ndla The Ener S_ tEven before the recent changes in the lndloa: The Energy S ector world energy situation, the growth of the Indian economy had become increasingly J9~T rt- , / > adependent on the availability of energy supplies. The increase in world petroleum prices has now created new problems for India. and given rise to a need for new adjustments. Hence this book-which grew out of a major study by a World Bank team-deals with a subject which is both highly topical and crucial to §\ WQ]®F]cog flttttRL [SU[b3DS R India's economic prospects. The book provides a concise but ... _ L wide-ranging review of the energy F8ILE COPY i w sector as a whole. including all the FILE COPY main forms of energy-coal; petroleum: Report No.:11178 Type: (PUB) A electric power from hydro, thermal and _ Title: INDIA : THE ENERGY SECTOR -Q nuclear sources; and the non-commercial Author: HENDERSON, P. D ' SECTOR fuels which still remain important in 1AuExtho: HENDERSoom Dent.:D.. India. It deals with the resource position, Ext.: 0 Room De t *' the growth and structure of the fuel and OLD PUBLCIATIu , power industries, and recent and OLD - UB_C_ATION - ^prospective developments in the energy situation in India including the effects of .- higher petroleum prices. It also considers -_. 3" " :_ ~.:,, - .a number of basic questions of energy policy. 1; s .]r b ,¢ The author is currently Professor of * _ _ a - L *--Political Economy at University College, Lincoln College. Oxford, and was a : ; tF,:, v w staff member of the World Bank. Aw -4 ^* -. ^-^ - ;-n w* W s ...... -t _. - .+ ss. silr_s.f ~~R s. 30 7-~~~~~~ -'i =,.....*- I NTERNA4L DOCUMEN TS lN IJT (mi croqrapihi cs) Indi vi dual reqUest for microfiche produc:ti on Doc umen t nru mb er: :L 1 1 79 Eo>x No. :229 Report lType: PLE (F INAL) SAMF:'LE:: F I CHE HEAD) I NG BOLI.vI n - PUBLIC;ATION 1 C)1 02-BO STUDIE( IN 11\EMPLOYMENT AND RlURAL DEVEL-OPMENT SMALL SCALE RURAL INDUSTRY IN BO.IV:IA. JUNE 4., 1986. C(R, ARD 1 O1F1 1 No. of Si:lver-: 1 MRaster 1 Di. az.: 1 Total :3 India The Energy Sector Oxford University Press OXFORD LONDON GLASGOW NEW YORK TORONTO MELBOURNE WELLINGTON CAPE TOWN DELHI BOMBAY CALCUTTA MADRAS KARACHI DACCA KUALA LUMPUR SINGAPORE JAKARTA HONG KONG TOKYO NAIROBI DAR ES SALAAM LUSAKA ADDIS ABABA IBADAN ZARIA ACCRA BEIRUT (© 1975 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Printed in India by Aroon Purie at Thomson Press (India) Limited, Faridabad and Published by C.H. Lewis, Oxford University Press, 2/11 Ansari Road, Daryaganj, Delhi-6 CONTENTS Preface xi Units, Spelling, Symbols and Conventions xiv 1. THE SETTING I 1. Introduction 1 2. The Energy Resources of India 6 Coal 7 Oil and Natural Gas 12 Hydroelectric Power 15 Nuclear Fuels 20 Sources of Noncommercial Energy 22 3. The Growth and Pattern of Energy Consumption and Supply 25 Total Energy, Commercial and Noncommercial 25 Commercial Energy 27 4. The Development of the Fuel and Power Industries 36 Introduction 36 The Coal Mining Industry 38 The Oil Industry 50 Electric Power 67 11. CURRENT PROBLEMS AND FUTURE POSSIBILITIES 91 5. The Present Energy Shortage and the Immediate Prospects 91 The Shortage of Electric Power 91 Problems of Coal Production and Coal Transport 100 The Oil Situation: Availability and Prices 105 6. Energy Supplies in the Fifth Plan Period 118 Introduction 118 Targets and Prospects in Coal 119 The Oil Industry in the Fifth Plan 127 Power Development 139 7. Some Questions of Policy and Practice in the Energy Sector 148 Information and Data 148 The Prices of Energy Products 150 The Coal Industry 156 The Oil Industry 158 The Electricity Supply Industry 163 v Vi CONTENTS The Use of Energy in Rural Areas 165 World Petroleum Prices and the Energy Problem in India 170 Postscript 177 APPENDIX 1. Aggregate Measures of Energy 179 APPENDIX 11. Estimates of Consumption of Noncommercial Fuels 183 TABLES 1. Estimated Coal Reserves in India 8 2. Respective Shares in Coal Production and Reserves of Bengal/Bihar and Outlying Fields 11 3. Crude Petroleum: Proved and Indicated Reserves and Domestic Production, 1966-73 14 4. Natural Gas: Reserves, Production, and Utilization, 1965-73 16 5. Estimated Share of Hydro Potential by States and Regions, River Systems, and Types of Project 17 6. Estimated Energy Consumption, Commercial and Noncommercial, 1953/54-1970/71 26 7. Estimated Consumption in India of Noncommercial Fuels, 1970/71 27 8. Commercial Energy Consumption by Main Fuels, 1953/54-1970(7l 28 9. Commercial Energy Consumption by Sector, 1960/61 and 1970/71 30 10. Growth Rates of Total Commercial Energy Consumption, GOP, and Industrial Production, 1960/61 to 1970/71 31 11. Main Producing Sectors: Contributions to GDP, Commercial Energy Consumption, and Energy Intensity, 1960/61 and 1970171 32 12. Analysis of Changes in Commercial Energy Consumption by Sector, 1960161-1970/71 34 13. Fuel and Power Industries: Targets and Realizations in the Fourth Plan Period 37 14. Coal Production by Sector, Type of Coal, and Main Coalfields 38 15. Inland Consumption of Coal, 1960(61-1970/71, and 1973 39 16. Employment, Output, and Output per Man-Year in Coal Mines, 1961-1972 41 17. Unit Costs of Coal Production in 1973: Singareni Collieries Company and Saunda Central Colliery 43 18. Average Unit Value of Coil Production for Selected Years 45 CONTE NTS Vii 19. Coking Coal: Prices Before and After April 1, 1974 46 20. Norn-Coking Coal: Prices Before and After April 1, 1974 46 21. Consumption of Petroleum Products 51 22. Consumption of Petroleum Products: Rates of Increase for Main Product Groups and Selected Products, 1951-73 52 23. Consumption of Petroleum Products: Relative Shares of Product Groups 54 24. India, U.S., and Western Europe: Comparative Shares in Consumption of Main Petroleum Products, 1972 55 25. Production of Crude Petroleum in India, by Company 56 26. Crude Throughput of Indian Refineries: Private, Public, and Joint Sectors 58 27. Estimated Refinery Throughput Capacity, September 1974 59 28. Domestic Production and Imports of Crude Oil and Refined Products 60 29. Petroleum Sector: Extent of Dependence on Imports 61 30. Prices Ex-Refinery and Ex-Storage Point, and Excise Duties, for Six Major Petroleum Products at Selected Dates 66 31. Electricity Generated: Gross and Net 68 32. Gross Electricity Generated According to Primary Fuels 70 33. Conventional Thermal Stations: Consumption of Principal Fuels, 1971/72 71 34. Electricity Supply: Installed Capacity 72 35. Relative Shares in Net Electricity Consumption 73 36. Electricity Consumption in Selected Manufacturing Industries 74 37. Number of Villages Electrified and Irrigation Pumpsets/Tubewells Energized 75 38. Per Capita Electricity Consumption by States 76 39. Sales of Energy to Ultimate Consumers by Different Supplying Agencies, 1971/72 78 40. State Electricity Boards: Average Revenue per Unit of Power Sold, 1971/72 86 41. Revenue and Operating Costs in Total and per Unit Sold, 1970/71 87 42. Borrowing and Capital Expenditure of Six State Electricity Boards, 1971/72 89 43. Available Power Supply and Estimated Demand by Regions and for All India, by Quarters, February 1973 to July 1974 94 44. Percentage Changes in Production in Selected Industries for Period January-August, 1972 to 1974 97 45. Utilization Rates for Thermal Stations for All India, 1968/69 to 1973/74 99 Viii CONTENTS 46. Coal Transport: Daily Average Wagon Loading, 1969/70 to 1974/75 103 47. Petroleum Imports by Quantity, Value and Unit Value, and Total Commodity Imports, 1970 to 1973 107 48. Iranian Light F.O.B. Prices and Tax Paid Costs 108 49. Fifth Plan Program: Proposed Plan Outlays in Energy Industries, 1974/75 to 1978/79 118 50. Fifth Plan Program: Proposed Plan Targets for Energy Industries, 1973/74 to 1978/79 119 51. Coal: Estimated Consumption in 1973/74, and Projected Demand in 1978/79, by Main Consumers 120 52. Coal Production in 1973/74 and 1978/79 by Type of Coal, Coalfields, and Public Sector Colliery Companies 122 53. Coal Mining Equipment: Projected Demand for the Fifth Plan Period and Anticipated Domestic Production in 1974/75 123 54. Fifth Plan Program: Proposed Plan Outlays by the Three Public Sector Coal Mining Companies 125 55. Fifth Plan Program: Proposed Plan Outlays in the Petroleum Industry 128 56. Domestic Crude Production in the Fifth Plan Period: Official Targets and Bank Estimates 130 57. ONGC: Proposed Distribution of Expenditures by Area in the Fifth Plan Period 130 58. ONGC: Proposed Distribution of Expenditures in the Fifth Plan Period between Exploration and Development and by Field Category 131 59. Petroleum Refining Capacity: Approved Additions in the Fifth Plan Period 132 60. Fifth Plan Period: Possible Growth of Refining Capacity, Refinery Output, and Consumption and Imports of Petroleum Products 135 61. Fifth Plan Period: Possible Growth of Crude Imports, and Changes in the Degree of Dependence on Petroleum Imports 138 62. Fifth Plan Program: Relative Shares in Plan Outlays in the Power Sector 139 63. Coal Replacement and Conversion Factors 180 64. Energy Consumption in 1970/71: Shares of Various Fuels on Three Different Measures 181 65. Estimated Energy Consumption, Commercial and Noncommercial: Coal Equivalent Basis, 1953/54 to 1970/71 181 CONTE NTS ix 66. Commercial Energy Consumption by Main Fuels: Coal Equivalent Basis, 1953/54 to 1970/71 182 67. Estimated Urban and Rural Population, and Consumption of Noncommercial Fuels, Past and Projected 184 MAP Coal and Electricity Sectors in India 90 xii PREFACE (2) Dr. Alirio A. Parra, senior partner in the firm of international oil consultants Parra, Ramos and Parra: the petroleum industry; (3) Mr. Bernard Montfort, of the Bank staff: the electric power industry; and (4) Mr. Neithard Petry, also of the Bank staff: the supply of mining equipment and the supply of heavy electrical equipment. Copies of these reports, though neither published nor issued as formal Bank documents, were sent to the government departments and enterprises in India which are particularly concerned with these topics, and which had themselves greatly contributed to the preparation of the reports. All five re- ports have been extensively drawn on in preparing this book, and especially those by Dr. Parra and Mr. Rhodes, both of whom also commented on parts of my own subsequent report. While working in India, both on the report and later on this book, I have drawn freely at every stage on the advice of the Bank's Resident Represen- tative, Mr. William M. Gilmartin, and his Deputy, Mr. Bilsel Alisbah. I also made frequent use of the expert knowltdge of the Minerals Attach6 at the U.S. Embassy in India, Mr. Charles W. Sweetwood. My thanks are due to them, and also to Mr. R.K. Bhatia, of the Delhi School of Economics; Mr. Deepak Lal, of University College, London; and Dr. Narottam Shah, Chief of the Commerce Research Bureau in Bombay. A number of persons read through my original report and made helpful comments and suggestions which have been taken into account in prepar- ing this book. I am indebted on this account to Messrs. Dennis Anderson, Efrain Friedmann and Martin Wolf of the World Bank; to Mr. Harry Perry of Resources for the Future in Washington, D.C.; and particularly to Mr. Philip Watts of the British Central Electricity Generating Board. Despite this long list of benefactors, my main obligation-which is shared by the other members of the Bank's study team-is to the very many officials and executives in India, from government departments, public enterprises and private businesses within the energy sector, who pro- vided most of the facts and figures and many of the ideas which are set out below. It is thanks to their expertise, and the unfailing courtesy and pa- tience with which it was put at our disposal, that both the Bank's study and this book were made possible. On my own behalf, it is a pleasure to acknowledge the information and guidance received from officials in the Planning Commission; the Minis- tries of Finance, Heavy Industry, Irrigation and Power, Petroleum and Chemicals, and Steel and Mines; the Coal Mines Authority; the Atomic Energy Commission; the Central Water and Power Commission; Bharat Heavy Electricals Limited, both at its Delhi headquarters and in Bhopal; the Indian Oil Corporation, both at its Delhi headquarters and at the Koyali refinery; the Indian Institute of Petroleum; the Oil and Natural Gas Com- PREFACE Xiii mission; Oil India Limited; and the Burmah-Shell Company. I would like also to express my particular sense of obligation to three officials in Delhi, each of whom went to considerable personal trouble to inform and advise me, and to comment on what I had written. They are Mr. M.K. Sambamurti, Director (Hydel) in the Power Wing.of the Central Water and Power Com- mission; Mr. T.L. Sankar, Chief of the Project Appraisal Division in the Planning Commission and previously Secretary to the Fuel Policy Commit- tee; and Mr. A.P. Verma, Managing Director of the Indo-Burmah Petroleum and Balmer Lawrie group of companies, and previously Joint Secretary, Ministry of Petroleum and Chemicals. It is necessary to emphasize that none of the organizations or individuals listed above can be held in any way accountable for the errors or deficien- cies which this book may still contain despite all that they have contributed to it, and that the responsibility for all judgments and expressions of opin- ion is mine alone. Both the preparation of the original report and the process of revising it for publication entailed a large amount of typing and other secretarial work in the Bank's Delhi office. For the report, this task was carried out by Mrs. Jannette Sunita, while for the revision it was undertaken by Mrs. Shukla Nath with much-appreciated help with some of the typing from other mem- bers of the Delhi staff. My thanks are due to Mrs. Sunita and Mrs. Nath for the capable way in which they brought the respective manuscripts to or- derly completion, and for their