Financial Daily from THE HINDU group of publications
Tuesday, Sep 24, 2002
Industry & Economy
Power infrastructure growth hinges on pricing, says IEA
NEW DELHI, Sept. 23
THE International Energy Agency (IEA) has said that further reform of energy pricing remains ``a vital pre-condition to the development of energy supply infrastructure in India''.
In its 2002 World Energy Outlook, released in Paris, the Paris-based inter-governmental think tank of rich countries' club said that foreign investors would have to provide an increasing part of the capital.
The cumulative investment needed over the next three decades to meet the projected increase in generation capacity alone is estimated at around $270 billion.
India would become ``increasingly important'' player on world energy markets as continued rapid expansion of the population and strong economic growth drive up energy demand.
Primary energy supply would rise by an average 3.1 per cent per year between 2000 and 2030 and demand for oil, gas and electricity would escalate rapidly, it said.
With limited domestic resources, India would have to import more oil and gas. Coal imports would probably increase too, as demand shifts to higher quality grades that could be acquired more cheaply abroad. India's oil import dependence would also increase sharply from 65 per cent in 2000 to 94 per cent in 2030.
IEA said the prospects for electricity supply were ``uncertain'', given the industry's severe financial difficulties, the result of decades of underpricing and poor management. Massive investment is needed to boost India's generating capacity and to improve and expand its transmission and distribution networks to meet the growing demand.
Even as India's electrification rate is projected to grow, IEA apprehends that hundreds of millions of people would still be without electricity in 2030.
Natural gas could play ``a much bigger role in India's energy mix in the future'', it said, adding that financial problems in the power sector the key growth market for gas would need to be found for liquefied natural gas (LNG) and cross-border pipeline projects. Some half of the projected growth in gas demand would be met by imports, it added.
Taking a broader perspective, the World Energy Outlook has depicted a future in which energy use continues to grow inexorably, fossil fuels continue to dominate the energy mix and developing countries fast approach the OECD countries as the largest consumers of commercial energy.
Though the earth's energy resources are adequate to meet the rising demand for at least the next three decades, the projections in the outlook raise serious doubts about the security of energy supplies, investment in energy infrastructure, the threat of environmental damage caused by energy production and use and the ``unequal access'' of the world population to modern energy.
It said that fossil fuels would remain the primary energy source meeting more than 90 per cent of the increase in demand. Global oil demand would rise by about 1.6 per cent from 75 million barrels per day (mb/d) in 2000 to 120 mb/d in 2030 with almost three-quarters of the increase in demand coming from the transport sector. Oil would remain the fuel of choice in road, sea and air transportation.
Consequently, there would be a shift in all regions towards light and middle distillate products, such as gasoline and diesel and away from heavier oil products, used mainly in industry with the shift getting more ``pronounced'' in developing countries, which currently have a lower proportion of transportation fuels in their product mix.
A key result of the Outlook is that energy trade will expand rapidly. In particular, the major oil and gas consuming regions would see their imports grow substantially and this trade would increase mutual dependence among nations, even as this would also intensify concerns about the global vulnerability to energy supply disruptions with production increasingly concentrated in a small number of producing countries, IEA said.
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