Introduction

Energy resources and it's types:-

• An energy resource is something that can produce heat, power life, move objects, or produce electricity. Matter that stores energy is called a fuel.

• Energy sources can be classified into two types: nonrenewable and renewable.

• Nonrenewable resources, such as fossil fuels and nuclear material, are removed from the earth and can be depleted. These resources have been the most used type of energy in the modern era.

• Renewable resources, such as wind, water, solar, and geothermal, come from sources that regenerate as fast as they are consumed and are continuously available.

• Some, such as biofuel produced from food crops and other plants, are replenished every growing season.

•  In the early part of the twenty-first century, renewable sources have become more popular as nonrenewable sources have begun to be depleted.

India at a glance

• India, home to 18% of the world’s population, uses only 6% of the world’s primary energy.

• India’s energy consumption has almost doubled since 2000 and the potential for further rapid growth is enormous.

• India’s economy, already the world’s fifth, is growing rapidly and policies are in place to press ahead with the country’s modernisation and an expansion of its manufacturing.

• If a well-managed expansion of energy supply can be achieved, the prize in terms of improved welfare and quality of life for India’s 1.3 billion people is huge.

• Accroding to the World Bank estimate (2020), 99% of India's population has access electricity. Though another estimate suggests that 96.7% of India's population is now connected to grid. 2.4% of Indian households are still unelectrified. Most of them are concentrated in the rural areas of Uttar Pradesh, Madhya Pradesh, Rajasthan, and Bihar. Majority of the unelectrified houses cited their inability to afford grid-connection as the reason for not having and electricity connection.

• Policy-makers at national and state levels are intensifying their efforts to ensure that energy is a spur, rather than a hindrance, to India’s advancement, looking to removing obstacles to investment in energy supply while also focusing on energy efficiency and pricing reform (the deregulation of diesel prices in late 2014, taking advantage of the fall in the oil price, means that all oil-based transport fuels are now subsidy-free).

• India is in the early stages of a major transformation, bringing new opportunities to its 1.3 billion people and moving the country to centre stage in many areas of international affairs.

• The energy sector is expanding quickly but is set to face further challenges as India’s modernisation and its economic growth gather pace, particularly given the policy priority to develop India’s manufacturing base.

• Three-quarters of Indian energy demand is met by fossil fuels, a share that has been rising as households gradually move away from the traditional use of solid biomass for cooking.

• Coal remains the backbone of the Indian power sector, accounting for over 70% of generation and is the most plentiful domestic fossil-fuel resource, although, as in the case of oil and gas, dependence on coal imports has grown in recent years

• Power generation capacity has surged over recent years, but the outlook for the sector is clouded by the precarious financial situation of local distribution companies and large losses in the transmission and distribution networks.

India's Total Installed Capacity (As on 30.11.2022)  Source: Central Electricity Authority
Installed Generation Capacity (Sector-wise)
Sector	MW	% of Total
Central Sector	99005	24.2%
State Sector	104918	25.6%
Private Sector	205238	50.2%
Total	409161
Installed Generation Capacity (Fuel-wise)
Category	Installed Generation Capacity (MW)	% share in Total
Fossil Fuel
Coal	203985	49.9%
Lignite	6620	1.6%
Gas	24824	6.1%
Diesel	589	0.1%
Total Fossil Fuel	236019	57.9%
Non-Fossil Fuel
RES (Including Hydro)	166362	40.7%
Hydro	46850	11.5%
Wind, Solar, Other RE	119512	29.2%
Wind	41895	10.2%
Solar	61966	15.1%
Biomass Power/Cogen	10206	2.5%
Waste-to-Energy	520	0.1%
Small Hydropower	4925	1.2%
Nuclear	6780	1.7%
Total Non-Fossil Fuel	173142	42.3%
Total Installed Capacity	409161	100%

• Solar power is a key element of the government’s expansion plans.

• India’s federal constitutional system distributes powers for energy between the central and state-level governments. Indian policy-makers are making strenuous efforts to remove obstacles to investment in energy supply, while moving ahead with complementary policies on efficiency and energy pricing that can constrain growth in consumption; several national ministries and other state bodies oversee different aspects of energy, complicating the task of formulating and implementing a unified strategy.

• Policy and investment decisions are much influenced by the sensitivity of land and water use, end-user tariffs and affordability, as well as the worsening air quality in many of India’s major cities.

• Over the past decades energy demand has steadily increased across all sectors, including agriculture, industry, commercial and residential, and is expected to continue to grow.

• Nonetheless, India’s per capita energy consumption stands at 30% of the world’s average (0.44 tonnes of oil equivalent ) per capita versus the global average of 1.29 and the International Energy Agency [IEA] average of 2.9.

• India’s energy system is largely based on the use of coal for power generation, oil for transport and industry, and biomass for residential heating and cooking. India's power ministry has announced its plan to reduce the amount of power generation from at least 81 of country's 173 coal-fired power plants over the next four years.

• Bioenergy and most coal supply are produced in the country, while oil and natural gas are mainly imported. In 2017 India’s total primary energy supply (TPES) was 882 million tonnes of oil equivalent (Mtoe), with nearly two-thirds being covered by domestic production (554 Mtoe).

India's Energy Sources and their share in total (2021 figures)
Source	Share in total
Coal	44%
Oil	24%
Biomass	22%
Natural Gas	6%
Primary Electricity (Hydro, Nuclear, Solar, Wind)	4%

• India has been able to meet the gap between demand for and domestic supply of energy while addressing the environmental externalities associated with energy use.

• Despite high growth rates experienced in energy-intensive sectors, energy consumption and carbon dioxide (CO2) emissions have not grown as rapidly as gross domestic product (GDP).

• Electricity supply is growing in line with economic growth, while its carbon intensity is in decline thanks to the increase in the share of renewables and declining utilization of coal power plants.

• India has achieved a 24% reduction in emission intensity of GDP between 2005 and 2016 and the country is committed to reducing emission intensity of its GDP by 45% from 2005 levels by 2030 - UN Report released in September 2022.

• The growth in CO₂ emissions has slowed and a minor decoupling of GDP growth from emissions has emerged since 2013.

Primary energy supply

• The rapid growth in total final consumption (TFC), as well as in power generation to supply rising electricity demand, has led to a rapid increase in total primary energy supply (TPES).

• India still depends heavily on coal as the major source of energy. During the FY 2020-21 energy generated from coal accounted for about 73% of the total generation of energy followed by crude oil (8.59%) and electricity from hydro, nuclear, and other renewable energy sources (8%).

• Bioenergy is the third-largest primary energy source in India, estimated to provide 21% of TPES in 2017. Compared to the rapid growth in fossil fuels, the increase in bioenergy supply has been modest.

• Hydropower supply has also been relatively stable, with around 10% growth in the past decade. Wind and solar, in contrast, have increased very rapidly, but from much lower levels.

• India also has a nuclear power fleet, which contributes 1.7% to TPES.

• India is a federal parliamentary republic consisting of 28 states and 8 union territories, which results in a complex political decision-making environment with multi-level governance.

• Many economic policy objectives are linked to the year 2022, the year when the country will celebrate the 75th anniversary of its independence in 1947. 

• Prime Minister Modi presides over the large energy portfolio, which is spread across central (federal) and state governments, with the states having some autonomy over energy policy.

• At federal level, India does not have one single ministry in charge of energy policy. The Government of India (GoI) has at least five ministries with responsibilities for energy: the Ministry of Power (MoP), the Ministry of Petroleum and Natural Gas (MoPNG), the Ministry of New and Renewable Energy (MNRE), the Ministry of Coal (MoC) and the Department of Atomic Energy (DAE).

   Electricity sector

• The MoP governs the electricity sector in India and also hosts the Bureau of Energy Efficiency (BEE).

• The Central Electricity Authority (CEA) is the main advisor to the MoP and is responsible for the technical co-ordination and supervision of programmes and data collection and dissemination, notably through the five-year National Electricity Plan.

• Under the Electricity Act 2003 the Central Energy Regulator Commission (CERC) is responsible for: fixing tariffs (regulated tariff and the tariff discovered through competitive bidding); licensing of transmission and trading; market development(facilitating open access, licensed traders, power exchanges); grid security (grid code, deviation settlement mechanism, ancillary services); regulating the interstate transmission system; adjudication of disputes; promotion of renewable energy sources; consumer protection; among other matters. The State Electricity Regulatory Commissions (SERCs) collaborate through the Forum of Regulators (FoR).

• Public-sector undertakings (PSUs) under the MoP include the Power Finance Corporation (PFC) and Rural Electrification Corporation, which function as non-banking financial institutions and provide loans for power sector development.

• National Thermal Power Corporation (NTPC) is India’s largest integrated thermal power company and the National Hydroelectric Power Corporation (NHPC) the largest hydropower producer.

• In addition, the MoP oversees the functioning of the North Eastern Electric Power Corporation (NEEPCO), the system operator Power System Operation Corporation (POSOCO) and the central transmission utility Power Grid Corporation of India Limited(Powergrid).

• India has several electricity transmission operators in the country.