patience with my exacting requests and bad handwriting. I would also like to acknowledge the help of the librarian at the World Bank's Delhi office, Mrs. Mani Nair. P.D. HENDERSON Delhi, October 1974. UNITS, SPELLING, SYMBOLS AND CONVENTIONS This book conforms to World Bank practice by using American spelling, as in such words as "labor," "program," and "aluminum." One corollary of this is that while in accordance with Indian practice all weight measures in the book are metric, the word tons is used throughout to refer to metric tons, instead of tonnes which is the spelling used in India as in Britain. One metric ton is equal to 1,000 kilograms, or approximately 2,205 pounds avoirdupois. Nearly all monetary figures in the book are given in rupees. Approximate conversion factors, based on the exchange rates at the time of writing, would be Rs. 8 to the U.S. dollar and Rs. 18.50 to the British pound. Many of the value figures quoted in Chapter 6 refer to projected development ex- penditures within the energy sectot in India under the Draft Fifth Five Year Plan, which was published in December 1973. All these sums are given in 1972/73 prices and would therefore be appreciably higher at price levels of a more recent year, such as 1974/75. Most of the figures quoted in the book relate to financial rather than calendar years, as in the previous sentence. The Indian financial year begins on April 1, so that for example when reference' is made to 1972/73 this means the year beginning on April 1, 1972 and ending on March 31, 1973. With respect to electric power, the units and abbreviations used here are the following: One megawatt (MW) = 1,000 kilowatts One gigawatt hour (GWh) = 1 million KWh One terawatt hour (TWh) = l billion (i.e.,109) KWh The first of these is a measure of capacity, while the second and third are measures of power output. Within the tables presented here, the following symbols are used: n.a. = not available [blank] = not applicable - = nil In many of the tables, in order to avoid useless detail,- the figures have been rounded off. This sometimes has the result thtat subtotals do not add precisely to totals-a result which is intentional, and not due to computa- tional error. The manuscript of the book was completed in October 1974, and this is the date implicitly referred to when the phrase "at the time of writing" is used in the text, or when reference is made to the information that is cur- rently available. xiv PART I THE SETTING 1. INTRODUCTION THE CONTENT of this book has been influenced to some extent by the way in which it came to be written. As noted in the preface, it originated in a study of the energy sector in India which was made by the World Bank in 1973-74. In particular, it has grown out of a report which I prepared for the Bank in the early part of 1974, and which constituted the final product of this study. Although the study was broadly conceived, its main initial purpose was to review the official plans that had been drawn up in India for the fuel and power industries as part of the Draft Fifth Five Year Plan, which was published in December 1973. The Fifth Plan period covers the five years to March 1979. For each of the reports which formed part of the Bank study, the production and investment plans which had been proposed for this period were a starting point and a principal topic for analysis. At the same time, a good deal of attention was necessarily given to cur- rent problems and immediate prospects within each of the fuel and power industries. These formed the context and frame of reference for the analy- sis of the Fifth Plan program. They were also both important in themselves and of concern to the Bank, because of the close connection between the energy supply position and the state of the Indian economy. In addition, a good deal of background and supporting informa- tion-facts, figures and past history-was collected in the course of the energy study. In the case of electricity supply, the Bank was already well in- formed about the industry because it had been involved over a substantial period in a number of project lending operations. With respect to coal, petroleum, and equipment supply it had much less prior knowledge. When therefore reports were prepared on these industries, it was useful to the Bank as well as helpful to the authors concerned to include a summary review of the main features of each industry and of its development over time. Finally, consideration was also given in the study to a number of prob- lems and issues of current policy in each of the industries reviewed, not only in relation to the Fifth Plan program but more generally. Each of these four related themes of the Bank study is developed in the remaining chapters of this book, though in a somewhat different order from the one in which they are listed above. Following this introduction, 2 THESETTING Chapter 2 gives a review of the energy resources of India as at present esti- mated. This is set out under five headings: coal; crude petroleum and natural gas; hydroelectric power; nuclear fuels; and traditional or noncom- mercial sources. There is also a brief reference to some newer and less con- ventional sources of energy, though on present evidence it seems unlikely that much can be expected from them for the next decade or more. Chapter 3 contains a short review of recent trends in the consumption and supply of energy in India, looking at all the main sources of supply and the economy as a whole. In particular, an analysis is given of changes in the pattern and intensity of energy consumption by fuels and major industrial groupings in the decade from 1960/61 to 1970/71, which is the latest year for which information is at present available. Chapter 4 gives a review of the present situation and recent development of each of the three main energy industries, namely coal mining, petroleum and electric power. In preparing this chapter, it became clear that consider- ably more factual and statistical material existed than I had previously realized, though it was not always in published or generally accessible form. Moreover, this material had not been previously brought together in such a way as to provide a unified and up-to-date survey of the energy industries taken together. Chapter 4 accordingly grew to considerably larger dimen- sions than had been originally planned, since the information it now con- tains was not available elsewhere in a similar form. Taken together,.Chapters I to 4 comprise Part I of the book, which is en- titled "The Setting." Part I is thus designed to provide a background of in- formation-technical, historical and statistical-for the analysis of the cur- rent situation and future possibilities in the energy sector which is given in Part II, in Chapters S to 7. Chapter 5 considers the recent and current shortages of energy supplies in India, looking in turn at each of the three main fuel and power industries, and reviews the short-term prospects for the balance between demand and supply. It includes a summary review of recent developments in the inter- national petroleum market, and the effects of these on the situation in In- dia. This chapter has been largely rewritten in the light of further evidence and of developments over the past six months. In Chapter 6, a review is given of the programs set out for the energy sec- tor in the Draft Fifth Year Plan. Since the Draft Plan was formulated, a number of developments have taken place which have affected the medium-term prospects for the Indian economy, and an extended period of consideration has therefore been necessary. At the time of writing no Fifth Plan has been finally adopted, though the plan period opened at the begin- ning of April 1974. Nevertheless, the proposals for the energy sector which are presented in the Draft Plan are still of interest and relevance. So far as possible, the production and investment plans for this and other "core sec- INTRODUCTION 3 tors" will not be cut down. Moreover, the plans provide a useful frame of reference for the analysis of energy prospects beyond the next year or two, for the rest of the present decade. Finally, Chapter 7 contains a brief discussion of a number of current issues of policy and practice in the energy sector. No attempt has been made in this chapter to be comprehensive, nor does the book end with a list of recommendations and a suggested program for action, which would have been out of place in a study of this kind. There are however a few particular topics on which decided views are expressed in Chapter 7. This is because in each case the nature of the problem, and the need and scope for improve- ments, seem not to be fully recognized in India at present. The first of these topics, which is discussed in the initial section of Chapter 7, is the position concerning data and intelligence in the energy sec- tor. This is at present very unsatisfactory with respect both to availability and timeliness of facts and statistics and to the way in which they are used. This may be due in part to the fact that there is at present no agency within the Government of India which has effective responsibility for energy questions as a whole, as distinct from particular aspects or industries. Even given this state of affairs, however, the flow of useful and timely informa- tion could and should be very much improved. A second topic is broader and more controversial, and concerns the use of prices and financial incentives as an instrument of economic policy. The potential usefulness of price adjustments tends to be ignored or underrated in every country and by all governments, and India is far from being an ex- ception to this generalization. It is true that within the energy sector there have been some recent indications that the role of pricing policy is not being overlooked. Thus as will be seen below there have been steep in- creases in the excise duties levied on certain petroleum products, while official concern has been expressed over the present situation with respect to electricity tariffs. The whole question of energy prices, however, needs greater and more systematic attention,' with a view to allocating supplies more efficiently and to minimizing the expected costs to the economy of meeting future energy demands. A few suggestions along these lines are made in the second section of Chapter 7. Chapter 7 also includes a section concerned with the consumption and supply of energy in rural areas of India, a subject which is not treated elsewhere in the book except for a reference to the rural electrification program. Since the rural areas still account for almost 80 percent of the total population of India, possibly 40,percent of total energy consumption, and probably more than 80 percent of the consumption of noncommercial 'In this connection, it appears that the Fuel Policy Committee in its final report has included a section on costs and prices in the energy sector. 2. THE ENERGY RESOURCES OF INDIA THE ENERGY RESOURCES of a country are not immutably or precisely given. They can be assessed only at a particular time, and then in relation to the existing state of knowledge and techniques, to prevailing economic condi- tions, and to possible future changes in each of these. Inevitably, a great deal depends on the country's natural endowment of actual or possible sources of energy, such as fossil fuels or hydro potential. But the value of these sources, and any estimates of the available quantities of each, will be determined by what is known or believed about how they can be developed and put to use, and by the expected costs and benefits that will result from doing this. In the present state of scientific and technical knowledge, it is convenient to list the main energy resources of India under five headings. Four of these can be grouped under the general description of "commercial energy." These are: coal; oil and natural gas; hydroelectric power; and nuclear fuels, both actual and potential. The fifth category comprises the various kinds of resources in India which provide "noncommercial" energy, so called because much of it is not ordinarily bought or sold, at any rate in recorded transactions. in this last category, much the most important item is forest resources, which provide the basis for a considerable volume of firewood and charcoal consumption. The other main forms of noncommercial fuel in India are vegetable wastes, which chiefly consist of crop residues, and dried cow dung. Each of these five categories is considered below. Before turning to them, reference may be made to other possible sources of energy which are as yet largely untapped, in India as elsewhere, because of limitations of existing knowledge and techniques. The main examples are solar energy, geother- mal energy, tidal power and wind power. Of these, it is the first which seems to have the greatest potential for In- dia in the long run, because of the large amount of solar energy which it re- ceives. If means can be developed of exploiting solar energy at an accepta- ble. cost, either directly or for conversion into electricity, this would add considerably to India's resources. It is generally thought, however, that this development is unlikely to take place for a considerable time. At present solar energy is used directly only to a limited extent, chiefly in favorable locations within the United States, for heating of buildings and of water. The use of energy in India for these purposes is and will remain extremely small. Conversion of solar energy into electricity can be achieved with pres- ent techniques only at very high cost; and a substantial fall in costs, if it proves to be attainable, is likely to require a long period of further research and development work. Meanwhile, geothermal energy might well prove to be a more im- mediately usable source, and a program of exploratory work has been 6 THE ENERGY RESOURCES OF INDIA 7 drawn up for India in which