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Energy crisis in South Asia

October 25th 2011
By Abhirup Bhunia

India, Pakistan and Nepal are at the forefront of a looming South Asian energy crisis. Developing nations, particularly dominant Asian players like China and India, have driven the world economy for a while now. But in what is likely to have a calamitous effect on industries and consequently on growth outlooks in the emerging nations, sources of energy are expiring or are in short supply.

A dark Diwali this time doesn’t look avoidable with much of the power stations left with coal only enough to keep the next few days going. In India, electricity companies and energy utilities are primarily state-owned. Populism ensures that tariffs are not increased. Meanwhile, with coal prices rising, it becomes increasingly difficult to generate electricity without passing the increased price on to the consumers, which is not an option under political influence.

It is another matter that in the end, it is the consumer that suffers due to incessant power outages.

The major problem lies with the lack of supply in face of growing demand, spurred by a rise in population and consumerism. Also, India’s dependence on energy imports is very high – it imports more than 75% of its oil needs and close to a quarter of its coal requirements are met by imports. In the next five years the import dependence for LNG is pegged to grow by about 10%. Thus, projects that have energy products as the chief raw material face uncertainty over unsure supplies. Also, due to a lack of market-determined prices for resources like coal and fuel, energy-intensive projects face losses on every upward spike in international prices of the commodities.

In spite of everything, India’s clean energy investments don’t match up to its growing global clout and the contribution from renewable energy sources is poor at 10%. The nuclear disaster in the Fukushima power plant in Japan has given rise to paranoia in India with major nuclear power projects scattered across the length and breadth of the country being vehemently opposed to by locals. Although land acquisition issues too are responsible behind the protests, the plants are stalled nonetheless adding to India’s energy security uncertainties. The government is seen to be encouraging state-run firms and private companies to acquire energy assets abroad to feed the energy hungry nation. The private sector has been acquiring coal blocks in Australia, Indonesia, etc, shale blocks in countries like the US and Canada, in addition to prospecting for oil off the Vietnam coast. The total energy shortage during peak hours has been estimated at as high as 14%. At the same time, continuous power cuts end up decreasing industrial output, hampers productivity and finish with substantial losses to industries across the board. Decreased coal mining due to a policy of classifying sensitive forests as ‘no-go’ areas for miners has been another major factor in dwindling coal supplies. In fact coal shortages will affect 15000 MW worth of power generation in the coming days. More than 65% of India’s electricity come from thermal power plants.

Landlocked Nepal, India’s neighbour to the north, is also facing massive power cuts and an energy crisis has long been projected in the Himalayan nation. The country produces a paltry 650 MW of power enough to meet only half of the overall demand. As a result, industries have been closing down. Its hydroelectric plants are outmoded. Ironically, it is India that Nepal looks up to for its imports – but even imports don’t tackle the shortfall. Experts have pointed out that the country has vast potentials in terms of generating power due to its mountain-river system. Not even a fraction of that potential has been realised. Recently the Nepal government announced an investment of around 275 USD to shore up its energy production but the entrenched and extended civil war involving the Maoists in the country has overshadowed much of the economic problem that this country faces due to energy deficit.

Protracted power cuts in Pakistan too has forced businesses to shut down and shunted people out of work. The terrorism-inflicted country too has lagged in green energy generation and its reliance on oil-based electricity has grown over time. Apparently the premiere electricity distribution board has been enmeshed in a dispute over labour unions thus hampering its efficiency. Geostrategic and politico-military deliberations in the country have shut out important dialogue on energy security. Pakistan’s daily shortfall stands at anywhere between 4000 to 9000 MW. The power crisis in Pakistan in particular is appalling with energy shortage being pinpointed as the root cause behind larger economic ills like low GDP, inflation and supply-side infrastructural bottlenecks.

In short, while South Asia is overpopulated and its energy demand mounting, its electricity generation is woefully undersupplied.

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