• Powergrid owns and operates the majority of the interstate transmission lines, while intrastate lines are owned by the state transmission utilities. As recent reforms opened the sector to private or merchant investment, private-sector entities also build, own and operate interstate transmission lines.

• Some energy-related departments are run directly under the Prime Minister’s Office. These include the DAE, which works on the development of nuclear power technology and the application of other radiation technologies, and NITI Aayog, which is an official think tank and policy advisory body of the GoI, co-ordinating activities that are inter-ministerial in nature, such as India's electric vehicle (EV) programme and reform of energy data.

• DAE has a mission to enhance the share of nuclear power in the power sector by deployment of indigenous and other proven technologies, as well as thorium-based reactors with associated fuel cycle facilities.

• A central-government-owned corporation administered by the DAE, the Nuclear Power Corporation of India Limited (NPCIL) is responsible for the generation of nuclear power, operating India’s 21 nuclear reactors.

• The MNRE(ministry of new and renewable energy) is in charge of the development of solar, wind and other renewables in India.

• Under the MNRE are the National Institute of Solar Energy, the National Institute of Wind Energy and the Indian Renewable Energy Development Agency (IREDA), which functions as a non-banking financial institution providing loans for renewable energy and energy efficiency projects.

• Solar Energy Corporation of India (SECI) is responsible for the implementation of various MNRE subsidy schemes, such as the solar park scheme and the grid-connected solar rooftop scheme.

• Biofuels are managed by the MoPNG.(ministry of petroleum and natural gas).

Coal sector

• The MoC(ministry of coal) has oversight of exploration, exploitation and the development of coal and lignite resources in India. Under the ministry, the Coal Controller Organisation is responsible for the sampling of coal, inspection of collieries, issuing guidelines for the maintenance of grades of coal, granting permission for the opening and closure of mines, and collecting.

Oil and natural gas sectors

• The MoPNG is in charge of policies relating to the petroleum and natural gas sectors.

• The ministry co-ordinates the upstream regulator, the Directorate General of Hydrocarbons(DGH), and downstream regulator, the Petroleum and Natural Gas Regulatory Board(PNGRB).

• The ministry also co-ordinates hydrocarbon data collection (Petroleum Planning and Analysis Cell) and investment through the Oil Industry Development Board.

• Most of the oil and gas companies in the country are PSUs, which are organised through the MoPNG.

• These include the county’s largest oil and gas producer Oil and Natural Gas Corporation (ONGC), the largest refiner and retailer Indian Oil Corporation Limited (IOCL), and India’s largest state-owned natural gas company GAIL, with activities in production, transmission, distribution and sales.

Electricity/Power Generation

• India is one of the largest electricity market areas in the world, comparable to the power systems of the European Union, the People’s Republic of China (“China”), the Russian Federation (“Russia”) and the United States.

• The national grid of India is the largest national synchronous grid in the world.

• The Government of India (GoI) has focused on keeping up with strong demand growth, while expanding energy access to millions of consumers every year.

• After years of scarcity, India’s electricity system has now reached surplus power and good adequacy thanks to investment in thermal and renewable capacity, including from the private sector, which accounts for around 50% of the installed power capacity.

• The GoI has been working to foster the financial health of the power sector.

•  Long overdue reforms of power distribution companies (DISCOMs) are also taking shape, fostered by the central government Ujwal DISCOM Assurance Yojana (UDAY) scheme to decrease debt ratios.

• To avoid continuous bail outs of the DISCOMs by India’s governments, the GoI has announced plans to strengthen the UDAY scheme and introduce strict conditionality of government loans to the power sector as part of a new tariff policy.

• As the renewable energy sector has entered a period of very dynamic development, more effortsare needed to remove barriers to investment and maintain momentum, notably for distributed generation, such as solar photovoltaic (PV).

• India has reached “one nation one grid” as it has synchronised its regional grids into one national grid at one frequency, but its markets remain fragmented, notably at the retail level, but also in wholesale trading.

• Structural reforms are under discussion to foster the creation of a wholesale market place for trading of power across India, including least-cost dispatch of electricity. The GoI is now tackling these structural concerns. In the context of surplus power, opportunities abound to carry out reforms to incorporate best practices from around the world.

• These particularly relate to the governance of power markets and systems to build a joint vison and enhance the role and collaboration of system and grid operators.

• India has built an institutional framework capable of providing the required investment.

• Reforms to this framework would allow greater economic efficiency, notably to boost cost-effective dispatch and balancing at the intrastate level, increase cross-border transmission capacity available for trades and better utilise existing assets.

• Today around 90% of trading is done through bilateral long-term contracts. This prevents efficient price discovery in the market, and leads to stressed assets and renewable energy curtailment.

• Governance challenges at the interface between open markets and regulated services currently limit the opportunities for economic efficiency and consumer benefits. Structural market reforms are needed to further improve the financial stability, reliability and efficiency of electricity distribution. Reliable electricity supply to consumers can be fostered by introducing power quality norms, metering and billing, and moving towards cost-reflective and market-based tariffs.

Supply and demand trend

• India's power demand grew a little over 4% during the five years ended 2021-22.

• India expects annual electricity demand to reach 1874 billion units during the year ending March 2027, representing an average 7.2% annual growth from demand of 1320 billion units in 2021-22.

• The largest consumption stems from the industrial and commercial sectors, although residential electricity demand is leading electricity demand growth.

Electricity generation

Electricity Generation in India (2015-2022)
Year	Electricity Generated (in billion units)
2015-16	917.14
2016-17	962.9
2017-18	1003.7
2018-19	1045.9
2019-20	1048.11
2020-21	1005.88
2021-22	1085.73

• India’s electricity generation has increased exponentially in the last decade, with an average annual growth rate of 6%.

• Share of coal power in India's total installed capacity (in 2022) is 49.9%. Total contribution  of fossil fuels in India's total installed power capacity is 57.9%.

• Share of renewable energy in total power generation has gone up.

• Hydropower in India's installed power capacity in around 11%.

• Power generation from other renewables (wind, solar, and bioenergy and waste) has increased.

• Nuclear power is also increasing, but at a much slower pace than coal and renewables.

• Recently, India stands 4th in solar PV deployment across the globe as on end of 2021. Solar power installed capacity has reached around 61.97 GW as on November 2022.

• Solar installed capacity in India has increased rapidly from 2.63 GW in 2013 to 61.97 GW in 2022.

• The largest power markets within India are the states of Maharashtra, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Gujarat, Tamil Nadu, West Bengal, Andra Pradesh, Rajasthan and Karnataka.

Imports and exports

• In 2017 India became a net exporter of electricity after having been a net importer for several decades.

• The country has increased international power trade with neighbouring countries in Southeast Asia

• In 2018 India exported power to Bangladesh, Myanmar and Nepal and imported power from Bhutan.

• India has developed new interconnections with Nepal and Bangladesh in recent years, as part of a greater regional integration move across South Asia.

• India plans to buy surplus hydropower from Bhutan and is putting in place investment and concessional finance to build hydropower in Bhutan and also in the Northern Indian territories.

Electricity Act 2003 and Amendment

Electricity Act, 2003

• The act covers major issues involving generation, distribution, transmission and trading in power.

• The Act delicenses power generation completely (except for all nuclear and hydro-power projects over a certain size).

• 10 percent of the power supplied by suppliers and distributors to the consumers has to be generated using renewable and non-conventional sources of energy.

• The techno-economic clearance from the Central Electricity Authority (CEA) has been done away with for any power plant, except for hydro-electric power stations above a certain amount of capital investment.

• The generators can sell electricity to any licensees or where allowed by the state regulatory commissions, to consumers directly.

• The regulatory body can impose a surcharge to compensate for some loss in cross-subsidy revenue to the State Electricity Boards (SEB’s) due to this direct sale of electricity by generators to the consumers.

• The Act licenses distribution in rural areas and brings in a licensing regime for distribution in urban areas.

• No person shall transmit electricity; or distribute electricity; or undertake trading in electricity,  unless he is authorised to do so by a licence issued by authorised commissions.

• Setting up the State Electricity Regulatory Commission (SERC) has been made mandatory.

• An appellate tribunal to hear appeals against the decision of CERC and SERCs.

• Metering of electricity supplied was made mandatory.

• For rural and remote areas, a stand-alone system for generation and distribution is permitted.

• Thrust to complete rural electrification and provide for management of rural distribution by panchayat, cooperative societies, NGOs, franchisees etc.

• Central Electricity Authority (CEA) to prepare the National Electricity Plan.

Privatisation of discoms

• Discoms are the weakest link in the electricity value chain.

• They are plagued by low collection, higher power purchase cost, inadequate tariff hikes and subsidy disbursement and mounting dues from government departments.

• The tentatively-named Atal Distribution System Improvement Yojana (ADITYA) scheme will help power distribution companies (discoms) pare their losses and effectively monitor electricity consumption.

• The ?2.86 trillion scheme aims to ensure continuous power supply to all residents and it involves adopting models such as privatizing state-run discoms and having multiple supply, network and distribution franchisees.

• The scheme envisages states to approve a roadmap to make discoms viable by switching to prepaid smart meters within three years and also clearing their dues.