the United Nations Development Program is expected to take part. The total potential, however, appears to be very limited. As to tidal power, a number of possible sites have been identified in India. However, in this case also the total potential appears small, while in the present state of technical knowledge electric power could not be gener- ated from tides at costs which would compare with other means of gener- ation. The use of wind power for electricity generation is also in most cir- cumstances a costly method, largely because investment costs are higher per unit of installed capacity. Only in windy areas which are remote from other sources of power does wind power offer a practicable alternative, though recent advances in windmill design may somewhat increase its po- tential contribution. In connection with all these possible new sources, a great deal of research and development work is now being undertaken in many countries includ- ing India, and recent changes in the world energy situation are bound to lead to an expansion in the scale of this effort. At present, however, it seems impossible to suggest a time by which any or all of these sources would make a significant contribution to the total supply of energy con- sumed in India. Hence no further reference is made to them in this study. COAL India has large and extensive reserves of coal. Published estirnates of their amount have varied appreciab]y, and in any case much exploratory work has still to be done before a confident assessment could be made. The figures given in Table I are taken from estimates recently published by the Geological Survey of India. It can be seen from the table that total estimated reserves of all types of coal are now put at some 81 billion tons, of which just over one-quarter comes into the category of proved reserves. Out of the proved reserves of some 21 billion tons, about 42 percent consists of coking and 58 percent of non-coking coal. The share of non-coking coal in other reserves, both indi- cated and inferred, exceeds 80 percent, so that for all forms of reserves cok- ing coal accounts for about one-quarter and non-coking coal for three-quar- ters. As remarked in the notes to the table, these figures in general refer only to coal seams lying at a depth not exceeding 2,000 feet, and in seams exceed- ing 1.2 meters in thickness, though in the case of a few coal fields, including much the two largest of Raniganj and Jharia, the depth goes up to 4,000 feet and reserves also include seams of between 1.2 meters and 45 centimeters in thickness. In so far as it became worthwhile to mine coal at greater depths than these, further reserves would be identified. In this respect the table gives a somewhat conservative picture. THE SETTING TABLE 1. Estimated Coal Reserves in India (million tons) Proved Other Reserves Total Reserves Indicated Inferred Reserves Prime coking coal 3,650 1,540 460 5,650 Medium coking coal 3,850 4,310 1,270 9,430 Semi- and weakly- coking coal 1,520 2,600 910 5,030 Total coking coal 9,020 8,450 2,650 20,120 Non-coking coal 12,340 22,310 26,180 60,830 Total coal reserves 21,360 30,760 28,830 80,950 SOURCE: Geological Survey of India, G.S.I. News, April 1972. The figures are based on data supplied by the G.S.I. itselfand by the former National Coal Development Corpora- tion. NOTES 1. The figures, which have been rounded off here lo the nearest ten nmillion tons, refer in general only to coal in seams exceeding 1.2 meters in thickness and to a depth not exceeding 2,000 feet (610 meters). However, in the case of a few coal rields including the two largest, the figures cover seams exceeding 45 centimeters in thickness and to a depth of 4,000 feet. 2. Proved Reserves are those with in 200 meters of workings, outcrop or borehole. In- dicated Reserves are those within points of observation no more than 1,000 meters apart, or 2,000 meters for beds of knownecontinuity. Inferred Reserves are those based upon broad knowledge of the measures even though there is no quantita- tive evidence within 1,000 or 2,000 meters. On the other hand, the figures refer to all forms of coal, including coal with such a high content of ash and moisture that so far it has not been gen- erally worked. Thus for example in the case of proved reserves of non-cok- ing coals, it appears that out of the total of 12 billion tons only about three- quarters can be assigned to grades with an ash content of less than 40 per- cent, which has normally been the maximum acceptable figure. Applying this factor to total reserves of non-coking coal, proved and other, would reduce the figure of 60 billion tons shown in Table I to 45 billion. Another factor to be taken into account is that not all in situ reserves, even of acceptable quality, can actually be worked. Moreover, only a certain proportion of workable reserves, which in Britain for example is normally put at 50 percent, can actually be turned into salable coal. This ratio largely depends on geological conditions and the methods of coal-getting that are used. For non-coking coal in India, it appears that in underground mines the ratio under present conditions may vary between 35 percent and 60 per- cent, with an average figure of perhaps 45 percent. For opencast mines, a figure of 80 to 90 percent would be typical. Taking both together, an average of about 55 percent for non-,coking coal might be appropriate. If for illustra- tive purposes this ratio is applied to the figure of 45 billion tons derived in the preceding paragraph as a possible rough estimate of in situ reserves of THE ENERGY RESOURCESOF INDIA 9 non-coking coal of acceptable quality, a figure of about 24 billion tons is derived for reserves of recoverable and salable non-coking coal. At the present level of output of non-coking coal, a reserve of this size would be adequate for between 350 and 400 years. If however allowance is made for possible future increases in output, the prospect is less reassuring. If for example it is assumed (a) that the Fifth Plan production target for non-coking coal of over 100 million tons in 1978179 is attained; and (b) that output increases thereafter at a constant rate of 5 percent per annum until it reaches a figure of 500 million tons a year (about the year 2011), after which it remains constant, this level of reserves would suffice only for a further 65 to 70 years from now. This may well be an unduly pessimistic figure, since an annual level of coal production in India as high as 500 million tons is at present hard to en- visage, while in recent years the rate of increase in production has been well under 5 percent per year. On the other hand, output did in fact rise at an average rate of about 5 percent per annum over the past 20 years as a whole, in a period when the rate of economic growth was lower than planned and coal was losing ground to oil. It is hoped in future to increase the rate of growth of the economy as a whole, while the recent sharp increases in oil prices have greatly improved the competitive position of coal and strengthened the case for greater reliance on indigenous fuels. In view of this, to project the past increase in coal output into the future for a period of just over 30 years from 1978/79, and to assume no further growth in output thereafter. may be taken as a possible illustrative hypothesis. On present evidence, the reserve positidn with respect to coking coal ap- pears rather less favorable. A critical factor here is the availability of prime coking coal, with which the other coking coals must be blended for metallurgical use. It can be seen from Table I that the total reserves of prime coking coal are put at about 5,600 million tons. Or this, the amount that can actually be charged to coke ovens may only be of the order of 1,600 million tons, because of losses arising not only in mining but from the washing process that is necessary in view of the high ash content. It has been estimated that this amount, together with the other coking coals that would be blended with it, might be adequate to meet demand for a further period of between 40 to 50 years if the steel industry's consumption con- tinues to rise at the rate that is currently projected. This figure however is probably on the low side, not only because it takes no account of possible changes in the technology of steelmaking but also because the very limited area of the coking coal fields is likely at some stage to set a physical upper limit to annual rates of output- with the possible result that eventual future demands might have to be restricted to this limit or met from outside India. 10 THESETTING The arithmetic of the previous two paragraphs takes no account of the strong possibility already mentioned that existing estimates of coal reserves in India may well be revised upwards in the course of time. Moreover, the estimated duration of given reserves would be increased in so far as im- provements in mining techniques made it possible to raise the proportion of in situ reserves which could be recovered and used. Increasing scarcity and higher relative prices of coal would make it more profitable to develop and exploit such improvements. In addition to coal, deposits of lignite exist at the Neyveli field in Tamil Nadu. Total reserves are estimated at nearly 2,000 million tons. Current production of lignite is at the rate of about 3 million tons a year, and a target of 6 million tons has been set for the end of the Fifth Plan period. At this level of output the reserves would last for over 300 years. Because of the conditions under which they are formed, the Indian coal deposits have two related characteristics which create problems both in working and in marketing. The first of these is that seams tend to be very thick, sometimes exceeding 45 meters. The second characteristic, which has already been noted, is the high ash content. In earlier years, when some 80 percent of the industry's output came from the higher quality and lower ash coal of the Jharia and Raniganj fields on the border of West Bengal and Bihar, an average ash content of 14 percent could be maintained. But over time the ash content of coal from these fields has risen, while the propor- tionate share of output from other fields with generally lower quality coal has increased. Inevitably, the average ash content has gone up, and it now exceeds 20 percent. The coal deposits of India are distributed very unevenly as between different regions of the country. As can be seen from the map, there are no coal fields in the northwest regions, none in the west except for the small fields in the eastern part of Maharashtra, and none in the south except for the Singareni fields in Andhra Pradesh, which are also small, and the lignite deposits of Neyveli in Tamil Nadu. Hence long and costly haulages are nec- essary if coal is to be supplied to these regions, particularly if it has to be brought from the main producing areas of West Bengal and Bihar. Even within the areas in which coal is mined, there is a strong element of concentration of both output and reserves in particular coal fields and geographical areas. The total number of coal fields at present is 82, excluding the few small fields in Assam. Within this total, the four largest fields-namely Raniganj in West Bengal, Jharia and North Karanpura in Bihar, and Singrauli in the northern part of Madhya Pradesh-together account for some five-eighths of the total reserves. Raniganj and Jharia alone produced about 58 percent of the industry's total output in 1969/70, the latest year for which published information on this subject is available at the time of writing. TIEE NE RGY RESOURCES OF INDIA 11 As to the distribution of output and reserves by area, a dominating posi- tion is still held by the two states of West Bengal and Bihar, where the in- dustry originally developed. Of the total reserves of coking coal, approxi- mately 86 percent are in Bihar and virtually all the remainder in West Bengal. Thus all but a very small fraction of coking coal output comes from the Bengal/Bihar area. With respect to non-coking coal, and for both types of coal taken together, the approximate percentage shares of Bengal/Bihar and the other (or "outlying") fields are shown in Table 2. The first four columns of the ta- ble relate to output and the last two to reserves. TABLE 2. Respective Shares in Coal Production and Reserves of Bengal/Bihar and Outlying Fields' (percentages) Production Reserves 1954 1960/61 1972/73 1978/792 Proved Total Non-coking coals Bengal/Bihar 70 71 60 50 46 58 Outlying fields' 30 29 40 50 54 42 Coking and non-coking coals Bengal/Bihar 81 80 68 611/2 68 68 Outlying I.eldsl 19 20 32 38V2 32 32 1. This term is used in India to refer to all coal fields outside the two states of West Bengal and Bihar. These are very largely to be found in four states, namely Andhra Pradesh, Madhya Pradesh, Maharashtra, and Orissa. 