Paper Example on India's Energy Sector

Introduction

India, also known as The Republic of India, is a nation situated in South Asia and covers an area of 3,287,263 square kilometers making it the 7th largest country in the world by size. India is surrounded by large water masses like the Indian Ocean on the South, the Bay of Bengal to the southeast, and the Arabian Sea to the southwest. Also, it shares land borders with China and Nepal to the northeast, Pakistan to the west, and Bangladesh to the east (Profile: National Portal of India, 2018). For the past seventy years since independence, India has recorded significant developments in the socioeconomic sector among them increase in population size and growth of the economy.

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As of July 2018, India had a total population of 1,296,834,042 people which was the second biggest after China (CIA Factbook, 2018). The median age of the population is 28.1 years with males having a median age of 27.5 years while females have a median age of 27.5 years. The main ethnic groups include the Indo-Aryan that comprises 72% of the total population, Dravidian 25% while the rest comprise 3% of the total population. Although there are two main ethnic groups, they are several subgroups which speak different languages. English is the main official language but there are other 22 official languages. The main religions include Hindu (79.8%), Christian (2.3%), Muslim (14.2%), Sikh (1.7%), and rest are practiced by 2% of the population (CIA Factbook, 2018).

Despite the huge population, the country has a low population growth rate of 1.14% with 34% of the population living in urban areas. Although India experienced many social problems decades ago, the high economic growth rate has enabled the government to address the majority of them. According to the International Monetary Fund (2017), the size of Indian economy was $2.611 trillion making it the sixth largest economy by market exchange rates and third largest by purchasing power parity in the world. In the past two decades, the annual growth rate of India's GDP has averaged at 5.8% but increased to 6.1% in 2012 to join the list of the fastest growing economies in the world.

According to CIA Factbook (2018), India has the second largest workforce in the world with more than 513.7 million people in the workforce. Although the agricultural sector contributes 18.1% to the national GDP, half of the workforce is engaged in this sector. The service sector which contributes 55.6% and the industrial sector which contributes 26.3% to the national GDP constitute the second and third largest workforce. Major industries include telecommunications, pharmaceuticals, steel, chemicals, mining biotechnology, construction, and petroleum. These industries rely heavily on the country's natural resources such as coal, oil, gypsum, kaolin, and iron ore.

Energy Characteristics of India

Overview and Events Affecting India's Energy Sector

In 2013, India was the third largest consumer of energy after China and the U.S. The high consumption is due to high rate of economic growth in the past decades that have resulted in the growth of industries. The country's energy consumption has increased by 75% from 2000 to 2013. That sharp increase has posed many risks given that energy production has not increased sufficiently to meet the demand. Statistics by International Energy Agency (2016) show that while the consumption has increased by 76%, the gap between production and consumption has more than doubled for the period between 2000 and 2013.

One of the primary challenges facing the Indian government is meeting the growing energy demand and developing sustainable and affordable energy resources to attract investments for transmission. Currently, issues such as high regulation of fuel prices for consumers, subsidies for fuel by the government, bottlenecks in transmission, rigid and complex regulations in the energy sector, and poor policies discourage big investment projects in the energy sector (Garg, Naswa, & Shukla, 2015). For instance, coal production is limited to state corporations only and no private investments are allowed while other sectors like electricity and petroleum are highly regulated which discourages private investments (Kumar et al., 2015). However, the new regime has started implementing measures such as reforms in the gas pricing policy and reduction in petroleum subsidies in an attempt to attract investors.

Although the total energy consumption has increased, the per capita energy consumption for the majority of Indians has remained low. In 1991, the per capita energy consumption was 9.81MBtu. twenty years later, that figure has increased to 19.74 Btu. Data by EIA shows that India's per capita consumption is below the world average of 74.96Btu. However, Kumar et al. (2015) point out that the figures for India's per capita consumption of energy cannot illuminate a clear picture because a huge percentage of the percentage still does not have access to current and sustainable forms of energy. According to CIA Factbook (2018), only 79% of the total population had access to electricity in 2013. There are inequalities in the distribution of electricity with 98% of the urban population having access while electrification in the rural areas was 70% (CIA Factbook, 2018). Further, the Planning Commission of India in 2014 stated that more than 250million people do not have access to electricity with the majority of them relying on traditional biomass energy for home purposes such as cooking (Planning Commission of India, 2014). However, the low per capita consumption of energy in India is expected to increase due to the policies and projects being implemented by the Indian government and the growth of GDP that is projected to increase by an average rate of 9% up to 2032. Going by these figures, the primary energy consumption in India will increase by more than 300% and the demand for electricity will increase by five times (EIA, 2016).