• It will specify a trajectory for loss reduction and contain incentives and disincentives for meeting targets.

• States with more than 18% aggregate technical and commercial (AT&C) losses can opt for an infrastructure support reform package.

• This entails choosing an option between running discoms in the public-private partnership (PPP) mode, inducting multiple supply and network franchisees, and working through input-based distribution franchisees.

• It has set an ambition of reducing electricity losses to less than 12%.

UDAY scheme

• The Ministry of Power launched Ujwal DISCOM Assurance Yojana (UDAY) in 2015.

The scheme includes

• Financial turnaround,Operational improvement and Reduction of cost of generation of power.

• Development of Renewable Energy Energy efficiency & conservation.

• It allows state governments, which own the DISCOMs, to take over 75 percent of their debt as of September 30, 2015, and pay back lenders by selling bonds.

• DISCOMs are expected to issue bonds for the remaining 25 percent of their debt.

• Maturity period of bonds is 10-15 years.

• Moratorium period is upto 5 years.

• The borrowing is not included for calculating the fiscal deficit of the State.

• As of now, only Odisha and West Bengal have not joined the scheme.

Transmission and distribution

• The Transmission and Distribution (T&D) loss is a metric to assess the health of the electricity distribution sector.

• It is calculated as the difference between input in the T&D network and sales to consumers.

• India’s T&D losses are almost 20% of generation, more than twice the world average.

• Electricity losses are the result of technical inefficiency and theft.

• By the end of 2013, each of the country’s five regional grids were interconnected to operate at a synchronous frequency in an effort to more efficiently transfer power from generation sources to load centers.

• In 2014, the government initiated the Integrated Power Development Scheme to further strengthen urban distribution networks by installation of information technology-based and tamper-proof energy monitoring, metering, and accounting systems and equipment.

• UDAY scheme launched has been successful to some extent in reducing T&D losses.

Electricity (Amendment) Bill 2022

• The  Bill Seeks to amend the Electricity Act 2003.
• The Bill has been introduced in the Parliament and sent to the Standing Committee for further deiberations.
• The Electricity (Amendment) Bill 2022 aims at giving multiple players open access to distribution network or power suppliers and also allowing customers to choose any service provider.
• The Bill seeks to amend Electricity Act 2003:

1. To facilitate the use of distribution networks by all licensees, under provisions of non-discriminatory "open access” with the objective of enabling competition, enhancing efficiency of distribution licensees for improving services to consumers and ensuring sustainability of the power sector.
2. To facilitate non-discriminatory open access to the distribution network of a distribution licensee.
3. To make provisions vis-à-vis graded revision in tariff over a year besides mandatory fixing of maximum ceiling and minimum tariff by the appropriate commission.
4. To convert the rate of punishment from imprisonment or fine to fine.
5. To strengthen functions that will be discharged by the regulators.

• The energy sector plays a critical role in both meeting sustainable development objectives and reducing environmental externalities in India.

• The country is vulnerable to climate change impacts and is exposed to growing water stress, storms, floods and other extreme weather events.

• Adaptation and resilience of the energy system to these conditions should receive higher political priority.

• Moreover, India attaches great importance to the Kigali Amendment to the Montreal Protocol on ozone-depleting substances, given its soaring cooling demand.

• India acknowledges that early action to address air pollution and emissions will reduce future adaptation needs.

• Providing secure, affordable and sustainable energy to all is an important policy priority in India, and major progress has been made towards the United Nations Sustainable Development Goals (SDGs), notably SDG7 on energy.

• India has been addressing energy-related environmental pollution since the 1980s, including issues related to air, water andland, and energy sector waste, with ground-breaking legislation under the Air (Prevention and Control of Pollution) Act.

• Reducing the health impacts of energy production and use and air pollution (now part of SDG3) is a key priority and the GoI has adopted comprehensive and stringent rules for the power and transport sectors.

• Climate change (SDG13) is a driver of the policy agenda on which India shows strong international leadership.

• India has submitted a Nationally Determined Contribution (NDC) under the Paris Agreement with considerable mitigation efforts taking into account India’s low per capita emissions and its development priorities.      

Electricity access

• Universal household and village electricity access 1 has been a key priority for the Government of India (GoI) for the past 15 years (with particular focus on rural areas).

• In April 2018 the GoI announced that India had achieved its goal of providing electricity to every village in India (600 000 villages).

• A year later, in April 2019, the GoI announced that it had effectively connected all the households that were willing to do so (26 million), according to the latest government data.

• The Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and the Saubhagya schemes are the two main government policies to respectively complete provision of electricity access for every village and household.

• The introduction of the Saubhagya scheme in September 2017 helped accelerate the rate of household electrification, connecting the last mile.

• Over 95% of people who have gained electricity access in India since 2000 have done so as a result of grid extension, according to the IEA.

• Coal power has been used to supply about 75% of the new electricity access since 2000, with renewable sources accounting for around 20%.

• Enhancing the use of clean energy will play an important role in ensuring that electrification objectives are in line with delivering air quality improvements as well as reducing GHG emissions.

• The access paradigm is, however, changing. Recent mini-grid policy developments show promising signs for enhancing the role of renewables in ensuring electricity access.

• A draft national renewable energy mini-grid policy was published in 2016 with the aim of developing 10 000 micro-grids and mini-grids with a combined capacity of 500 megawatts.

Energy and air quality

• Air pollution is a major cause for concern in India and a key policy priority for the government.

• Combinations of various air pollutants from a diverse range of sources have led to very unhealthy levels of air pollution concentrations in certain regions, in particular major urban areas.

• The energy sector is the largest source and therefore also the key component of the solution for the air pollution crisis in India.

• Combustion of fossil fuels (in power, transport and industry) and bioenergy are the two key activities releasing air pollutants and causing negative health impacts. Non-energy-related sources, such as dust from construction of buildings and roads or fallow fields, also play an important role.

• Episodes of high concentrations of air pollutants can also be exacerbated through particular non-energy sector related events, such as burning of crop residue in specific seasons, the pollution from which can migrate from rural to urban areas. The air pollutants most characteristic to energy sector activities, including NOX, SO2 and PM 2.5.

• As many as 10 of the top 20 most polluted cities in the world are located in northern and north-western India, exceeding World Health Organization (WHO) recommended average annual concentrations by on average 10 times .

• In 2017 air pollution caused around 1.2 million premature deaths in India (12.5% of the total), with household air pollution estimated to have been the cause of over 480000 of them, and outdoor air pollution attributed to an estimated additional 670 000 (GBD, 2019).

• Coal used in power generation contributed 7.6% of all PM 2.5.

Renewable Energy

• The Government of India (GoI) has set ambitious renewable electricity targets for the short to medium term. By 2022 the country aims to have 175 GW of installedrenewable electricity capacity. In 2018 the GoI announced an increased ambition of 227 GW renewable capacity by 2022 and 275 GW by 2027.

• At the United Nations’ Climate Summitin New York on 23 September 2019, the Prime Minister of India announced a new target of 450 GW of renewable electricity capacity, without specifying a date.

• At the end of November 2019 grid-connected renewable electricity capacity reached 84 GW, with 32 GW coming from solar photovoltaic (PV), around 37 GW from onshore wind and the remainder from small hydro. Solar PV has been on a rapid rise in recent years.

• To increase investment in renewable electricity in a cost-effective way, India has introduced national competitive auctions for wind and solar PV. Lessons have been learned following the abrupt change in the renewables support scheme from feed-in-tariffs to centrally run reverse auctions.

• Current auction volumes show that wind power has developed at a much slower pace than solar PV.

• The auctions complement other policy measures at state level, such as Renewable Purchase Obligations, and at a local level, such as further support for rooftop PV installations. To ensure continuous progress in the growth of renewables, auction design, grid connections and the financial health of the power distribution companies (DISCOMs) are critical elements for reform.

• Modern renewable energy is not only used in electricity generation – the potential is also great for heating, cooling and transport.

• India needs a holistic strategy for renewable energy to tap into this potential and to make sure that market development can be beneficial for sustainable development more generally, including local air and water quality. Potential also exists to scale up the use of bioenergy, including energy-from-waste(EfW), which requires robust sustainability governance.

Renewable Energy Sources

• There is high potential for generation of renewable energy from various sources-wind, solar, biomass, small hydro and cogeneration bagasse.

• The geographic distribution of the estimated potential of renewable power as on 31.03.2016 reveals that Rajasthan has the highest share of about 14% (167276 MW), followed by Gujarat with 13% share (157158 MW) and Maharashtra with 10% share (119893MW), mainly on account of solar power potential.

Rooftop solar PV

• For residential and commercial solar PV applications, the GoI has set an ambitious target of 40 GW of rooftop solar by 2022 within the 100 GW solar target.

• The MNRE has adopted guidelines for the implementation of Phase II of its Grid-Connected Rooftop Solar Programme.

• The target is supported by RPOs, rooftop auctions and programmes that facilitate the deployment of rooftop solar PV on government buildings across states.