2. Planned. SOURCES: For reserves, the figures given in Table I are used, in conjunction with other infor- mation from official sources. For production, the figures for 1954 are derived from Ministry of Steel and Mines, Coal Controller, Monthly Review of Coal Production and Distribution, May 1971 those for 1960/61 are from the Report of the Energy Survey Committee; those for 1972/73 from Coal Controller, Provisional Coal Statistics, November 1973; and those for 1978/79 from data supplied by the Plan- ning Commission. NOTE: As remarked in the text, the share of Bengal/Bihar in coking coal, both production and reserves, is virtually 100 percent. Over the past 20 years or more, a deliberate attempt has been made to in- crease the production of non-coking coal-in the outlying fields, both ab- solutely and relatively, so as to minimize the difficulties and costs of transporting coal long distances from Bengal/Bihar. As can be-seen from Table 2, a good deal of progress has been made in this direction, while under the Fifth Plan program a further increase is projected in the share of output from the outlying fields. From the last two columns, however, it appears that over a longer period there are limits to the extent to which this process can be continued. For all forms of coal the estimated share of Bengal/Bihar in both proved and total reserves is 68 percent, while even for non-coking 12 THE SETTING coals alone the share in total reserves is not far short of 60 percent. Thus for as far ahead as can be seen at present, India will continue to depend for well over half of total coal supplies on production from West Bengal and Bihar. OIL AND NATURAL GAS By comparison with coal, proved reserves of oil in India are at present ex- ceedingly small. However, a great deal of survey and exploration work re- mains to be done, so that large areas in which productive deposits of oil or natural gas might possibly be found have yet to be investigated thoroughly. Hence the potential for further discoveries may be considerable, though it is still at present very uncertain. The total sedimentary area of India, onshore and offshore, comprises 27 basins. On land, these cover an area of about 1.41 million square kilometers, some 43 percent of the country. Offshore, a further 0.38 million square kilometers of possible oil-bearing rock have been identified up to the 200 meters isobath line, of which about two-thirds lie within the 100 meters isobath. To judge from past experience in, the world as a whole, perhaps only about 3 percent of the total sedimentary area is likely to prove productive. Within the 27 basins that have been identified in India, the prospects vary considerably. The basins are at present grouped into four main categories of promise. Those with high prospects comprise Cambay and a large part of Assam-Arakan-the basins in which all the existing productive wells are to be found. The area which falls into this category comes to about 300,000 square kilometers, or some 18 percent of the total sedimentary area, onshore and offshore, up to the 200 meter isobath line. A second category with medium prospects comprises a further 15 percent of the total sedimen- tary area. Here the basic geological conditions appear similar to those of Cambay and Assam, but so far neither oil nor gas has been found in quan- tities which would make commercial development worthwhile. The remaining two-thirds of the sedimentary area consists of basins where the prospects are assessed only as fair (which make up some 40 per- cent of the total area) or poor (about 27 percent). It is thus probable that in many of the basins little or no oil or gas will be found. . Up to now, geological and geophysical studies have been conducted in 14 of the 27 basins, while exploratory drilling has faken place in nine. The presence of hydrocarbons has been proved in seven of these nine, but as noted above only two of these, the onshore portion of the Cambay basin and Assam, have been shown to contain oil and gas in exploitable quan- tities. Of the total number of wells so far drilled, about 90 percent have been in these two areas, and they account for an even higher proportion of the total meterage drilled. TIIE ENERGY RESOURCESOF INDIA 13 The result of the exploratory and drilling activities of the past 15 years is that an estimated 185 million tons of proved and indicated crude petroleum reserves have been discovered, all in the two areas of Gujarat and Assam. The fact that oil-bearing reservoirs are still being discovered in these pro- ducing areas suggests that further useful deposits of oil remain to be found. The chances of finding oil in remunerative quantities offshore appear to be good. It has often been the case that offshore areas of coastal basins have provided greater yields per well than onshore; and the offshore portion of the Cambay basin, where the first exploratory drilling now in progress has already found oil at shallow depths, holds considerable promise. An en- couraging feature is that the oil has been found in limestone reservoirs, as in the Middle East fields, and in rocks that are of younger age than those in which oil discoveries have been made in the other producing areas of the Indian subcontinent. Even before these recent discoveries, it had been conjectured that recoverable reserves in the Bombay High area of the Cambay basin might amount to some 125 million tons. An earlier broad appraisal of total reserves in India, made by the Soviet geologist Kalinin on the basis of geological analogy alone, concluded that there should be, all told, some three billion tons of oil on land within India and a further one billion tons offshore. Thus the potential for new discoveries could be very great. At the same time, the position is not altogether an encouraging one. Judg- ments made on the basis of broad geological evidence alone are subject to a wide margin of error. Until a great many more exploratory driliings have been done, the amount of oil resources that may exist will remain a matter of speculation. Recent onshore developments, moreover, have been disap- pointing. The main producing- wells, actual or prospective, were all dis- covered in the 1950s or early '60s; there has been no addition to their num- ber in the past 10 years. Most of the recent discoveries are marginal, and represent small accumulations of oil. Since the mid-I 960s, the additions to proved and indicated reserves have been small, and as shown in Table 3 the current level of proved and indicated reserves in 1972 was appreciably below the figure for 1967, which is the highest so far attained. As domestic production of crude is now above the levels reached in 1967 and 1968, the ratio of production to reserves is correspondingly lower. Any long-run sus- tained increase in the level of domestic crude production has now become critically dependent on the discovery and development of substantial new producing oilfields. Production of crude in India is at present concentrated in a small number of fields. It is estimated that in 1973 well over 90 percent of output came from the six main producing fields. Within this group, two in particular are predominant. These are Ankleshwar in Gujarat, which is operated by the public sector Oil and Natural Gas Commission, and Nahorkatiya in Assam, 14 THE SETTING TABLE 3. Crude Petroleum: Proved and Indicated Reserves' and Domestic Production, 1966-73 (million tons) Ratio of Reserves to Production Reserves1 Production (Duration Perrod) 1966 153.0 4.65 32.9 1967 154.8 5.67 27.3 1968 141.0 5.85 24.1 1969 132.3 6.72 19.7 1970 127.8 6.81 18.8 1971 113.82 7.19 15.8 1972 125.22 7.37 17.0 1973 n.a. 7.20 n.a. 1. Strictly speaking, the figures for reserves shown here refer to what are known in India (where the classification system used in the U.S.S.R. is followed) as categories A, B, and C1. Category A covers oil in areas fully outlined by wells, while category B includes oil that has been proved by the presence of wells with favorable reservoir data. Categories A and B together are probably equivalent to what in the U.S. are termed proved reserves. Category Cl comprises accumulations where the porosity and permeability of formations are known and in which at least one well has been drilled. This category corresponds to what are known in American practice as indicated reserves. 2. Figures for 1971 and 1972 reserves are provisional. SOURCES: Government of India, Ministry of Petroleum & Chemicals, Indian Petroleum & Chemicals Siatistics, 1972; data for reserves at the end of 1971 and 1972, and for production in 1973, supplied by the Ministry. which is operated by Oil India Limited, ajoint sector enterprise in which 50 percent shares each are held by the Government of India and Burmah Oil Company. The costs of finding, producing, and distributing oil depend on a variety of factors, including the difficulties of the terrain, the depth and ac- cessibility of oil deposits, and the productivity of producing wells. In most of these respects the Gujarat fields are more favorably placed than those of Assam. The fields in Assam are relatively inaccessible and distant from markets, and petroleum occurs in a large number of separate pools at depths which vary from 3,000 to 4,000 meters. The average depth of wells in the onshore Cambay basin is just under 1,700 meters (5,500 feet), while the cor- responding figure for Assam is over 3,300 meters (10,800 feet). Annual pro- duction per well, or well productivity, is not very different between the two regions, but is generally higher in Gujarat. For India as a whole, produc- tivity averages about 270 barrels per day. This is low compared with big Middle Eastern fields, but not much below the current level in Venezuela. The quality of Indian crudes is good. In the Gujarat fields, the crude pro- duced is very light (3648° API) with a sulphur content of less than 0.1 per- cent. A problem arises, however, in production and refining because of the rather high wax content, which averages between 11 and 13 percent. This THE ENERGY RESOURCESOF INDIA 15 results in a high pour point, and in winter the oil must be heated to flow. Assarn crudes tend to be heavier (averaging about 340 API), with an average sulphur content of 0.3 percent and a lower pour point. The cost of producing crude oil is higher in Assam than in the onshore Cambay fields. For all domestic production, the average direct producing costs at present may be in the region of $1.50 to $1.65 per barrel.' This is very high in comparison with the really big Middle Eastern fields, but not in relation to the costs incurred in a number of other producing countries. The comparable figure for Mexico, for example, is about $2.20 per barrel. In future, costs are liable to rise, even apart from general increases in input prices, because new onshore supplies are likely to have to come from reser- voirs which will be deeper and costlier to develop. However, the main fac- tor determining production costs will be the size of any new fields that are discovered, which cannot be accurately predicted. In any case, at present and anticipated levels of worid crude oil prices Indian production even at appreciably higher unit production cost will certainly be competitive with imported crude. Natural gas is found in India both alone and in association with crude oil; but most of the output comes from associated sources, and the only non- associated gas field is that at Cambay in Gujarat. The gas-oil production ratio tends to be low in India, but as shown in Table 4 the output has in- creased rapidly in recent years. From the final column of the table, it can be seen that over 40 percent of output is still not utilized, but is flared. Because of their generally very close association in India, the prospects for future discoveries of natural gas, and for later consequent increases in output, are as hopeful but also as highly uncertain as those for crude oil. HYDROELECTRIC POWER The basis for assessment of the hydroelectric power reserves of India is a comprehensive initial survey which was undertaken during the period 1953-60 by the Central Water and Power Commission. The method used in this survey was to examine each basin in detail, and to estimate the firm power potential that it was felt could be provided at a cost which would be low enough to be competitive with other sources of power. The calculations were made on the basis of prevailing techniques of hydro construction and [At current levels of crude production, the total costs of the Oil and Natural Gas Commis- sion operations considerably exceed this figure, since they include the cost of carrying shut-in wells, research and design facilities, and the overhead of the central staff. In order for ONGC to meet all outlays from revenues derived from the sale or crude from its fields, a price of perhaps $4 per barrel would probably be necessary. As outlays continue to increase, and unless and until a higher level oroil production is attained by ONGC, this figure can be ex- pected to rise. Neither this figure nor those quoted above for direct production costs take ac- count of recent and prospective increases in costs arising from general inflationary trends, and from associated rises in input prices. 