and Hindustan Petroleum Corp (which also stand among the top 250 global energy companies). Six out of the seven are state-owned or state-supported oil companies, which clearly implies that the state acts as the predominant actor in driving the energy dynamics in the country. Moreover, there are a number of local as well as international private players that are actively involved in the energy production sector, like Reliance Industries, which was ranked eighth among the top global oil companies in the survey ‘Platts Top 250 Global Energy Company Rankings 2016’. The number of private players entering this sector is on a rapid rise.
Coal, which is one of the dirtiest of all energy sources, contributes to almost 58% of the power generation in India, and will continue to be a major source in its energy basket in the future as the government is promoting the harnessing of locally available coal. It recently allotted 16 coal blocks to state companies for commercial mining. On the whole, fossil fuels (i.e. coal, oil, and gas) together contribute 70% of India’s electricity generation.
The current Indian government has rolled out a number of initiatives to decrease greenhouse gas emissions. In the annual budget for financial year 2016-17, the country’s Finance Minister Arun Jaitley announced that the clean energy tax on coal mined and imported in the country has been increased from Rs 200 ($2.94) to Rs 400 ($5.88) per ton. The minister also stated that the revenue collected from this tax shall be put into the renamed Clean Environment Fund. Furthermore, India signed a series of bilateral clean energy and climate change agreements with the US when Prime Minister Modi visited the US in June this year.
There have also been non-governmental initiatives for measuring and scaling down levels of greenhouse gases, like India Greenhouse Gas Program (India GHG Program). It was a voluntary initiative launched in 2013 by World Resources Institute—India, The Energy and Resources Institute (TERI), and Confederation of Indian Industry (CII) that aims to standardize measurement and management of GHG emissions in India. The India GHG Program provides businesses with the wherewithal and technical knowhow to measure their emissions, identify reduction opportunities, establish short and long-term reduction goals. It also tracks their progress based on the GHG Protocol, the most widely used emissions accounting and reporting standard in the world.
Energy efficient activities are not the only emissions reduction measures that Indian companies are putting into action. However, in the last few years Indian companies have made emission saving of over 70% that are from energy efficient activities. Also, there are emission cuts happening through other activities like replacing traditional biomass with off-grid standalone systems, community solar programs, etc.
But the problem still remains as developing countries like India will need between USD 70 and USD 100 billion per year through 2050 to meet current and future climate adaptation needs as calculated by the World Bank. However, India is currently spending approximately USD 4.4 billion annually, which is far below the stipulated benchmark for realistic greenhouse gas mitigation activities.
The country’s energy basket has a mix of all the resources available including renewable, but is heavily tilted towards fossils. In the total energy basket mix, the share of oil and gas constitutes around 40%. The country is a net importer of crude oil, however it has become a net exporter of petroleum products by investing in refineries designed for export.
India has huge potential for renewable energy, with 45 GW of hydropower and 23 GW of wind power capacity, among other renewable sources. However, it has not yet been able to tap into its potential energy reserve. The present government is aiming high in this area, with a target to reach 175 GW of installed renewables capacity by 2022 (excluding large hydropower), which is a steep increase from today’s level of 37 GW. Solar power, and to an extent wind, are key elements in driving the government’s expansion plans.
Profiles of Leading Energy Companies
Coal India: Coal India Limited (CIL), a 90% state-owned enterprise, stands as the sixth-largest mining company in the world. The company produces 81% of the country’s coal requirements from its 430 mines, of which 227 are underground mines, 175 opencast mines, and 28 mixed mines. Its target is a total output of 100 mt during 2020, which is up from 60 mt this year. This will be likely achieved by opening of 25 new mines, which entails a total investment outlay of 20,000 crore.
Companies Investing in Renewable Energy: Today, India’s biggest energy companies are moving beyond their roots in fossil fuels to invest in renewables, backing Prime Minister Narendra Modi’s goal of finding alternatives to fossil energy and promoting clean energy. Indian Oil Corp., a prominent refiner, along with Oil India Ltd., are working to build a 1-gigawatt solar farm in Madhya Pradesh. Tata Power, one of the country’s large private power producers with 7.3 gigawatts of capacity, signed the biggest renewables agreement in India last month, acquiring 1.1 gigawatts of clean-energy capacity valued at USD 1.4 billion from Welspun Renewables Energy Pvt Ltd. Government-owned NTPC, India’s largest power generator with a coal-based installed capacity of 35 gigawatts, intends to transform itself into the largest green power producer in coming years. Hence, at present the largest oil companies in the country are trying to join hands with the largest conventional electricity generators, like NTPC Ltd. and Tata Power Co., that are emerging as the biggest players in the country’s clean energy sector.
Natural Energy Processing Company (NEPC), a public limited company, has been a pioneer in harnessing wind energy in India. The Khemka Group owns and promotes the company with the primary goal of promoting wind energy. The group has a multibillion turnover from diversified activities in the field of power generation from wind energy and manufacture and marketing of wind turbine generator (a renewable energy device). The company has so far installed over 1,600 WTGs of different capacities totaling to more than 450 MW in various states of India. It has also supplied more than 4,000 wind turbines across India, and has also setup demonstration wind farms in various wind-prone states in the country. Now, the company has diversified into manufacturing solar technology compatible power systems—Inverters/UPS of various capacities available with or without solar panels.
–Submitted by Climate Scorecard Country Manager Hriday Sarma