The MNRE has several policies to incentivise and facilitate rooftop installations:

a) providing central financial assistance for residential, institutional, social and government buildings;

b) advising states to implement net/gross metering regulations and tariff orders;

c) providing a model memorandum of understanding, power purchase agreement (PPA) and APEX agreement for rooftop projects in the government sector; and

d) appointing experts to support public-sector undertakings in the implementation of rooftop projects in ministries and departments.

Offshore wind

• The GoI estimates the potential of offshore wind to be in the region of 10-20 GW.

• A good alternative to onshore wind, offshore wind, however, has yet to be adopted in India.

• An initial tender of 1 GW is expected to be held and a white paper is being developed in collaboration with the European Union to identify bottlenecks in the supply chain and industry infrastructure, as India does not have a large-scale offshore turbine industry.

Wind Speed Vs India's geographic location

Off-grid solar PV

• Various schemes are available at both national and state level to support the uptake of off-grid electrification, mainly through solar technologies.

• In 2015 the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) scheme was launched to support the adoption of decentralised distributed electricity in rural India via off-grid installations, mainly mini-grids.

• In 2017 the Off-Grid and Decentralised Solar PV Programme was put in place to facilitate uptake of various solar PV applications for lighting and water pumping in rural areas by providing financial means to the implementing agencies. The programme was extendeduntil the end of the 2020 financial year.

•  In December 2018 the Atal Jyoti Yojana (AJAY) Phase II programme was initiated to finance the installation of over 3 million solar street lights in selected regions.

• Initiated by the GoI in February 2019 (and followed by guidelines in July 2019), the KUSUM scheme will support farmers to replace existing diesel pumps with solar PV pumps (withboth on-grid and off-grid features). The scheme will allow farmers to become prosumers and sell power to the DISCOMs at a predetermined price. The scheme aims to add solar and other renewable capacity of 28 GW by 2022. It has three main components:

a) financing of 10 GW of renewable energy plants, each up to 2 MW capacity;

b) offering 1.75 million standalone solar agriculture pumps, central government to provide 30% subsidy and state government to provide 30% subsidy; and

c) converting 1 million grid-connected agriculture pumps to solar powered operation with central government and state government providing 30% subsidy each.

Solar energy intensity vs Indian geographical area

Bioenergy and waste

• India is close to meeting its 2022 target for 10 GW of bioenergy capacity.

• The principal contributor is the use of bagasse in sugar mill co-generation plants.

• The Scheme to Support Promotion of Biomass-Based Co-generation in Sugar Mills and Other Industries offers central financial assistance in the form of a capital subsidy per additional MW of capacity delivered by investment in more efficient co-generation technology and runs until 2020.

• There is scope to increase electricity generation from sugar mills when they are upgraded to more efficient co-generation systems.

• India has also introduced a policy to instigate low-level biomass co-firing (5-10%) in appropriate power generation facilities. This will serve as a means of offsetting coal use while also valorising agricultural residues that may alternatively have been burned in the field, degrading air quality.

• India’s 2016 waste management rules provide the basis for stimulating greater exploitation of EfW. For example, the rules stipulate that states should: procure all electricity generated from EfW projects; support the promotion of using waste in industry when it is available within a 100-kilometre radius; encourage waste segregation and require that non-recyclable waste of high calorific value be used for energy.

National Biofuels Policy 2018

Other Key Initiatives by Government in Renewable Sector

• The state-owned Nuclear Power Corporation of India Limited (NPCIL) is responsible for the design, construction, commissioning and operation of 22 thermal nuclear power plants, with a total installed capacity of 6780 MW, comprising of-

  • 17 small and medium-sized indigenously developed pressurised heavy water reactors (PHWRs) (about 220 MW and 540 MW) commissioned between 1980 and 2011.

  •  Two large Russian-built pressurised water reactors (PWRs) commissioned in 2013 and 2016(1000 MW each).

  •  Two small US-built GE boiling water reactors (BWRs) commissioned in 1969 (150 MW each).

  • One small Canadian-built AECL PHWR commissioned in 1972 (100 MW).

• The GoI included nuclear energy in the country’s NDC (UNFCCC,2015) and set ambitious targets to increase India’s nuclear capacity, if the supply of fuel can be ensured.

• Its 12th Five-Year Plan for 2012-17 called for total installed nuclear capacity of 63 GW equivalent by 2032.

• India has a total of seven nuclear reactors under construction, including four indigenous PHWRs totalling 2 800 MW, two Russian-built 1 000 MW PWRs and a 1 500 MW indigenous FBR.

• Moreover, India has discussed plans with France’s EDF for six EPRs, with the United States for six AP1000s, and additional six VVERs from Russia.

• In January 2019 the government stated that plans for new nuclear would fall well short of its 2032 target of 63 GW and that the total capacity is likely to be about 22.5 GW (WNA, 2018).

• India’s Department of Atomic Energy informed India’s parliament that 21 new reactors with a total installed capacity of 15 700 MW are expected to be completed in the country by 2031.

• CEA’s National Electricity Plan of 2018 confirmed 15 GW of nuclear by 2027.

• India has a largely indigenous nuclear power programme.

• Due to earlier trade bans and lack of indigenous uranium, India has uniquely been developing a nuclear fuel cycle to exploit its reserves of thorium.

• Of its total capacity, 14 reactors with an installed capacity of 4 280 MW are under IAEA safeguards and use imported fuel.

• The remaining 8 reactors with an installed capacity of 2 400 MW use indigenous fuel.

• In 2008 India and the Nuclear Suppliers Group signed an agreement that opened the doors to international trade of nuclear technology and materials.

• Bilateral agreements with the United States, Russia, France, the United Kingdom, South Korea, the Czech Republic, Canada, Australia, Argentina, Kazakhstan, Mongolia, Namibia and Japan were signed.

• Investment challenges in India relate to the liability of the vendor for all nuclear safety aspects, rather than the operator, which makes the import of foreign technology difficult (some bilateral agreements have special provisions to dispense with India’s liability law).

• In 2016 the GoI asserted that “international and domestic concerns” over India's liability laws had been resolved with the 2015 establishment of the India Nuclear Insurance Pool, but suppliers remain hesitant to invest in India.

• Electric car sales in India are still negligible as a share of vehicle sales.

• In 2013 the GoI launched the National Electric Mobility Mission Plan 2020.

• The government has a target for 15% of vehicle sales to be electric by 2022 and introduced a significant incentive programme, the so-called Faster Adoption and Manufacturing of (Hybrid &)Electric Vehicles, or FAME.

• It provides subsidies to cities across India worth around 60% of the cost of the purchase of EVs.

• India also has a support programme for local EVmanufacturers.

• Many states, such as Karnataka, Telangana, Delhi, Andhra Pradesh and Maharastra, have followed national policy and set state-level targets for the deployment of EVs, including electric buses.

• Depending on the charging method used, EVs can provide flexibility resources to the power system (smart charging, time-of-use charging, vehicle-to-grid [V2G] services).

• However, they can also create significant system integration challenges locally.

• In line with the EV ramp-up, further adjustments to the tariff systems will be required.

• As of today 13 Indian states have a defined tariff for charging of EVs, but only 4 states (Delhi,Maharashtra, Uttar Pradesh and Telangana) have applied tariff pricing to the category.

• Previous studies on the impact of EV charging on system integration have found that fixed time-of-use pricing approaches can have negative side effects for the system, because EV charging can contribute to capacity spikes that can occur at the beginning of low-cost time windows.

• Hence, promoting managed charging of entire EV fleets in line with real-time system conditions is likely to be the preferable option once EVs achieve scale.

• India is the world’s second largest producer of coal after the People’s Republic of China.

• The share of coal in both the energy mix and the power mix in India has been increasing since the 1970s, and in 2017 coal provided 44% of the total primary energy supply (TPES) and 74% of electricity generation.

• Coal is the most abundant fossil fuel resource in India, although Indian coal is generally of poor quality, with high ash content and low calorific value.

• With the nationalisation of India’s coal industry in 1975, Coal India Limited (CIL) was set up as a monopoly to market coal and to manage the coal mines.

• This decision reflected the need to have energy for economic growth, and a new appreciation of energy security after the first oil shock.

• Being the most abundant fossil fuel in India, coal was identified as the foundation of its energy supply. The nationalisation aimed to foster safety, mitigate frequent mining accidents and stimulate investment in the country.

• In 1993 the coal production monopoly of CIL was partially broken with the allocation of captive blocks for power, iron and steel and, later on for cement, coal gasification and coal liquefaction.

• A decade later, in 2003, power sector reform triggered coal demand to rise rapidly in this sector. Over the years, however, coal production was not able to catch up with demand and CIL faced difficulties ramping up production, not only because of insufficient investment and productivity, but also because of barriers to production caused by delays in statutory clearance, notably to use land that was dedicated to afforestation.

• The coal demand–supply gap started increasing year by year, which was met through imports. With a view to developing and increasing domestic coal production, the Government of India (GoI) allocated 218 coal blocks to captive use. However, in 2014 the Supreme Court declared that the majority (204 out of 218) of the captive block allocation from 1993 was arbitrary and illegal, which brought production at those blocks to a halt.