16 THE SETTING TABLE 4. Natural Gas: Reserves, Production, and Ufilization, 1965-73 Reserves (billion Production Utilization Flared Gas Ratio of cubic Utilization to meters) (million cubic meters) Production (%) 1965 737 346 391 47 1966 63.15 803 373 431 46 1967 67.25 1,221 465 756 38 1968 63.34 1,317 604 712 46 1969 65.60 1,384 730 654 53 1970 62.48 1,424 676 748 47 1971 62.29' 1,509 761 748 50 1972 62.511 1,565 927 638 59 19731 n.a. 1,674 913 761 55 1. Reserves figures for 1971 and 1972 are provisional, as are all figures for 1973. SOURCES Ministry of Petroleum and Chemicals, Indian Petroleum & Chemicals Statistics, 1972; data on reserves for 1971 and 1972, and on production in 1973, supplied by the Ministry. utilization, and of the constraints believed to be imposed by topographical and hydrological conditions and by other demands on available water resources. The firm power potential defined in this way was estimated by drawing up a complete inventory of actual or putative hydro stations, with specified design parameters in each case. The total of assessed hydro resources was then arrived at by summing the individual figures for each of these stations. This aggregate total, which is still normally quoted as the accepted esti- mate of India's hydro potential, is just over 41 million KW at a load factor of 60 percent. In Table 5, the percentage shares of this total figure are shown according to (1) regions and states, (2) the main river systems, and (3) the types of hydro project which comprised the CWPC inventory. From the first two columns of the table it can be seen that there is a broad correspondence between regions and river systems. The very large potential resources of the northeastern region, just over 30 percent of the total, come from the rivers of the Brahmaputra basin and neighboring drainage areas. The northern region's resources, which form just over one- quarter of the total, correspond almost exactly to the potential of the Ganga and Indus basins. The river systems of central and southern India, which provide over 40 percent of.the potential, are the sources of hydro power for the southern, eastern, and western regions. To some extent the availability of hydro power redresses the differences which arise from the very uneven regional distribution of coal reserves. The main coal producing states of Bihar and West Bengal are not well favored with respect to hydro resources. On the other hand a number of states in the south and northwest, which have no coal reserves and are remote from the coal producing areas, are well endowed with, or have THE ENERGY RESOURCESOF INDIA 17 TABLE 5. Estimated Shares of Hydro Potential by States- and Regions, River Systems, and Types of Project (percentages) States and Regions River Systems Types of Project Southern region 1. Southern India Andhra Pradesh 6.0 (a) West flowing rivers 10.4 (a) Run-of-river 25.0 Karnataka 8.2 (b) East flowing rivers 21.0 (b) Storage projects 75.0 Kerala 3.7 Total 31.4 Total 100.0 Tamil Nadu 1.7 Total 19.7 Western region Gujarat 1.6 Madhya Pradesh 11.2 2. Rivers of central India 10.4 Maharashtra 4.6 Total 17.4 Eastern region Bihar 1.5 Orissa 5 0 West Bengal 0.1 Total 6.5 Northern region llimachal Pradesh 4.5 Jammu and Kashmir 8.7 3. Ganga Basin 11.4 (a) High head 33.1 Punjab and Haryana 3.3 (b) Medium head 58.0 Rajasthan 0.4 4. Indus Basin 16.0 (c) Low head 8.9 Uttar Pradesh 9.1 Total 100.0 Total 26.1 Northeastern region Assamt 28.2 5 Brahmaputra Basin Manipur 2.1 and neighboring Total 30.3 drainage areas 30.3 Total 100.0 100.0 1. Including Meghalaya, Nagaland and Mizoram. SOURCE: Government or India, Report of the Energy Survey of India Committee, New Delhi, 1965. NOTES:' 1. The Ganga basin is formed on the north by the rivers draining the Himalayan range, and on the south by the rivers that drain the northern part of the Central Plateau. For both the Ganga and Brahamaputra basins, the CWPC inventory of possible projects included some which would be situated outside India, but the total for assessed firm power potential of 41 million KW at 60 percent load factor took account of projects only within India. Similarly the figure for the Indus basin covered only that portion of the basin which lies within India. 2. High-head projects are defined as those in which the head exceeds 1,000 feet, while in medium-head projects the height is from 100 to 1,000 feet and in low- head projects from 25 to 100 feet. 18 TH E SETTI NG relatively simple access to, hydroelectric potential. These include Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala and Punjab. The estimated total potential of 41 million KW at 60 percent load factor is equivalent to an annual output of 216 TWh. This figure can be compared with the present level of hydro generation, which at 27 TWh is only one- eighth of it. The corresponding planned level of output for the final year of the Fifth Plan period is about 46 TWh, which is rather more than 20 percent of the total. Hence even on the basis of an assessed potential of 41 million KW the scope for further development of hydro resources is considerable. In fact, there are grounds for regarding this estimate of hydro potential as conservative. Even at the time when it was arrived at it was in the nature of a prudent minimum figure rather than the most probable one. The main reasons for this were the following: (a) The estimates of the firm power potential were made on the basis of the minimum average flows that could be expected to be available with a probability of 90 percent, taking into account the regulation afforded by the storage envisaged. Hence no account was taken of the energy that could be produced on a secondary basis corre- sponding to inflows higher than dependable flows, nor of the energy that could be supplied on a seasonal basis. (b) The estimates referred only to sites within India, and no allowance was made in the estimated total for-the possibility that hydro power from Nepal might become available for use in India. (c) It was known that in the light of further survey work the esti- mates of the hydro potential of the Himalayan rivers might be revised upwards. (d) No account was taken of the possible effects of improvements in the technology of hydro design, construction, and operation. Since the original CWPC survey was completed, a number of develop- ments have established that a higher estimate of total hydro potential is now warranted. These are summarized in the 1971 Report of Power Economy Committee.2 This suggests that the firm power potential of the Indus basin might now be put at some 12 or possibly 14 million KW, instead of between six or seven million as shown in the survey. Hence even on the former somewhat coriservative basis of assessment a figure of close to 50 million KW would now seem to be indicated. As to new factors not taken into account in the above estimates, two developments which have occurred since the original CWPC survey was made have improved the outlook for hydro resources. One is that the esti- mated potential of the Karnali Valley in Nepal has been raised consider- ably. The possibilities of some form of joint development of this resource, 2Government of India, Ministry of Irrigation and Power, Report of Power Economy Commit- tee, New Delhi, March 1971 (Chapter 2). THE ENERGY RESOURCES OF INDIA 19 with substantial sales of hydro power to India, now appear more promising. A second factor is that recent improvements in the technology of pumped storage schemes have considerably raised the potential for seasonal sup- plies of hydro power on the river systems of the Deccan. A further point is that in its assessment of firm hydro potential, the CWPC has followed the practice of estimating demands for irrigation and for industrial, commercial and domestic water supplies, and deducting the losses arising from these from the potential available for hydro generation. These categories of demand are treated as "priority uscs," so that hydro power becomes the residual claimant. It is possible that a more flexible op- timizing approach to water resource developments, in which all forms of demand were permitted to vary in relation to one another so that a greater number of possibilities could be explored, might suggest a larger role for hydro power in the development of river systems. If so, this again would be a reason for regarding current estimates of potential as being on the low side. On the other hand, it has to be remembered that for a substantial part of the hydro potential that has been identified, the date at which it might be put to use is uncertain and probably remote. This applies particularly to the resources of the northeastern region. Even if the cost of providing hydro power at a particular location would be low, it does not follow that generat- ing facilities should be established there. The case for this will depend on how far potential consumers would be prepared to pay a price which would cover the estimated costs to society of the power that would be generated. For as far ahead as can be foreseen at present, it seems unlikely that power consumption in the northeastern region will warrant the exploitation of any but a small part of the identified hydro potential there: its remoteness, the difficulties of communication, and the lack of raw materials which require ample supplies of electric power for processing, are likely to hold down the pace of development. Hence the value of these hydro power resources may largely depend on further progress in the technology of extra-high voltage transmission lines which would reduce the losses from conveying power over long distances, and on the development within India of a more fully articulated power grid of which these lines would be a constituent part. These developments can be foreseen, but their time has yet to come. Looking ahead towards the end of the century, a very rough assessment of the possible contribution of hydro power can be made on the basis of some projections made by the Power Economy Committee three years ago. They suggested that over the coming two or three decades it might be worthwhile to install about 80 to 100 million KW of hydro capacity. If we take the lower of these two figures as being applicable, and assume an average plant load factor of 40 percent which takes account of the use of hydro power for meeting peak loads, an output of some 280 TWh is indi- 20 THE SETTING cated at a time perhaps 20 to 25 years from now. It will be seen that this figure considerably exceeds the estimate of 216 TWh mentioned above, which corresponds to the assessment of firm hydro power potential of 41 million KW at a 60 percent system load factor. This possible output of 280 TWh from hydro plant has to be compared with a corresponding figure for total electricity generated. This is neces- sarily a matter of conjecture. For illustrative purposes, we may take the target level for the final year of the Fifth Plan period, which is 128 TWh, and assume thereafter a constant annual growth rate of 8 percent. This would yield a figure of some 475 TWh by the middle of the last decade of the century. Hence the existing known potential of hydroelectric power can be judged to make possible a substantial contribution to a total power output some four times as high as that which it is hoped to achieve in the Fifth Plan, and some seven times as high as at present. Since hydro resources are renewa- ble, this would be a continuing contribution, and it seems likely that esti- mates of potential will continue to be revised upwards. These however will depend on further advances in knowledge and techniques, and on the cost and availability of alternative sources of energy. NUCLEAR FUELS Resources of nuclear fuels in India consist of uranium, and potentially of thorium also. The first of these is already in use for the generation of electric power in India, and the current nuclear power program provides for further construction of power stations with CANDU-type heavy water reactors using domestically produced natural uranium as fuel. The main concentration of uranium ores at present, and the only source in which uranium is being actively mined within India, is in the Singhbhum district of Bihar. In addition to the two mines that are now being worked or developed, other exploitable deposits may exist in Bihar. Besides this prin- cipal area, deposits near Udaipur in Rajasthan may prove worth developing, though the uranium concentration is expected to be considerably lower. Prospecting and exploration work for uranium is being carried out in a number of different regions in India, under the direction of the Department of Atomic Energy in collaboration with other government agencies. The existing proved minable ore reserves in the Bihar mines have been estimated at some 3.5 million tons. The grade of ore is believed to average some 0.060 to 0.065-that is, just under two-thirds of one percent-of U308, which is a lower level than that generally found in the existing mines of other producing countries. With this concentration, the existing proved reserves of ore would yield some 22,000 tons of U30,. In addition, a figure somewhat larger than this has been suggested as the present estimate of in- ferred as distinct from proved reserves. TIIE ENERGY RESOURCESOF INDIA 21 On the basis of these reserves of uranium, and with the technology that is currently in use, uranium supplies would suffice for a rather restricted period, the length of which would depend on the rate at which the installed nuclear power capacity was built up. This period would be extended by im- provements in fuel technology in the present reactors, and by the discovery and proving of further reserves of uranium. Each of these however appears to offer only limited scope. The main possibility for increasing the available resources of nuclear fuel, in India as elsewhere, arises from the development of fast breeder reactors. These would be able to make use of the plutonium that is now being produced by the present generation of nuclear reactors, but which is not used in them, and by producing more plutonium than they would them- selves burn, they would enormously increase the total resources of nuclear fuel that could be developed from a given amount of uranium. Moreover, the development of fast breeder reactors would open up the prospect of using thorium, of which India has very large reserves, in order to supplement uranium as a basic fuel.3 The thorium would be converted in the breeder reactors into the fissile material U233 which itself can be used directly as a nuclear fuel. If and when this process becomes estab- lished, so that breeder reactors based on thorium can be introduced, the capacity to generate electricity from domestic sources of fuel would be ex- tended virtually without limit. Known reserves of thorium, which are found chiefly in the monazite sands of Kerala and in the Ranchi plateau on the border of West Bengal and Bihar, are currently put at 450,000 tons. It is estimated that the energy potentially available from this amount is about 18Q, or more than five million TWh. This compares with a current level of electricity generation of about 70 TWh, and a possible level by the end of the century of perhaps 500 TWh. This tremendous increase in fuel resources depends, however, on the successful development both of fast breeder reactors on a commercial scale and of the thorium-based process for adding to nuclear fuel supplies. Both the development time and the costs of realizing these objectives are ex- tremely uncertain. Some very difficult technical problems remain to be solved. Although a great deal of money and effort is now being put into the development of fast breeder reactors