Energy flywheel gathers momentum

India is moving closer to achieving energy security by addressing chronic bottlenecks. Coal production now exceeds 1 bn tonnes, with both Coal India and private miners posting healthy growth. The US intervention in Venezuela signals its intent to maintain oversupply in the oil market. Changes in liability laws are expected to draw private capital into nuclear energy. Renewables now constitute over half the total installed power capacity, a milestone in the country's effort to create 500 GW of non-fuel capacity in the next 5 yrs. Each of these achievements involves policy reorientation to access energy from all sources to maintain economic momentum over a period of anticipated high growth.

The country is well-placed to negotiate external pressure over sourcing crude oil from affordable sources, such as Russia, if the glut persists in the market. India will be driving incremental energy demand globally and would find itself boxed in if the crude oil market were to turn tight. Oil-producing nations are finding it difficult to stick to production quotas, and with the prospect of additional reserves being tapped, their job becomes even more difficult. India has maintained a neutral stance on sourcing crude oil and natural gas, which makes switching vendors simple. It also allows New Delhi to deflect criticism over the strategic impact of its energy imports.

The economy has a low-energy intensity, but the scenario is projected to change with greater policy focus on manufacturing exports. New technologies like AI and EVs will contribute to India's incremental energy demand. The work that has gone into improving the supply response in the energy market will, however, have to be matched by improvements on the demand side. India must get its energy pricing right to be able to successfully harness it for accelerated growth. Politicisation of electricity prices has eluded successive rounds of reforms. It remains an area of concern because it affects the investment climate. The distribution bottleneck, if left unaddressed, will impact upstream revenue.