• To auction these cancelled coal blocks through competitive bidding and to allocate the same to public-sector companies, in 2015 the GoI enacted the Coal Mines (Special Provision) Act and amended the Mines and Minerals (Development and Regulation) Act of 1957 and the Coal Mines (Nationalisation) Act of 1973.

• Considerable progress has been made in building coal power plants and in ramping up coal production. Since May 2014, 52 new mines have been opened, adding over 160 Mt of mining capacity per year.

• Coal power generation has increased continuously in India since 1973, which has reinforced the role of coal in electrification and economic development, and explains why addressing the negative impacts of coal was not a priority, given the focus on increasing the supply of energy, in particular electricity generation. Most of the coal consumed in India is domestic and a large share of it is transported throughout the country, sometimes over long distances. As coal supply has been scarce, the allocation of coal is regulated by the government to ensure supply is prioritised while reducing transport and logistics costs. Given that demand is scattered throughout India, this means that coal is mostly transported by the rail system.

• Transport of increasing amounts of coal over long distances has put pressure on the rail system.

• Coal mining supports direct employment of around 500 000 workers.

• Considering direct and indirect employment, several million jobs are dependent on the coal industry.

• However, India has to deal with the environmental externalities linked to production and use of coal, which are equally abundant – its ecosystems are affected by mining, there is air pollution from coal use, impact on water at different stages of the production and consumption process, and the CO2 emissions associated with coal burning.

• India’s coal dependence is unlikely to disappear in the medium term and it is therefore a must for policymakers, industry and, more generally, Indian society, to minimise its negative impacts by using state-of-the-art technology in a cost-efficient way.

• Today, the Indian coal sector is at a crossroads. On the one hand, the Indian economy is expected to grow considerably in the coming years, and so too are the three largest coal-consuming sectors: electricity generation, iron and steel and cement production.

• The prospects for the electricity sector are bright, driven by economic development, the increasing number of people with access to electricity and the growing middle class who will expand their use of air conditioners and other appliances. On the other hand, climate commitments made by India (within the framework of the Paris Agreement), air pollution, water stress in some areas and other environmental issues, and the declining costs of renewables, in particular solar photovoltaic (PV), impact the business case of the coal sector at large.

• The main certainty is that, given its central role in the energy and economy in India, a part of India’s success in the future is linked to the successful and efficient management of the coal sector.

Resoures and reserves

• According to the latest Geological Survey of India of April 2018, India holds proven coal reserves of 148.79 gigatonnes (Gt) and total coal resources of 319.02 Gt.

• The proven lignite reserves amount to 6.54 Gt, while total lignite resources are 45.66 Gt.

• Most of the hard coal in India is bituminous coal, with some sub-bituminous reserves.

• Indian coking coal has a high ash content, is mostly used for thermal purposes and is generally not suitable for the production of metallurgical coke.

• The regional distribution of reserves mirrors the production profile . Most of hard coal resources are located in seven States: Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Maharashtra and Telangana.

• And lignite resources are concentrated in three states: Tamil Nadu, which accounts for 80% of lignite resources, Rajasthan and Gujarat..

Domestic production

• Coal production in India has been showing a falling trend.

Coal Production (in MT) in April - Nov. 2022-23
	Production
Company	Target	Achieved	Achieved in PY	Growth
Coal India Ltd.	700	412.620	353.412	16.75%
Singareni Collieris Company Limited	70	40.503	40.867	(-) 0.89%
Captive & Others	141	71.072	83.791	32.13%
Total	911	524.195	448.070	16.99

• In 2017 coal production totalled 726 Mt, of which 635.6 Mt was thermal coal, 47.5 Mt lignite and 40.9 Mt coking coal.

• Almost 94% of the production is open pit, with the balance mined in underground mines.

• Production costs in India are INR 1200/t (USD18/t) on average, lower than in most countries, even adjusted for quality, as the country has low strip ratios.

• Average costs are very much dependent on the performance of CIL, which accounts for 80% of domestic production (with an average cost of INR 1 176/t).

• However, production growth has not been able to keep up with demand growth, especially since the electricity sector reform of 2003, leading to increasing domestic coal supply shortages and imports.

• Hard coal production in India is concentrated in four states – Odisha, Chhattisgarh, Jharkhand and Madhya Pradesh – which account for almost 80% of production.

• Other producing states are Telangana, Maharashtra and West Bengal, with smaller volumes produced also in Uttar Pradesh, Meghalaya and Assam.

• Jharkhand is the largest producer of coking coal.

• 4 High-ash coal, i.e. coal with a low calorific value (CV), is predominant in India, with 70% of domestic supply in the CV range of 3 400-4 600 kilocalories per kilogram (kcal/kg) GAR (gross as received).

•  This is lower quality than the international standards, especially seaborne-traded thermal coal, which is typically in the range of 5000-6 000 kcal/kg NAR (net as received).

• Lignite production in India (around 47 Mt in 2017) is much smaller than hard coal, and it is produced mostly in three states: more than half in Tamil Nadu and less than one quarter each in Gujarat and Rajasthan.

Imports

Import of Coal in India  (in Million Tonnes)
Coal	2018-19	2019-20	2020-21	2021-22	2022-23 (P)
Cocking Coal	51.84	51.83	51.20	57.16	28.705
Non-Cocking Coal	183.51	196.70	164.05	151.77	103.200
Total Coal Import	234.35	248.54	215.25	208.93	131.905
Coke	4.93	2.88	2.46	2.48	1.446

• To satisfy growing coal demand amid production shortages, imports have been increasing for two decades, reaching 209 Mt in 2017.

• During the period 2014-16 the push for additional domestic production and new mines, together with some moderation of demand growth, resulted in a temporary decline in imports.

• Indinesia, Australia, and South Africa are India's major coal suppliers.

• Other major suppliers are the United States, Mozambique, the Russian Federation and Canada.

Coal power generation

• The National Thermal Power Corporation (NTPC) is India’s largest coal power generator and one of the largest in the world, with 52 GW of installed coal generation capacity.

• Utilities owned by the state governments hold another 59 GW, while independent power producers (IPPs) account for 75 GW.

• Different public joint ventures in which NTPC is present account for 5 GW.

• Additionally, there are captive power plants with a total capacity of 54 GW, which produce electricity for own use in certain industries (steel, aluminium, cement and fertilisers).

• India has 50 GW of capacity under construction, with 50% being supercritical, while among installed capacity less than one-third is supercritical.

•  India’s subcritical coal-fired fleet is relatively young at 15 years old on average.

• Coal power generation has grown at an astonishing rate of 8% per year during the past decade, surpassing the robust growth of 6.5% in power demand, which was strongly driven by the Electricity Sector Reform of 2003.

• Besides operational issues, a low plant load factor has economic implications for the recovery of investment costs.

• Around 55 GW of coal power plants in India are under severe financial stress, including many state-owned plants, for which tariff revenues very often do not cover generation costs. Private plants are struggling to conclude power purchase agreements (PPAs) and fuel supply agreements (FSAs).

• These non-performing assets in the power system have become a problem for the financial sector, as many of them have not repaid their loans.

Government policies 

• India’s coal sector is progressively moving towards market-based approaches with competitive auctions of coal mines and linkages, although it is still regulated all along the coal supply chain?

Commercial mining

• India is introducing commercial coal mining – the most radical reform since the nationalisation of the coal sector in the 1970s.

• Since the amendment (Special Provisions) of the Coal Mines Act in 2015, which formally ended the marketing monopoly of CIL, private companies can develop new mines based on government auctions of unallocated coal mines/blocks.

• Private companies can sell coal in the free market without price or end-user restrictions.

• The Cabinet Committee on Economic Affairs (CCEA) approved the auction methodology in February 2018, which marked the start of commercial mining.

• The methodology provides for an ascending forward auction whereby the bid parameter will be the royalty per produced tonne of coal to be paid to the state government.

• The floor price will be determined in accordance with a methodology established in 2014.

• 6 Public power plants were excluded from the competitive bidding; however, in a separate process they were able to receive guaranteed supplies in the recently reallocated coal fields (41 out of 89).

• After the cancellation of two round of auctions, in December 2019, the GoI carried out the auction of coal blocks and allocated five blocks (to Birla and Vedanta).

• In 2019 the GoI also approved changes to allow captive coal producers to sell up to 25% of their production in the open market without any price restriction.

• Foreign companies are allowed to own and operate coal washeries (without coal mining investment).

• In September 2019 the GoI ruled that coal mining will also be fully open to foreign companies, as the country aims to increase the amount of foreign direct investment in the coal sector.

Coal washing 

• Washing is the process of reducing ash content in raw coal, most commonly using density to separate more heavy ash from lighter coal, besides other more sophisticated and expensive ways of washing.

• India’s high-ash and low-CV coal causes high operational, transport and maintenance costs for coal users.

• Benefits of washing include better heat transmission and plant efficiency, less boiler corrosion, lower ash disposal requirements and lower emissions of air pollutants, as well as lower weight and transport costs.