in sevetal countries, the eventual pay- off from all this activity is still in doubt. It is true that breeder reactors would bring about a substantial reduction in the fuel costs of nuclear power 3The use of thorium as a fuel is not limited to breeder reactors; on present plans it will be used in a number of nuclear power plants of the HTGR (high temperature gas-cooled reactor) type in Germany and the U.S. It will not, however, be used in conventional (as distinct from breeder) reactors of the types that are now in service or planned for future construction in In- dia. 22 THIE SETTING stations, but this advantage may well be outweighed, at any rate for a con- siderable time to come, by higher initial capital costs. Much will depend on further progress in the technology involved, and also on trends in the price of uranium, which will largely determine what happens to the fuel costs of existing types of nuclear power station. Uranium prices in turn will be affected by the rate of expansion of nuclear power generation in the world as a whole, and by the extent of new discoveries of uranium ores. All these factors are subject to a great deal of uncertainty. Because of these uncertainties, it is not yet possible to say with confi- dence'when fast breeder reactors will reach the stage of being able to gener- ate useful amounts of power at an acceptably low cost. This is true even for countries where development work has gone much further than in India, and where the scale of expenditures greatly exceeds what is planned or could be contemplated in the Indian program of development. The present official expectation in India is that full-scale fast breeder reactors developed within India will be producing power by the second half of the 1980s. This may well prove to be too optimistic a projection. Superimposed on the problems that may arise with fast breeder reactors in general are those of developing the use of thorium. Effective ways of pro- ducing from natural ore deposits the metallic thorium required, and of developing on a commercial scale reactors in which it will be converted to U233, have yet to be devised and proved. For these to be developed inde- pendently within India may take a considerable time. Moreover, even assuming that it were possible and acceptable for the Indian program to make use of foreign as well as indigenous technology in order to speed up the process of development, the scope for this may be limited because the possible gains from turning to thorium may be rated less highly in other countries, with the result that relatively little would be spent on proving them. Thus the full potential of India's thorium reserves, and the time by which it will be possible to begin exploiting them seriously, still remain to be established. SOURCES OF NONCOMMERCIAL ENERGY Forest resources Forests and woodlands are an important element in the inventory of fuel resources in India, since they are the source of firewood and charcoal which is the main item of domestic fuel consumption. Although the total amount of firewood consumed is not known precisely, it is currently put at some 130 million tons. This exceeds by some 50 percent the present level of out- put of the coal industry. THIE ENERGY RESOURCESOF INDIA 23 Not a great deal seems to be known about the sources of firewood, the implications of current or higher levels of consumption for the inventory of forest resources, or the extent to which well-conceived programs of forestry development would permit the maintenance or increase of firewood sup- plies in the long run. The total forest area of India is put at some 75 million hectares, which is about 23 percent of the total area of the country. Of the forest area itself, some 60 percent is classified as exploitable (which means that the forests are actually in use), and a further 20 percent as potentially exploitable. Vir- tually the whole of the forest area comes under the ownership of the States, and all recorded production of timber is from State forests. In round terms, the most recent available production figures (for the year 1969/70) are 22 million cubic meters for total timber production, of which 13 million cubic meters consisted of fuelwood. In terms of tonnage this latter figure comes to only 9 million. It follows that out of the 130 million tons referred to above, which is believed to be a reasonable current estimate of total fuel- wood consumption, only about 7 percent is accounted for from recorded production. As to the remainder, it can only be said in general terms that it must come from three sources: (1) forest areas not owned by the States; (2) unrecorded production from State forests; and (3) woodlands, such as those belonging to villages and at roadsides, which do not fall within the defini- tion of forest areas. Since so little of the present forest area is in the hands of agencies other than the States, the first of these sources must be relatively unimportant. The effects of fuelwood consumption on this scale, and the resultant ex- tent of felling, are generally believed to be serious; but even the broadest quantitative indicators of the possible amount of damage and depletion are lacking. At the same time, no estimates or assessments exist of the future levels of firewood consumption which might be consistent with sound management for forest and woodland resources. However, the need for greater attention to this problem, and for action designed to increase the supply of fuelwood by planned investment, has been recognized in a num- ber of recent reports including that of the Fuel Policy Committee, and in the Draft Fifth Plan itself. Some possible lines of action are referred to in Chapter 7. Vegetable wastes and cow dung On the present most widely accepted estimate of consumption of non- commercial fuels, and allowing for differences in thermal value, firewood accounts for almost two-thirds of the total, vegetable wastes for about 20 percent, and cow dung for about 15 percent. 24 THE SETTING Since vegetable wastes are mainly derived from crop residues, the avail- able quantities largely depend on the amounts harvested of the crops con- cerned, and the total is therefore likely to rise over time in line with aggreg- ate crop production. It is not thought that any problem of resource use arises in connection with this source of domestic fuel. The burning of dried cow dung is a more controversial practice, because of the alternative use of dung as a fertilizer. The present cattle population of India, including buffaloes, is probably of the order of 250 million, which would perhaps yield 1,550 million tons of wet dung in a year. Since it takes about five tons of wet dung to produce one ton of dried dung for fuel pur- poses, and since current consumption of dried cow dung as fuel is put at some 70 million tons, it appears that on these estimates between one-fifth and one-quarter of the total supply is burned as fuel. It is sometimes argued that any use of cow dung for this purpose is ex- tremely unfortunate, since its value as fertilizer greatly exceeds its value as a fuel. The strength of this argument depends on what it is reasonable to assume about (a) the cost of afternative fuels, and (b) the effectiveness with which dung is actually likely to be used as a fertilizer. What does seem to be clearly established is that much more effective use could be made of this resource both as a fuel and as a fertilizer, by methods which are both proved and reasonably simple to introduce. This subject also is taken up in Chapter 7. 3. THE GROWTH AND PATTERN OF ENERGY CONSUMPTION AND SUPPLY IN ORDER to measure aggregate changes in energy production or consump- tion, it is necessary to express the various constituent forms of energy in terms of some common unit of measurement. Some ways in which this can be done are briefly outlined in Appendix 1. None of these methods is clearly superior to the others, and indeed it is arguable that no measure derived purely from the physical or technical characteristics of fuels is very satisfac- tory. In India the Energy Survey Committee in its Report of 1965' initiated the practice of measuring the amounts of different fuels in terms of a com- mon unit specified as million tons of coal replacement, which is one of the measures described in the Appendix. Since then this measuredhas been gen- erally chosen for the analysis of energy trends within India, and in particu- lar it has been adopted by the Fuel Policy Committee. It is therefore used in the discussion which follows. However, some figures of consumption have also been shown in coal equivalent terms in Appendix 1. TOTAL ENERGY, COMMERCIAL AND NONCOMMERCIAL A striking feature of energy consumption in India is the very important position still held by the traditional or noncommercial sources of supply. One such source which has not yet been referred to, and for which only very rough estimation is possible, is the animal power which still con- stitutes a substantial share of the energy input into agriculture. Although this is increasingly being replaced by mechanical power, it remains ex- tremely large in absolute terms. A recent estimate2 is that the energy derived from animal power came to about 110 million tons of coal replace- ment in 1965/66. This amount was estimated to be over one-third of all energy consumption at that time, expressed in terms of coal replacement, and to exceed the amounts derived both from commercial sources of energy and from other noncommercial sources, each of which was put at under one-third of the total. So far as fuels are concerned, the main forms of noncommercial energy, as already noted above, are firewood and charcoal, dried cow dung and vegetable wastes. It is these sources alone which are referred to below under the heading of noncommercial energy, with animal power excluded. 'Report of the Energy Survey of India Committee (Government of India, New Delhi, 1965). Although irievitably dated in many respects, this study remains an extremely useful source. 2Given in "Natural Resources in the Indian Economy," by Narottam Shah, which forms Chapter I of Natural Resources in the Indian Economy, edited by Vadilal Dagli (Bombay, Vora and Co., 1971). 25 26 THE SETTING The amounts of these noncommercial fuels consumed can also be esti- mated only roughly. A set of figures has been derived here, by means which are outlined in Appendix 11; but as noted in the Appendix the results have little more than illustrative value. Estimates of consumption per head of noncommercial fuels in 1962/63 were made by the Energy Survey Commit- tee from evidence which had then recently become available. In the ab- sence of more recent evidence, these values are assumed here to have held good both before and after this period, so that consumption per head is taken to be constant over a long period of years. Different values of consumption per head apply for urban and rural areas, so that total consumption for a given year is derived by multiplying each of these by the estimated urban and rural population for that year. The details of this calculation are set out in Appendix 11, and in Table 67 which accompanies that Appendix. The end product, which is the set of estimates of aggregate consumption of noncommercial fuels, is also shown here in the third line of Table 6. This table compares in aggregate terms and for selected years the absolute amounts and relative shares of commercial and noncommercial fuels, which together comprise total estimated con- sumption of energy as defined here. TABLE 6. Estimated Energy Consumption, Commercial and Noncom- mercial, 1953/54-1970/71 1953/54 1960/61 1965/66 1968/69 1970/71 A motints consumed (m .tc.r.)' Commercial energy 60 101 147 177 197 Noncommercial energy 127 147 164 175 183 Total 187 248 311 352 380 Per-cenage shiares Commercial energy 32 41 47 50 52 Noncommercial energy 68 59 53 50 48 1. Million tons of coal replacement. For comparative purposes, and since the coal equivalent measure is more commonly used internationally, a similar presentation with coal equivalent instead of coal replacement values is given in Appendix 1. Table 65. SOURCES Forcommercialenergy,dataweresuppliedbythePlanningCommiss1on:lfornon- commercial energy, the sources and method used are described in Appendix II. It can be seen from Table 6 that over the whole period covered by the figures-that is, from 1953/54 to 1970/71 -the estimated consumption of commercial energy measured in coal replacement terms more than tripled, while total consumption of commercial and noncommercial fuels taken togeiher approximately doubled. As a result of its faster rate of growth, the ENERGY CONSUMPTION AND SUPPLY 27 share of commercial energy in the total rose considerably over this period, from under one-third in 1953/54 to over one-half in 1970/71. On the assumption that per capita consumption of noncommercial fuels remains constant, this share will have risen further since 1970/71, and will continue -to increase with time. Again using the coefficients given in the report of the Energy Survey Committee, for each of the three main noncommercial fuels rather than for the total, it is possible to show the estimated composition of the total con- sumption of noncommercial fuels. This is given for 1970/71 in Table 7, which also gives the estimated amounts consumed of the three fuels in orig- inal units as well as in million tons coal replacement. TABLE 7. Estimated Consumption in India of Noncommercial Fuels, 1970/71 Amounts Consumed Relative Share of Original Units Million Tons Consumption in M.T.C.R. (mn. tons) Coal Replacement (%) Firewood and charcoal 126 120 66 Dried cow dung 68 27 15 Vegetable wastes 39 37 20 Total 233 183 100 SOURCE: The sources and methods used for these estimates are described in Appendix II. From Table 7 it can be seen that some two-thirds of the estimated con- sumption of noncommercial fuels, measured in coal replacement values, consists of firewood. Cow