Energy security must be based on coal

After the first oil shock of 1973, there was much talk of how to achieve energy security in India. That’s happening again today, with oil at $ 60/barrel. But in the 1970s everybody agreed that energy security meant maximizing the use of our coal reserves, which were sufficient for 300 years’ consumption. Nobody regarded energy security as arranging imports of oil or gas. That puts in perspective the crazy scene today. We have a Coal Minister who has absolutely nothing to say on energy security. By contrast, we have an eloquent Petroleum Minister scouring the world for gas and oil deals in pursuit of what he calls energy security. He has dazzled media and policy thinkers alike with his vision of “peace pipelines” carrying gas to India through what used to be politically impossible territory (Pakistan, Bangladesh). He seeks to buy stakes in gas and oil fields across the globe. Never before has a Petroleum Minister displayed such a sweeping vision, where gas pipelines through Pakistan and Bangladesh become ties that bind us together, not security risks. This is imaginative oil diplomacy.

But is it energy security? The gas pipelines will reduce the cost of delivered gas compared with LNG (liquefied natural gas), but at an increased risk of disruption. The risks are modest, the potential diplomatic gains are huge, and so this is a worthwhile diplomatic gamble. But worthwhile gambles are not security. India badly needs energy security, but that cannot be based on imported gas and oil. It must be based on maximising the use of coal, and substituting oil and gas with coal wherever feasible. That is not happening, for two reasons. First, we have no overall Energy Minister, and different energy-related Ministries behave like separate fiefdoms. Second, despite our huge coal reserves, we have turned from an exporter to an importer of coal. Hence nobody even bothers to think of schemes to substitute oil with coal, as happened in the 1970s. Our coal reserves are estimated at 248 billion tonnes, and in 2004 alone an additional 2,154 million tones were discovered. But our annual production at around 400 million tones is grossly inadequate to meet the needs of even existing power stations. In past decades, India used to export coal, mainly to Bangladesh and Nepal. Today our power plants need to import 15-20 million tones to keep running. We need to increase the efficiency of thermal power stations, but every 1% increase requires an additional 5 million tones of coal.

The Power Minister has warned that the coal shortage may rise to 50 million tones in three years time, and to 80 million tones by the end of the 11th Plan (2011-12). Is this not insane? We have among the biggest coal reserves in the world, yet are massive importers rather than exporters. The nationalized coal industry is too incompetent to convert huge reserves into even modest production. The coal nationalisation law of the 1970s made mining a government monopoly, banning private mining. Captive mines are allowed for user industries (like private steel plants or power plants). But no businessman can mine coal for sale to customers, not even public sector customers. If we are at all serous about energy security, we must to throw open coal mining to private and foreign investment. Even coal prospecting should be thrown open, to maximize the discovery of high-quality coal (most Indian coal is of low quality). We need to produce enormous quantities of coal to feed existing and planned power plants, and to gasify coal to substitute oil and natural gas.

Yet there is no move toward such an obvious reform.

The trade unions in the coal industry oppose any private sector mining, because they do not give a damn about energy security. The Left Front opposes any legal amendment to permit private sector mining. People in these outfits would rather see India go down the tube in energy than relax their bankrupt ideologies. Here, then, are the real threats we face. The main threats are not the possibility of OPEC cutting off oil supplies, or of Pakistan cutting off gas in a future pipeline, or of the ONGC failing to find oil abroad. The biggest threats to our energy security are people like Prakash Karat (of the CPM) and MK Pandhey (of CITU). If they determine policy, then India, despite massive energy reserves, will become an ever-bigger importer of energy, with all the risks that entails. In such circumstances, no amount globe-trotting by the Petroleum Minister will give us energy security.

For Marxists to view private and foreign investment as exploitation is not new. When the Sheikh of Kuwait proposed giving additional acreage to foreign oil companies in the 1950s, leftist critics warned him about capitalist exploitation. He replied, “It is better to be exploited and become rich than not be exploited and remain poor.” That is equally true of coal in India.

What do you think?