• While coal washing is beneficial,as it reduces costs and also some CO2 emissions, it also has some drawbacks. First,

  • washing increases capital costs, as it requires investment to build and operate the washery (supplies, power and labour costs).

  • Ash separation is not perfect and washing produces by-products, such as washed coal, middlings and rejections, thus losing part of the energy contained in the raw coal.

India’s climate commitments and the role of coal

• India’s National Determined Contribution (NDC) under the Paris Agreement sets out plans to reduce the emissions intensity of the economy by 33-35% by 2030 from 2005 levels; to reach 40% of power generation capacity from non-fossil fuels; and to create an additional carbon sink of 2.5-3 billion tonnes of CO2 equivalent through additional forest and tree cover.

• The GoI has expressed certainty on reaching at least the two energy-related targets sooner than 2030. Thanks to progress made in the implementation of these targets, the emissions intensity of India’s gross domestic product has already decreased by around 20% over the past decade (2005-15).

• At the same time, total energy-related CO2emissions are expected to rise.

• The National Electricity Plan of India of 2018 included plans to build 94 GW of new coal-fired capacity (mainly supercritical coal units) between 2017/18 and 2026/27 (CEA, 2018).

• However, to date only 22 GW have been permitted amid weak economics, while 50 GW are under construction. Given the slow progress, the CEA’s 2018 plan did not foresee the construction of any additional new coal plants. However, the CEA has outlined in its draft.

• 2019 generation optimisation plan a large potential investment in new coal plants up to 2030 (105 GW of pithead plants and 44 GW of load-centred plants) (CEA, 2019).

• The 2018 National Electricity Plan includes a new target for the closure of 48.3 GW of end-of-life coal plants. Specifically, the plan forecasts the closure of the oldest 22.7 GW of coal power plants up to 2021/22.

• This would include 5.9 GW of normal end-of-life retirements and 16.8 GW of early closures because of non-compliance with air quality regulations.

• An additional 25.6 GW of coal capacity is being considered for early retirement in the five years from 2021/22 to 2026/27.

• India’s power system is experiencing rapidly rising shares of variable renewable electricity, which has two different impacts on the economics of existing coal power plants.

• On the one hand, it means less generation from these plants will be needed, which brings more economic and financial stress for many producers. On the other, flexibility requirements of the electricity system will rise. Many coal plants in India were not designed to follow load, but to provide baseload power.

• The GoI is currently identifying the plants that can and need to provide such flexibility. The deployment of other sources of flexibility, such as natural gas, pumped hydro storage or nuclear remain below expectations.

• The implementation of the new power market reforms are important to support flexibility and CERC has proposed reforms of ancillary services and short-term markets and economic dispatch.

• Oil remains an essential energy source for India.

• It is the second-largest source in the country’s total primary energy supply (TPES) and the largest in its total final consumption(TFC).

• Oil demand has increased rapidly over the last several decades and India is now the third-largest oil-consuming country in the world.

• In the last decade, India’s domestic oil production has remained relatively stable at an average of 862 thousand barrels per day (kb/d), with an annual average growth rate of 0.3%, but oil’s share of total domestic energy production has declined.

• For refined products, India’s production has increased steadily and the country is currently a net exporter.

• Over the same period, India’s oil demand grew by more than 50%, mostly led by rapid growth in gasoline and diesel for transport, the largest oil-consuming sector, and liquefied petroleum gas (LPG) in cooking.

• While the rate varies, oil demand has been growing across all sectors and is expected to surpass that of the People’s Republic of China(“China”) in the early 2021 as India becomes the leader of oil demand growth.

• With continued strong growth in oil demand against falling domestic production, India has become more reliant on oil imports, which hovered around 83% in 2018.

• At the same time, India’s import bill for crude oil has increased by 27% from USD 88 billion in 2017 to USD 112 billion in 2018.

• In March 2015 Prime Minister Modi set out a roadmap to reduce India’s oil imports by 10% by 2022.

• To address this, India has been broadening its strategic partnerships through international bilateral investment and foreign direct investment in India to diversify the country’s import sources and suppliers.

• The Government of India (GoI) has created the Indian Strategic Petroleum Reserves (ISPRL) to build its strategic crude oil reserves.

• With net imports expected to grow in the future, India can benefit from further reinforcing its oil emergency response policy, with increased emergency stocks and demand-restraint measures to counterbalance disruptions. As oil demand is expected to remain robust, India should also continue to enhance its international engagement in oil security issues.

Oil Supply?

• Location-wise, oil production in India comes primarily from three onshore states, Assam, Gujarat and Rajasthan, which together account for more than 96% of onshore outputs,and from the aged offshore Mumbai High Field.

• Some recent discoveries in Rajasthan and in the offshore Krishna-Godavari (KG) basin hold some potential.

Crude oil imports

• India relies heavily on crude oil imports, as domestic production is not sufficient to meet the country’s soaring refinery activity and end-used demand.

•  In the first half of 2022-23, India's crude oil import bill surged 76% to $90.3 billion even as totaal import quantity increased by 15% to 116.6 million tonnes.

• Russias, Iraq, and Saudi Arabia are India's top three crude oil suppliers today.

• Russia has surpassed Iraq in 2022.

Petrochemical industry

• Petrochemicals play an essential role in enabling the key sectors of the economy to grow.

• India's annual petrochemical consumption is expected to triple to 80 MMt by 2040 forcing the country to either raise imports or invest into building new facilities. India, Asia's third largest economy, annually consumes 25-30 MMt of petrochemicals. India is a net importer of petrochemicals.

• Per capita consumption of petrochemicals in India is significantly lower than that of the developed economies. 

• India is expected to contribute 10% to the incremental growth of global petrochemical demand. To promote the petrochemical sector, the Government of India has allowed 100% FDI through automatic route.

• The “Make in India” programme will give a boost to the country’s manufacturing industry, such as the automotive sector, requiring more plastics, and the increased focus on agriculture and irrigation will accelerate the demand for petrochemical fertilisers.

• The GoI’s thrust to improve national infrastructure will also stimulate the demand for synthetic materials for construction.

• In order to meet such growing demand for petrochemical products, a number of Indian state-owned energy companies are making major investments to further promote their petrochemical activities, and are expected to become significant players in the sector.

• Capacity expansions by several other manufacturers are moving ahead and gradually filling the gap between domestic demand and supply.

• Overall, the outlook for the petrochemical industry in India is more positive than it has been recently, as the growth in gross domestic product (GDP) and industrial outputs in key end-use sectors (such asautomotive and packaging) are expected to be higher than in previous years.

Refineries

• There are 23 refineries with a combined refining capacity of around 5.2 mb/d.

• Out of the 23 refineries, 19 are in public sector, one in joint venture, and 3 in private sector.

• The proportion of capacity belonging to public-sector, private-sector, and joint-venture refineries stood at 57%, 36% and 7%, respectively.?

• The three largest single refineries are privately owned by Reliance and Nayara Energy, which add up to a total capacity of 88.2 Mt/y.

• They are all located on the west coast of the country facing one of the world’s largest crude oil-producing regions – the Middle East – in order to benefit from low transport costs.

• Although several refinery projects have faced delays in the past few years due to financial issues or extreme weather events, the world’s largest oil refinery and petrochemical mega-project with a capacity of 1.2 mb/d is being planned in Ratnagiri. It is a joint venture of state owned companies – IOCL, Bharat Petroleum and Hindustan Petroleum are taking a 50% stake, with international partners Saudi Aramco and ADNOC.

• The project was expected to be completed in 2024 and commissioned in 2025, but is running into delays. The completion of this mega-project would boost India’s oil product exports after a medium-term slowdown (IEA, 2019a).

• Some refineries are planning to upgrade their capacity to produce higher-quality fuels with reduced sulphur, conforming to Bharat Stage (BS) VI (EURO VI) emission standards.

• Since April 2017 India has been rolling out EURO IV compliant fuels called BS-IV, but has decided to leapfrog the EURO V norms and directly adopt the EURO VI standard from April 2020.

• In October 2018 the Supreme Court ordered that vehicles only complying with the BS IV fuel standard cannot be sold or registered in the country after 1 April 2020.

• The development of cities in India is accelerating. An escalating level of air pollution pushed the government to impose BS VI fuels in the National Capital Region (NCR) of Delhi in April 2018.

• India is continuously building up its refining capacity to meet the rising domestic demand and maintain its position as Asia’s refining hub.

• To this end, the GoI prepared a roadmap for India’s oil sector to meet projected oil demand in 2040. The roadmap is based on a package of measures: first, to improve domestic production of gasoline and diesel by increasing existing brownfield refining capacity by 125 Mt per year, and build new greenfield refineries at Barmer (9 Mt per year) and on the west coast (60 Mt per year).

• Based on this plan, India’s total refining capacity could reach 401 Mt per year by 2025, and 443 Mt per year by 2030 (554 Mt per year if including 25% export capacity addition).

• The government anticipates that if the plan is realised, the built capacity would be sufficient to meet India’s domestic demand up to 2035.

• Moreover, as India wants to remain Asia’srefining hub, the government plans to further build up its refining capacity (including 25% capacity for export) up to 667 Mt per year by 2040.