dung accounts for about 30 percent of consump- tion by weight, but in terms of coal replacement its estimated share is only 15 percent. The remaining 20 percent of noncommercial fuels consists of vegetable wastes. The consumption per head of noncommercial fuels is probably rather higher in rural than in urban areas: while the urban popula- tion is estimated to have been almost 20 percent of total population in 1970/71, its share of noncommercial fuel consumption is put at over 17 per- cent. Household consumption of commercial fuels-kerosene, soft coke and electricity-is appreciably higher in urban than in rural areas. COMMERCIAL ENERGY Within the total consumption of commercial energy, the shares of the different principal fuels can be shown in two alternative ways: by sources of primary energy, or by sources of final consumption of energy. The difference lies mainly in the treatment of electricity. The chief primary sources of commercial energy in India are four, namely coal, petroleum, hydroelectricity, and (from 1970 onwards) nuclear 28 THESETTING power. On this classification, electricity generated from coal or petroleum is regarded as a secondary fuel, and therefore excluded from the list. If however commercial energy consumption is broken down according to final sources, then the three main components become coal, petroleum, and electricity. Under this classification, only the amounts of coal and petroleum products that are directly used for energy consumption are shown and not the amounts that are converted into electricity before being used as energy, while all electricity is included whatever the source of energy that is used in generating it. It would be preferable to show the growth of commercial energy con- sumption according to both these classifications, by primary sources and by final sources. Unfortunately however there are no figures for consumption by primary fuels which are fully consistent with the most recent estimates of coal, petroleum, and electricity consumption; and these estimates them- selves at present go only up to 1970/71. Hence in the tables which follow in this section, commercial energy consumption is analyzed over the period from 1953/54 to 1970/71 only in terms of consumption of coal, petroleum, and electricity and not according to primary sources. TABLE 8. Commercial Energy Consumption by Main Fuels, 1953/54 to 1970/71 1953/54 1960161 1965/66 1968/69 1970/71 1. Absolute amounts (m .t.c.r.)' Coal (direct use)2 28.7 40.4 51.8 53.0 51.4 Petrolem3(direct use)2 23.8 43.9 64.6 82.3 97.2 Electricity 7.6 16.9 30.6 41.5 48.6 Total 60.1 101.2 147.0 176.8 197.2 2. Relative shares (percentages) Coal 48 40 35 30 26 Petroleum 40 43 44 47 49 Electricity 13 17 21 23 25 Total . 100 100 100 100 100 1. For comparative purposes, and since the coal equivalent measure is more commonly used internationally, a preciscly similar presentation in terms of coal equivalent values is given in Appendix 1, Table 66. 2. Direct use excludes coal and oil that is used for conversion into electricity. 3. Figures for petroleum exclude consumption of non-energy products, such as naphtha for use as feedstock, lubes and greases, and bitumen. SOURCE: Data supplied by the Planning Commission. Total consumption of commercial energy, as shown in the first line of Table 6, and also the amounts consumed within this total of coal, petroleum and electricity, are shown in Table 8. The upper half of the table shows ab- ENERGYCONSUMPTIONAND SUPPLY 29 solute amounts consumed in million tons of coal replacement, while the lower half shows the relative shares of each of the three fuels. A precisely similar table, but with consumption measured in coal equivalent instead of coal replacement values, is given in Table 66 of Appendix 1. Over the whole period covered by the figures in Table 8-from 1953/54 to 1970/71-consumption of all three fuels rose considerably. Direct use of coal, measured in coal replacement units, has almost doubled since 1953/54, though almost the whole of this increase took place in the earlier part of the period up to 1965/66, when the average annual rate of increase was about 6 percent. Since 1965166 coal consumption has changed very little (though this does not take account of sales of coal to thermal power stations, which continued to rise), and for the period as a whole the average rate of incrcase is 3.5 percent per annum. The amount of petroleum directiy used for energy purposes has more than quadrupled between 1953/54 and 1970/71, with an average annual rate of increase of 8.6 percent. Energy consumed in the form of electricity rose approximately sixfold over the whole period, with an avcrage growth rate of about 11.5 percent. As a result of these disparate rates of increase, the share of coal fell from just under a half to just over one-quarter; that of petroleum has slowly in- creased from 40 percent to almost one-half; and the share of electricity has more than doubled, from 13 percent to 25 percent. Table 9 compares consumption of commercial energy in 1960/61 and 1970/71, distinguishing the main categories of consumers. In the first four rows of the table, consumption of each fuel is shown by each of four pro- ducing sectors into which the economy is divided and which among them account for the whole of output (or gross domestic product). The fifth line gives the total for these four producing sectors. In addition, commercial energy is consumed by the domestic or household sector, and this is shown in the sixth row of the table. Total commercial energy consumption, shown in the final row of the table, is the sum of energy consumed by the four pro- ducing sectors and by households. In the last four columns of the table the changes in consumption between 1960/61 and 1970171 are also shown. Looking al the figures for 1960/61, marked differences appear in the amount and pattern of fuel consumption by sector. Mining and manufac- turing and transport were the two dominant consumers, with almost 75 per- cent of the total energy consumption. In each case about half the energy consumed in that year came from direct use of coal, but with respect to the other half transport was almost entirely dependent on oil, while for mining and manufacturing etectricity was more important than oil. With respect to oil, household consumption was almost double that of mining and manufacturing, while in the case of electricity the mining and manufactur- ing sector accounted for over two-thirds of the total. TABLE 9. Commercial Energy Consumption by Sector, 1960/61 and 1970/71 (m .t.c.r.) Total Consumption Change in Consumption, 1960/61 1970/71 1960/61 to 1970/71 Coal Oil Electricity Total Coal Oil Electricity rotal Coal Oil Electricity Total I Producing sectors Agriculturel - 2.7 0.8 3.5 - 4.5 4.5 9.0 - 1.8 3.7 5.5 Mining and manu- facturing 20.9 7.2 11.6 39.7 31.9 10.9 34.4 77,2 11.0 3.7 22.8 37.5 Transport and communicatinn1 16.0 17.4 0.8 34.2 15.1 47.2 1.4 63.7 -0.9 29.8 0.6 29.5 Others2 0.7 - 2.2 2.9 0.3 7.0 4.5 11.8 -0.4 7T0 2.3 8.9 Total 37.6 27.3 15.4 80.3 47.3 69.6 44.8 161.7 9.7 42.3 29.4 81.4 2. Household cort- sumption 2.8 16.5 1.5 20.8 4.1 27.6 3.8 35.5 1.3 11.1 2.3 14.7 3. Total consumption 40.4 43.9 16.9 101.2 51.4 97.2 48.6 197.2 11.0 53.3 31.7 96.0 I. Consumption of oil in agriculture in the form of tractor engine fuel is here included in consumption of the transport and communications sector. It is a relatively small amount. 2. These comprise the following service activities: (1) trade and hotels and rcstauranls; (2) banking and insurance; (3) real estate and ownership of dwellings and business services. (4) public administrattion and defense: and (5) other services. SOURCE. Data supplied by the Planning Commission, m z rn ENERGYCONSUMPTION AND SUPPLY 31 This pattern was broadly maintained in 1970/71, but with certain modifications. With respect to coal, the mining and manufacturing sector has become more dominant as a consumer; the whole of the net increase in coal production over the ten year period is accounted for by this sector. The transport sector became more dependent orn oil, as a result both of the more rapid expansion of road transport than of rail and also of the change on the railways from steam to diesel locomotives. Big increases took place in pro- portionate though not absolute terms in consumption by agriculture and "other sector3." In agriculture both oil and (still more) electricity consump- tion rose, largely because of the spread of pump sets for irrigation. In the other sectors the increase was concentrated on oil. Looking at the increases between 1960/61 and 1970/71, it can be seen that despite the very rapid growth in agriculture and the "other" sectors, over two-thirds of the total increase was in mining and manufacturing and in transport. Well over half the increase in oil consumption took place in the transport sector, but only about 7 percent in mining and manufacturing. The rate of increase in total energy consumption for different periods can be compared with the growth of income and production in India. In Table 10 the comparative growth rates are given for the period from 1960/61 to 1970/71, and for two subperiods within it, of energy consumption, gross domestic product at constant prices, and industrial production. TABLE 10. Growth Rates of Total Commercial Energy Consumption, GDP, and Industrial Production, 1960/61 to 1970/71 (average annual compound rates of growth, in percentages) 1960/61 1965/66 1960/61 to to to 1965/66 1970/71 1970/71 1. Commercial energy consumption (m.t.c.r.) 7.8 6.1 6.9 2. Gross domestic product at 1960/61 prices 2.9 3.2 3.0 3. Industrial productionI 9.0 3.3 6.1 1. Increases are for calendar year periods 1960-65, 1965-70 and 1960-70. SOURCES: Energy consumption Pigures are derived from Table 8. Data on gross domestic product are from Estimates ql Nationial Product, Saving antd Capital Formation, 1960/61-1971/72, published by the Government of India, Central Statistical Organization. November 1973. The industrial production series is taken from Basic Statistics Relating to the In,dian Economy, published by the Government of India, Planning Commission. 1972. It can be seen that total commercial energy consumption increased dur- ing the decade at a considerably faster rate than national product. For the decade as a whole, the growth of energy consumption was close to that of 34 THE SETTING of the total increase over the decade of 81.4 million tons in coal replacement values, about two-thirds (55.4 million tons) came from increases in sector output, just over one-fifth (16.7 million tons) from greater energy intensity within each sector, and just over 10 percent (9.4 million tons) from the greater energy intensity in relation to the increase in output. TABLE 12. Analysis of Changes in Commercial Energy Consumption by Sector, 1960/61 to 1970/71 (million tons of coal replacement) Increases Arising From Changes in Energy Co- Changes in efflcients Changes in Energy Co- Applied to Output efficients Increases in Total Alonel Alone2 Output3 Changes I. Agriculture 0.8 3.8 0.9 5.5 2. Mining and manufacturing 28.7 5.1 3.7 37.4 3. Transport and communication 24.3 3.1 2.2 29.5 4. Others 1.6 4.7 2.6 8.9 5. Total of indi- vidual sectors4 55.4 16.7 9.4 81.4 6. Total of all pro- ducing sectors taken together4 35.1 32.3 14.1 81.4 1. In terms of the notation of footnote 3, this column shows the values of k I aX. 2. In terms of the notation of footnote 3, this column shows the values of A kX 3. In terms of the notation of footnote 3, this column shows the values of AhAx. 4. It will be seen that for the first three columns of the tables, the sum of the increases for the individual sectors is not equal to the total for the economy as a whole, which they com- prise. The reason for this divergence is set out in the text. SOURCE: As for Table 11. In the final row of the table the same separation is made for the economy as a whole. It is clear that while the total increase of 81.4 million tons is the same, as it must be by definition, the relative importance of the three ele- ments is noticeably different. The effect of increases in output is smaller, and that of the increase in energy intensity is greater. This is explained by the fact that the proportionate increase in the output of the energy intensive sectors, industry and transport, was more than that of agriculture and other services. The result of such a change in the composition of national product is to raise the average energy coefficient for the economy as a whole e'ven if the separate coefficients for each particular sector remain unchanged. By comparing the figures in the last two rows of Table 12, it is possible to ENERGY CONSUMPTION AND SUPPLY 35 assess how far the increase in energy intensity for the economy as a whole can be explained by changes in the relative output of different sectors, and how far it results from more intensive use of commercial energy within each of these sectors. For instance, if all producing sectors had grown over this period at the same rate as the economy as a whole, with no change in intensity of use of energy (i.e., with the 1960/61 energy coefficients remain- ing unchanged), then the total increase in commercial energy consumption would have been 35.1 million tons of coal replacement, as shown in the first column of the final row of the table. Since however the energy-intensive sectors grew faster than the others, the actual increase in consumption aris- ing from output changes, even with the 1960/61 intensity of energy use, was 55.6 million tons. To analyze the pattern of energy consumption in terms of four sectors only is not very satisfactory. Within each of these, the behavior of constitu- ent sub-sectors, and particularly those which are energy-intensi ve, needs to be looked at more closely. Such an analysis cannot be made on the basis of the data at present available; but it is indispensable to a thorough and systematic account of the relationship between energy use and economic change in India. 