Energy Consumption Pattern in India

According to the 2011 census, 69% of India's population resides in the rural areas (Office of the Registrar General & Census Commissioner, India, 2012). An NSSO survey conducted in 2010 revealed that only 12% of the rural population use clean cooking fuel, 66% use electricity for lighting purposes, while 34% use kerosene (Ramji et al., 2012). In the urban areas, the majority of the population use clean energy for cooking and lighting. On the other hand, the industrial sector heavily relies on coal, oil, and gas for the production of electricity and other purposes.

Figure 1: Energy Use by sector in India 2013

As shown in the figure below, the primary source of energy in India is coal which supplies 44% of total energy, biomass at 24% and oil at 23%.

Figure SEQ: 2 Energy Consumption in India as of 2013

In India, coal is mainly used to produce electricity. According to EIA (2016), the energy consumption of the power production sector has increased from 11% in 2000 to 15% in 2013. That is attributed to the high rural-urban migration since the 1990s which has seen an increase in the use of electricity in urban households.

Apart from coal, India is a high consumer of crude oil. In 2015, it was the 4th biggest consumer of crude oil in the world. Despite the high oil consumption, there is a huge gap in India's oil supply and demand. Data by EIA (2016) shows that the demand for oil in India was 4.1 million barrels while the domestic supply was only 1million barrels per day. With the current expansion of the industrial and transport sectors, oil demand is projected to rise.

Comparison of Energy Sector in India vs China

China and India are among the largest countries in the world both in the size of their economy and population. The rapid development of both countries has been fueled mainly by coal with India leading the pack globally at 60% consumption of coal while China is ranked second with a consumption of 57% as of December 2013 (EIA, 2016). Interestingly, China and India have striking similarities and differences in relation to the energy sector. These facts lead to concerns whether India is the next China. In order to understand the context and compare the energy profiles of both countries, data from reliable sources are used to analyze the similarities and differences relating to the history of the energy sector, the context of the current energy profile, and future projections.

Comparison of China vs India from 1991 to 2014

China and India are the two biggest countries in the world in terms of population with China having a population of 1.3billion people while India has a population of 1.2billion people (O'Neill, Ren, Jiang, & Dalton, 2012). Although the difference in population size is small, there are big differences in energy demand, production, and consumption between the two countries. Data provided by World Bank in 2014 showed that China had a per capita energy consumption of 2143kgoe while that of India was 624kgoe (kilogram of oil equivalent) (The World Bank, 2014). In 2014, India's per capita power consumption was 1010kwh and China's was 4000kwh (The World Bank, 2015). That huge difference is noted not only in power consumption but also in the consumption of natural gas and oil.

For the period between 1991 and 2001, the difference in the growth rate of oil demand between China and India was still big though not as big as after 2001. It is interesting that China joined the World Trade Organization, an event which marked a turning point for the country. Between 1991 and 2001, China's growth rate of oil demand was 245000bpd while that of India was 117000bpd. However, between 2002 and 2014, the average growth rate of China's oil demand was 472000bpd while that of India was 129000bpd. Similar changes were also noted in the natural gas sector.

Comparison of Demand Growth Projections in India vs China

According to Abdi (2018), the events that stimulated the sharp increase in energy demand in China in the past decade are currently witnessed in India. In this view, the EIA (2016) projects that India's energy demand will double in the coming three decades as its economy grows to reach $9trillion by 2046. During this period, the world's energy demand is expected to increase by 26% to reach 703quadrillion British thermal units with India's percentage increasing to 9% from the current 6% (EIA, 2016). Further, India's electricity consumption is expected to increase by 185% with the use of coal to produce electricity increasing twice-fold. It is important to note that these projections are based on current usage of energy and do not take into account of the government's plans. Consideration of the government's plans gives a different picture.

On the other hand, China's per capita income is expected to increase by 300% by 2040 while its economy will grow to reach $16trillion in 2025 and $30trillion by 2040 (Singh, 2018). At that time, China's economy will account for 20% of the world's economy in 2040 and the energy demand will increase from 116 qBTUs in 2013 to 153qBTUs in 2025 and 154qBTUs by 2040 (Singh, 2018). The slow growth rate for the energy demand between 2025 and 2040 is attributed to the fact that China's economy will have reached the maturity stage by 2025 hence the growth rate for energy demand will reduce.

Comparison of the Use of Renewable Energy between India and China

Both China and India have acknowledged that they are increasingly concerned about the impacts of global warming. As a result, both countries have invested enormous resources into the development of sources of renewable energy to reduce dependence on fossil fuels. In particular, India plans to have increased the production of green energy from the current 3GW of solar and 22GW of wind to 100GW of solar energy and 60GW of...