Oil products imports and exports

• Despite being a net importer of crude oil, India is a net exporter of refined oil products thanks to its large refining capacity.

• India produces significantly more diesel and gasoline than needed for domestic consumption, which contributes to its exports of oil products .

• Most of the exported oil products in 2018 (1 306 kb/d) were road transport fuels: 43% diesel and 23% gasoline. The top five countries that imported India’s petroleum products were the United Arab Emirates, Singapore, the Netherlands, China and Turkey.

• However, India is still import-dependent on certain petroleum products.

•  In 2018 India imported 800 kb/d of oil products, primarily petroleum coke (part of other products below) and LPG. India stands as world's second-largest importer of LPG after China.

• The country's LPG imports have markedly increased over the last five years, surpassing the import volumes of Japan.

• According to state-owned IOCL, 50% of India’s LPG demand will be met by imports until 2040 (IOCL, 2018).

• The increased use of LPG as a cleaner cooking fuel, replacing firewood and kerosene, is expected to turn India into the world’s largest LPG importer by 2040 (IEA, 2018).

• India also imports naphtha, for techno-commercial reasons rather than due to a domestic demand–supply gap.

      Net import (left) net export (right).

Institutions related to petroleum

• The Ministry of Petroleum and Natural Gas (MoPNG) regulates the entire value chain of the oil sector, including exploration and production, refining, distribution and marketing, import and export, and conservation of petroleum products.

• Under the MoPNG, the Directorate General of Hydrocarbons (DGH) regulates the upstream side of the oil sector, as well as coalbed methane projects.

• The Petroleum and Natural Gas Regulatory Board (PNGRB) was created in 2006 to protect the interests of consumers and entities engaged in the sector and to promote competitive markets.

• PNGRB is also mandated to regulate the refining, processing, storage, transport, distribution, marketing and sale of petroleum, petroleum products and natural gas, excluding production of crude oil and natural gas, so as to ensure uninterrupted and adequate supply in all parts of the country.

• The PNGRB Act (2006) provides for the promotion of competition in the oil and gas sectors by ensuring the non-discriminatory open access of oil and gas pipelineinfrastructure on a common carrier/contract carrier principle at regulated tariffs determined by PNGRB under its notified regulatory framework.

• In India, two state-owned companies dominate oil production and refining activities.

• About 2/3rd of crude oil production in India is done by the ONGC.

Exploration and production policies

• To address production declines from mature basins, the GoI has taken several measures to enhance exploration and production (E&P) of oil and gas in the country:  Hydrocarbon Exploration and Licensing Policy (HELP):Approved in March 2016 and implemented since July 2017, the HELP replaced the previous licensing policy, the New Exploration Licensing Policy (NELP), which was criticised for its narrow scope and long, burdensome procedures.

• The HELP unifies the permitting authority into a single register to grant licences for E&P and covers both conventional and non-conventional oil and gas resources. It also introduced pricing and marketing freedom.

 Open Acreage Licensing Policy (OALP)

• The HELP introduced the OALP in 2017 to further encourage companies to seek permission for exploration of any block at any time by submitting an expression of interest. Previously, there were formal bidding rounds led by the GoI and E&P activities were limited to blocks approved by it.

• The first round of the OALP was concluded in May 2018, with 76% of the total blocks awarded to private companies; 55 contracts were signed with 6 companies, of which twowere private – Vedanta and HOEC – winning 41 contracts and 1 contract respectively.  The second and third rounds of the OALP were concluded in July 2019. Contracts were signed for 32 blocks with 6 companies, of which 3 were private companies. Vedanta and BP–RIL won 10 contracts and 1 contract respectively.

• Under the OALP I, II and III, a total of 87 blocks covering an area of 118 280 km2 have been awarded so far; 61% of the blocks, equivalent to 51% of the awarded area, werewon by private companies, mainly Vedanta (51 blocks), HOEC (1 block) and BP–RIL (1 block).

 National Data Repository

• In support of the OALP, the government launched the National Data Repository in June 2017.

• It is a comprehensive archive of geo-scientific data for E&P activities.

• By allowing companies to access the data through an e-platform and consult relevant information, the government helped the interested parties in making bidding decisions.?

Ports and pipelines

• As of 2018 there were 12 major crude oil ports in India, with a total capacity of around 5.5 mb/d.

• The major crude oil ports are in Vadinar (1.3 mb/d), Jamnagar (1.2 mb/d) and Mumbai (865 kb/d), all located on the west coast. There are also about 12 ports handling finished products around the coast of India.

• Around 227 Mt (4.6 mb/d) of petroleum products were handled through these ports in 2017 and their share of total traffic at the ports was 33%.

• India’s crude oil pipelines have an estimated combined capacity of 159 Mt per year (3.2 mb/d). As of March 2018 India had 10 406 kilometres (km) of crude oil pipelines, including 488 km of offshore pipeline.

• IOCL owns the three longest crude oil pipelines, of which two – Mathura and Panipat – serve refineries close to Delhi from the western coast.

• India also has an extensive oil product pipeline network with a total length of 16 612 km, including 2 847 km of LPG pipeline.

• They are owned by seven different companies, although IOCL controls the majority, and most of the pipelines are small in capacity, the largest being 7.95 Mt per year (162 kb/d).

• India has six LPG pipelines with an estimated capacity of around 7.77 Mt per year(158 kb/d).

• To meet the rising LPG demand, India plans to develop more infrastructure for LPG distribution. IOCL is laying an LPG pipeline from the west coast in Gujarat to Gorakhpur in eastern Uttar Pradesh. This pipeline, with an estimated capacity of 3.75 Mtper year (76 kb/d) could become the longest LPG pipeline in the world. IOCL is also building additional import capacity at Paradeep (east), Kochi (south) and Kandla (west) to meet the increasing requirement for LPG imports.

Storage

• India's strategic crude oil storages are currently located at Vishakhapatnam (Andhra Pradesh), Mangaluru (Karnataka), and padur (Karnataka).

• As of March 2018, under Phase I of the Strategic Petroleum Reserves programme, India’s total storage capacity of crude oil and oil products was around 38 Mt (281 million barrels [mb]), including 5.3 Mt (39 mb) of strategic reserve capacity.

• These strategic reserves are estimated to hold approximately 9.2 days of India’s crude requirement according to the consumption pattern of 2018/19.

• The GoI gave in-principle approval in 2018 for Phase II of the Strategic Petroleum Reserves programme, which has a capacity of 6.5 Mt or almost 50 mb.

• Storage sites are situated in 20 locations throughout the country, close to major refineries or terminals connected to pipelines. IOCL has a vast crude oil tank farm of 18 tanks with a total capacity of 1 Mt at Vadinar, on the western coast.

• There are also crude oil storage tank farms at Mundra (0.5 Mt), Viramgam in Gujarat (0.3 Mt) and at Chaksu in Rajasthan (0.2 Mt).

• The total volume of stocks from the publicly owned refineries, which have a throughput capacity of around 3 mb/d, are reported to JODI as being 92 mb (except private refineries Reliance SEZ and Nayara).

• This implies that the days of cover provided by publicly owned refineries stood at around 30 days on average.

• India’s natural gas consumption is small but increasing.

• Most gas is used in the industrial sector and in power generation.

• Residential gas consumption is small, but India is expanding its gas distribution networks rapidly, an area where major growth is expected.

• Some states and cities also promote gas vehicles to reduce emissions from the transport sector.

• Domestic production covers just over half of India’s gas supply.

• The rest is imported in the form of liquefied natural gas (LNG), which has increased rapidly in recent years, thanks to the decline in global gas prices.

• Investment in new LNG terminals is on a rapid rise.

• In 2014 India linked its domestic gas price to a basket of international LNG prices.

• Since domestic gas production has developed below expectations, gas use for power generation struggles to compete with cheap coal and renewables under the current contracted import prices.

• To stimulate more domestic production of oil and gas, the Government of India (GoI) has introduced a Hydrocarbon Exploration and Licensing Policy (HELP), which brought freedom of price setting and marketing for new gas production.

• India aims to increase the share of natural gas to 15% of the energy mix by 2030 (PNGRB, 2013), which suggests a doubling of current demand and infrastructure needs, as part of a gas trading hub.

• This will require the availability of transport capacity across India, which will enable all market players to access LNG supplies.

• Under the Petroleum and Natural Gas Regulatory Board (PNGRB) Act 2006, gas pipelines were declared common carriers/contract, and non-discriminatory third-party access is mandatory.

• In practice, however, several companies maintain gas supply and transport activities, generating conflicts of interest that prevent a fully functioning third-party access regime.

• The future outlook for natural gas in India depends on the growth in demand, the evolution of the pricing regime, and the pace of gas infrastructure expansion.

• International experience (notably in the European Union) suggests that the key prerequisites to a fully functioning gas market are unbundling and domestic gas hub pricing that reflects local gas supply/demand fundamentals.

Supply and demand

• India has a target to raise the share of gas in its energy mix to 15% by 2030, from the current around 6.4%.

• India's net production of natural fell in the last decade to 33131 million standard cubic metre (mmscm) in FY 2022, compared to 39753 mmscm in FY 2013.

• ONGC is the largest producer of gas in the country contributing around 61% of the country's production in FY 2022.

• India's consumption of natural gas has hit 63907 mmscm in FY 2022 compared with 57367 mmscm in the FY 2013. This is due to growing demand from fertilizer, city gas distribution (CGD), and other sectors.

• Of the total gas consumption in India, 30% is consumed by fertilizer sector, 20% by CGD, and 15% by power sector.

• India's reliance on imports went up to 48.2% of consumtion in 2022, compared with 30.7% in 2013.?

• Qatar remained the major supplier of LNG to India in 2021 contributing to a share of 42% in India's total gas exports.

Gas production and reserves

• As of 1 April 2018 India has recoverable conventional natural gas reserves of 1 340 bcm, of which 61% are located offshore.

•  Reserves held under the production-sharing contracts(PSC) regime account for 49% of total, whereas the two incumbent public service undertakings (PSUs), Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), have shares of 42% and 9%, respectively (MoPNG, 2018a).

• As for unconventional resources, recoverable coal bed methane reserves are estimated at 108 bcm.

• Different estimates for shale gas resources range from 45 to 2 100 thousand cubic feet (or 1.3 to 59 thousand cubic metres), without information on recoverable reserves (MoPNG, 2018b).

• Natural gas production has remained stable at around 30 bcm per year since 2013, following a spike in 2010-12 linked to the commissioning of new fields (D1-D3 and MA)and a steep decline in production at the Krishna Godavari Dhirubhai 6 (KG-D6) offshore field due to water and sand ingress in the reservoir (Figure 11.5), which led to the permanent shutdown of the MA Field.

• The majority of natural gas exploration and production activities are carried out by two PSUs – ONGC and OIL.

• Private and foreign players entered Indian exploration and production in the late 1990s under the New Exploration Licensing Policy (NELP) framework.

• In 2017/18 the two PSUs accounted respectively for 71% and 9% of total natural gas production, the remaining 20% being produced under the PSC regime.

• Over two-thirds (67%) of natural gas production came from offshore fields, and in particular from the Mumbai Basin where ONGC-operated Bassein and Mumbai High fields accounted for 33% and 16% of total production, respectively.

• The Ministry of Petroleum and Natural Gas (MoPNG) projects a doubling of production by 2021/22 and significant changes in the production mix, as private producers under the PSC regime are expected to increase their output by five times.

Production in BCM(billion cubic metres)

• The GoI sees strong potential for India to produce biogas from agricultural and other waste, and has set a target for the annual production of 15 Mt of compressed biogas by 2023 under the policy of Sustainable Alternative Towards Affordable Transportation (SATAT).

Institutions

• The Ministry of Petroleum and Natural Gas (MoPNG) oversees the oil and gas industry, from exploration and production to distribution, marketing and pricing.

• It has authority over state-owned oil and gas companies (PSUs).

• The Directorate General of Hydrocarbons (DGH) was established in 1993 under the administrative control of MoPNG and has several responsibilities, including the implementation of the NELP, HELP and Discovered Small Field Policy, as well as matters concerning PSCs and revenue-sharing contracts for discovered fields and exploration blocks.

• DGH is also engaged in opening up unexplored areas for future exploration and development of non-conventional hydrocarbon energy sources, for instance coal bed methane.

• The Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted in 2006 to protect the interests of consumers, to promote competitive markets and to regulate the refining, processing, storage, transport, distribution, marketing and sale of petroleum, petroleum products and natural gas (excluding production of crude oil and natural gas.

Gas infrastructure

• India’s natural gas transport network has 16 800 km of long-distance pipelines, which connect western, northern and south-eastern markets.

• Several new pipelines are under construction to the east and north-east of the country, adding another 15 000 km in the coming years, notably trans-regional gas pipelines.

• State-controlled GAIL owns and operates over two-thirds of the gas pipeline network. India has no international pipeline connections. There are currently no underground storage facilities for natural gas.

• India has four LNG terminals located on the country’s west coast and one new LNG terminal (Ennore) on the east coast, all with a total receiving capacity of 34 million tonnes per annum (Mtpa, or the equivalent of 37.4 bcm).

Pipeline import options

• There have been some efforts to establish a pipeline from Iran via Pakistan to India (IPI Pipeline), but it was put on hold in 2008 following sanctions against Iran by the United States.

• Since then, a rival pipeline from Turkmenistan via Afghanistan and Pakistan to India (TAPI Pipeline) has been studied.

• While both pipelines have geopolitical concerns for India as they cross Afghanistan and/or Pakistan, the latter has seen some progress.

• The ground-breaking ceremony of the 1 800 km long TAPI Pipeline took place in December 2015. The pipeline consortium – the TAPI Pipeline Company – was set up in 2014 with shareholdings by Turkmenistan (85%), India (5%), Pakistan (5%) and Afghanistan (5%).

• The project is stated to be completed within seven years, with commercial operations targeted to begin in 2022 (PIB, 2016) and is due to supply some 14 bcm per year for 30 years (PIB 2014).

• Another international pipeline is the Middle East to India Deepwater Gas Pipeline (MEIDP), being proposed by the South Asia Gas Enterprise (SAGE), from Oman to India with a length of 1 200 km and a maximum depth of 3 500 metres below sea level.

• However, as of 2015 this pipeline is no longer under the consideration by the GoI (PIB, 2015). SAGE has also presented the possibility of this undersea pipeline being used to import gas from Iran into India.

• The exploration and production of shale gas in the United States (US) has been a game changer, making the country self-sufficient in natural gas over the last few years. This has created considerable excitement globally, particularly in Europe.

• India is also looking at exploring shale gas domestically to fill in the supply–demand gap.

• But will what works for the US also work for Europe and India? This policy brief explores this question in the context of India. It explains the nature of shale gas, the technology for its extraction from underground sources, and its potential for India. It also highlights overseas acquisitions of this resource by Indian companies even before it is sourced domestically, and then examines the viability of the technology in India.

• One of the key determinants of the viability of this technology is the availability of large quantities of clean water.

• This policy brief raises a red flag on this complementary input for exploiting shale gas resources in India, given that India is a water-stressed country, and is fast approaching water scarcity condition

Drilling and recovery of shale gas

• Figure shows the various underground geographical features for recovery of conventional and unconventional gases.

• Conventional gas can occur by itself or in association with oil.

• These are shown on the left and right side of the figure, respectively.

• Coal bed methane (CBM), which is extracted from coal beds, is also an unconventional gas and, in terms of depth, occurs much closer to the land surface than other similar gases.

• However, shale rock is sometimes found 3,000 metres below the surface.

• Therefore, after deep vertical drilling, there are techniques to drill horizontally for considerable distances in various directions to extract the gas-rich shale.

• A mixture of water, chemicals, and sand is then injected into the well at very high pressures (8,000 psi) to create a number of fissures in the rock to release the gas.

• The process of using water for breaking up the rock is known as “hydro-fracturing” or “fracking”.

• The chemicals help in water and gas flow and tiny particles of sand enter the fissures to keep them open and allow the gas to flow to the surface.

• This injection has to be done several times over the life of the well.

• The number of wells to be drilled for shale gas far exceeds the number of wells required in the case of conventional gas and the land area required is a minimum of 80 to 160 acres.

Proposed shale gas exploration policy in India

• There is an obvious interest in exploring for shale gas domestically, given the enormous success in the US.

• The Ministry of Petroleum and Natural Gas (MoPNG) has identified six basins as potentially shale gas bearing. These are Cambay, Assam-Arakan, Gondwana, Krishna-Godavari, Kaveri, and the Indo-Gangetic plain.

• A map derived from different sources is shown in Figure.

• In a study conducted by the United States Geological Survey (USGS), recoverable resources of  have been estimated in 3 out of 26 sedimentary basins.

• The Government of India had also put out in 2012, a draft policy for the exploration and exploitation of shale gas, inviting suggestions from the general public, stakeholders, environmentalists, etc.

• Salient features of the policy draft are given in below-

Features of the proposed shale gas policy

• The identified blocks will be advertised for international competitive bidding. Participation of the state will not be mandatory.

• All areas, which are already allotted and where operations have entered the development/production phase shall be excluded from the area to be offered for shale gas exploration.

• If an offer for shale gas overlaps or falls within an existing oil and gas/CBM block, right of first refusal will be offered to the existing contractor to match the offer of the selected bidder.

• Fiscal regime proposed for exploration to be based on royalty and production linked payments, similar to the regime adopted for CBM operations. Ad valorem royalty at the prevailing rate for natural gas would be applicable and accrue to the state governments.Production-linked payment on ad valorem basis will be made to the central government on different production slabs, which will be biddable items. Cost recovery will not be admissible.

• The contract duration will be of 32 years and will be divided into two phases. Phase I will be for a period of 7 years and will be for exploration, appraisal, evaluation of the prospect, and feasibility. Phase II will be the development and production phase for the remaining duration of 25 years.

• There will be freedom to market shale gas within India on an arm’s length basis within the framework of the government policies in marketing and pricing of the gas.