4. THE DEVELOPMENT OF THE FUEL AND POWER INDUSTRIES INTRODUCTION IN THIS CHAPTER a brief account is given of recent developments in the three main fuel and power industries, namely coal mining, petroleum, and electric power supply, and of the salient features of each of these industries in India. So far as available data permit, the growth of production, con- sumption and productive capacity is shown, together with other basic infor- mation, and a description is also given of the main changes that have oc- curred in the organization and ownership of these industries. The growth in output and capacity that has taken place can be considered not only in absolute terms but in relation to the official targets that were set. In Table 13, a comparison is made for all three industries between the actual estimated values for 1973/74, which was the last year of the Fourth Plan, and the targets which were set at the outset of the Plan. For coal mining, separate figures are given for coking and non-coking coal; for petroleum, domestic crude production, and refining throughput and capacity, are sepa- rately given; and for electricity\ supply, power generation and installed gen- erating capacity are both given. I It can be seen from Table 13' that none of the targets set for the fuel and power industries in the Fourth Plan was achieved or even nearly achieved. In the case of coal, however, the planned increase in output was not matched by a corresponding increase in effective demand. This does not fully explain the slow rate of growth of production, since in the latter part of the Fourth Plan period there were persistent shortages of coal. But an in- crease in output up to the planned figure for 1973/74 would not have been practicable. For petroleum products also, domestic demand increased less rapidly than had been projected, so that if the planned output of refined products had been attained some part of it would probably have been ex- ported. Only in the case of crude oil,production and electricity supply would an appreciably larger increase in output have been absorbed by domestic de- mand. In the former case, there would have been a corresponding reduction in imports of crude petroleum, and in the latter case the power shortage which developed in the closing years of the Fourth Plan period could have been averted. For all three industries, a common influence on the way in which their organization has evolved over the past twenty years has been the Industrial Policy Resolutions adopted in 1948 and1956 by the Indian Parliament. Under the terms of the first Industrial Policy Resolution, the respective future spheres of public and private enterprise in industry were broadly defined. In three sectors, namely armaments, atomic energy and railway 36 THE FUEL AND POWER INDUSTRIES 37 TABLE 13. Fuel and Power Industries: Targets and Realizations in the Fourth Plan Period Planned Actual Increase Increase 1973/74 1968/69 1968/69 Fourth 1973/74 to to 1968/69 Plan Actual 1973/74 1973174 (actuall) Targel Estimates (%) (%) Coal Coking coal (mn. tons) 171 25.4 15.8 49 -7 Non-coking coal (mn. tons) 54.3 68.1 62.1 25 14 Total (mn. tons) 71.4 93.5 77.9 31 9 Petroleum Crude petroleum production (mn. tons) 6.06 8.5 7.2 40 19 Output of refined products (mn. tons) 15.4 26.0 21.0 69 36 Refinery capacity (mn. tons) 16.25 28.0 24.5 72 51 Electric po wer Electricity generation (GWh) 51.7 86.0 72.4 66 40 Installed generation capacity (MW) 14,300 23,600 18,456 65 29 SOURCES. All the figures in the first two columns of the table are taken from Government of India Planning Commission, Draft Fifth Five-Year Plan, 1974-79, Part II. In the third column, the actual estimated figures for 1973/74 are taken from Table 14 for coal; Tables 25 and 27 for crude petroleum and refinery capacity respec- tively; and Table 34 for generating capacity. The estimates of output of refined products and of electricity generation are from information directly supplied by the Ministry of Petroleum and Chemicals and the Central Water and Power Commission respectively. NOTE: A variety in decimal places appearing within the table is explained by the fact that no liberties were taken in rounding figures of varying exactitude from the several sources. transport, the central government would have exclusive responsibility. In six other industries, in which coal mining and mineral oils were both in- cluded, the State was to have the exclusive right to set up new establish- ments, subject however to the proviso that exceptions to this rule could be made in the national interest. The second Industrial Policy Resolution extended considerably the list of what were now termed "Schedule A" industries, in which the State would have either a monopoly or the exclusive right-again subject to a proviso concerning exceptions in the national interest- to establish new pr6ductive units. Coal and lignite mining and mineral oils were both listed as Schedule A industries, and the generation and distribution of electricity and the manufacture of heavy electrical plants were also now included in the list. The Industrial Policy Resolutions thus provided the framework within which there has been a continued process of creation, development, and ex- tension of public sector enterprise in the fuel and power industries. The role that now remains for private enterprise is extremely small, and is continu- ing to diminish. 38 THE SETTING THE COAL MINING INDUSTRY The growth of production and consumption In Chapter 3 it was seen that the amount of coal directly used for energy purposes almost doubled in the period from 1953/54 to 1970/71, but that there was virtually no increase after 1965/66. In Table 14, figures are given for coal production over this period, which include the coal that is not directly used for energy. Production is shown in total, and also broken down into the public and private sectors, coking and non-coking coal, and production from Bengal/Bihar and from the outlying fields. TABLE 14. Coal Production by Sector, Type of Coal, and Main Coal Fields (mn. tons) SHARES IN TOTAL PRODUCTION OF Non- Total Public Private Coking coking Bengal/ Outlying Production Sector Sector Coal Coal Bihar Fields 1954 37.5 4.0 33.5 13.8 23.7 30.2 7.2 1960/61 55.7 10.6 45.1 16.1 39.6 41.3 14.4 1965/66 67.6 13.6 54.1 17.0 50.7 51.2 16.5 1968/69 71.4 16.5 54.9 17.2 54.2 52.3 19.1 1969/70 75.7 17.5 58.2 18.1 57.6 55.7 20.0 1970/71 72.9 17.8 55.1 17.8 55.1 52.4 20.5 1971/72 72.4 25.3 47.1 16.7 55.7 49.9 22.5 1972/73 77.2 41.3 35.9 16.6 60.6 53.1 24.1 1973/741 77.9 75.3 2.6 15.8 62.1 52.6 25.2 1. Provisional. SOURCES: Total production and Its distribution between the public and private sectors for the years up to and including 1970/71, except for 1954, are taken from S. Mohan Kumaramangalam, Coal Industry in India (Oxford and I.B.H. Publishing Co., 1973). For the two years after 1970/71, the figures in the first five columns of the table are from Coal Controller, Provisional CoalStatistics, as are the data for cok- ing and non-coking coal in 1970/71. Earlier figures for coking and non-coking coal, and for Bengal/Bihar and outlying fields, are mainly from Coal Controller, Monthly Review, except for 1960/61 where figures given in the Report of Energy Survey Committee of India are used. The remaining data were supplied by the Department of Mines. Over the period as a whole, total production rather more than doubled, though again the increase in recent years has been small. In effect, the level of output reached a plateau in 1969/70 above which up to the end of 1973/74 it had not risen appreciably. The share of coal produced by the public sector rose gradually up to 197.0/71, but the absolute amount produced within the private sector continued to rise until 1969/70. In the last two years the TIIE FUEL AND POWER INDUSTRIES 39 public sector has acquired a virtually exclusive position in the industry, as a result of the nationalization measures which are described below. As between coking and non-coking coal, the share of the latter in total production has risen. Estimated coking coal production in 1973/74 was only about one-eighth above the level it had reached in 1954, and appreciably below the level of 1969/70, whereas production of non-coking coal was about two and one-half times higher than in 1954. As to the regional com- position of output, reference has already been made to the increase in the share of production from the outlying fields, and from the last two columns of Table 14 it can be seen how this has increased over time, from less than one-fifth initially to about one-third today. Production in the Bengal/Bihar area has apparently still not been restored to the level that it reached in 1969/70. No data concerning coal consumption by principal consuming industries are available from currently published sources. However, Table 15 shows estimates for the three years 1960/61, 1970/71 and 1973, the figures for 1970/71 being taken from unpublished material. TABLE 15. Inland Consumption of Coal, 1960/61, 1970/71 and 1973 (mn. tons) 1960/61 1970/71 1973 1. Railways 15.6 15.2 13.0 2. Colliery consumption 2.6 2.5 (2.5)' 3. Thermal power stations 9.1 12.4 21.0 4. Steel industry and coke ovens 9.0 16.3 14.7 5. Industry, other than iron and steel 9.4 19.52 (24. 1)2 6. Agriculture, commercial, government and other 1.6 7. Soft coke 2.6 4.1 3.5 Total 49.9 70.0 78.0 1. Attributed figure for 1973, not given in the original source. 2. Derived as a residual item in 1970/71, for which it includes all coal not dispatched by rail, and also in 1973. SOURCES: For 1960/61, data are taken from the Report of the Energy Survey Committee. For 1970/71, they are derived from the report of an official task force on the coal mining industry in relation to the Fifth Plan. The 1973 figures are from Industrial Outlook Report, Minerals and Petroleum, India 1973, prepared by Charles W. Sweet- wood and V. Subramaniam at the U.S. Embassy in Delhi. The three sets of figures in Table 15 have to be used with a certain amount of caution, since it is not clear how far either the totals or some of the constituent items are precisely comparable. Broadly, consumption ap- pears to have increased by some 56 percent over the period from 1960/61 to 1973. In the case of one of the main consumers, the railways, consumption began to decline in the early 1970s as a result of the gradual replacement of 40 THE SETTING steam by diesel and electric locomotives. Consumption by thermal power stations apparently more than doubled over the period,' and the same ap- pears to be true of industrial consumption other than in iron and steel. The consumption of the iron and steel industry itself, which is the main single industrial consumer, increased considerably between 1960/61 and 1970/71, but probably increased little between then and 1973.2 Apart from iron and steel, the main industrial consumers throughout the period were the ce- ment industry, brick kilns, and cotton textiles. Some features of the industry today The average size of the coal mines in India is small, though as a conse- quence of the recent nationalization measures and the accompanying reorganization of collieries it has considerably increased. In January 1971, the latest date for which published information is available, there were nearly 800 collieries in operation. Dividing this into the industry's output for 1970/71 yields an annual average production per mine of just over 90,000 tons. Almost one-third of the collieries producing in January 1971 had an output in that month of less than 500 tons, implying an annual rate of production of less than 6,000 tons. As a result of nationalization, a large number of small units have been closed or merged, most of them in the Raniganj and Jharia coal fields. Thus the 300 or so private mines taken over by the Coal Mines Authority in the Raniganj coal fields have been reconstituted into 86 mining concerns, while the 388 mines acquired earlier by Bharat Coking Coal were similarly reorganized into 87 units. The total number of operating units in production in the public sector is now rather over 300, so that their average output is of the order of 240,000 tons per year. About 20 percent of coal production in India comes at present from open- cast mines, and 80 percent from underground mines which are for the most part not very deep. Working methods for coal extraction vary greatly, from the most primitive method of pick-mining through solid blasting or cutting and blasting to highly mechanized methods. For 1969, the latest year for which information is available, 36 percent of output was recorded as having been obtained by coal cutters, which were then used in 226 mines. Mechani- cal loaders were in operation in 22 units, covering less than 3 percent of out- put, and conveyors in 39 mines with less than 10 percent of output. 1. The figure shown in Table 15 for 1970/71 is low by comparison with that for 1973. This is probably because the former series measures steel industry consumption in terms of raw coal rather than washed coal, and hence excludes consumption by thermal power stations of wash- ery middlings. 2. The apparent fall shown in Table 15, as between 1970/71 and 1973, is probably the result of the differences in defmnition referred to in footnote 1. THE FUEL AND POWER INDUSTRIES 41 Table 16 shows figures relating to employment, output and output per head in Indian coal mines during recent years. Separate series are given for workers in underground mines, opencast mines and above ground, and also for total employment in the industry, over the period from 1961 to 1972, which is the latest year for which these data are available. Total employ- ment is also compared in Table 16 with figures for total production, so as to derive a series for average annual output per employee. TABLE 16. Employment, Output, and Output per Man-Year in Coal Mines, 1961-1972 (calendar years) