2. Energy planning in India: a review

Integrated energy planning was recognised as an essential element of development planning in India as early as the sixties. The Government of India constituted the Energy Survey of India Committee (ESIC) in 1963 [17] to study ‘‘the present and prospective demands and supplies of energy, both total and in respect of constituents of energy on a national, regional and sectoral basis’’. The study was expected to provide the Government with the basic material for development planning in the field of energy up to 1981. The committee was specifically required to look into the energy needs of the rural areas. Keeping in view the past trends in energy consumption, the committee estimated the sectoral and regional energy demands for alternate growth scenarios and provided an analysis of the options available for meeting these demands. The committee also made several recommendations on investment planning in energy sector and pricing of different forms of energy. These recommendations provided the agencies concerned with energy planning in the country a greater insight into the long-term problems of the energy sector.

The Fuel Policy Committee (FPC) was appointed by Government of India in 1970 [18] to prepare an outline of the national fuel policy for the next 15 years. Apart from analysing the supply and demand options in the energy sector, the committee was specifically required to look into the technical and organisational aspects of energy planning with special reference to the scope for improving the efficiency of energy use. While the committee was deliberating on the subject in 1973, the world oil market went through major upheavals making it necessary for the committee to consider the implications of those changes for the Indian economy. In the light of this development, the committee made a number of important recommendations on energy policy including several suggestions on substitution of oil by coal and electricity and on energy conservation in general. The committee adopted econometric forecasting techniques and end use analysis in arriving at sectoral energy demand estimates. However, the major thrust of this study, which was finalised in 1974, was more on supply side of energy than on sectoral demand analysis and demand management.

TheWorking Group on Energy Policy (WGEP) was another expert group [19] constituted by the Government of India in 1977. WGEP was required to outline the national energy policy for the next 5, 10 and 15 years. The report of WGEP was finalised in 1979. WGEP made detailed projections of the demand for both commercial and noncommercial forms of energy up to the end of the century and suggested a number of corrective policy measures to manage the energy demand. The Reference Level Forecast (RLF) and Optimum Level Forecast (OLF) made by the Working Group highlighted the crucial issues of energy planning relevant to energy conservation and inter-fuel substitution. The methodology adopted by WGEP was more or less similar to the one adopted by its preceding expert groups. The sectoral demand estimates in this report were, however, based on a more detailed analysis of the end use requirements of energy. The recommendations of WGEP provided a broad framework for energy sector planning in the Sixth Five-Year Plan.

Even though both FPC and WGEP emphasised the need for integrated energy planning, in practice however, no formal institutional mechanism could be evolved on a firm footing for examining the various policy issues on an integrated basis. It was in this context that the Advisory Board on Energy (ABE) was set up in 1983 on the eve of formulation of the Seventh Five-Year Plan [20]. In addition to several important recommendations on the technical, financial and institutional aspects of energy, the ABE also made detailed projections of energy demand in different regions till 2004 under assumptions of different macro-economic scenarios. These estimates were made based on both end use and regression methods.

The studies undertaken by ABE and the Expert Groups prior to it provided useful policy guidelines for energy sector planning. However, considering the complexity of the investment choices available in energy and energy related sectors, it became necessary to evaluate the various options together with reference to the long-run economic resource costs involved, so as to provide a more precise indication of the optimum energy strategy to be adopted by the Government. It is in this context that long-term energy modelling studies have been undertaken in the Planning Commission to analyse the supply options available in coal, oil, natural gas and electricity with reference to the economic resource costs involved. The sectoral energy demands in this study were estimated on the basis of anticipated growth elasticities.

These studies emphasised more on resource cost optimisation on the supply side than on sectoral energy demand analysis. It is, however, becoming increasingly evident that a detailed analysis of the factors that contribute to energy demand in different sectors is essential for evaluating the energy implications of different policy options in the economy. This envisages a much more disaggregated analysis of the sectoral energy demands on the basis of end use requirements of energy in each sector. The present study is an attempt in this direction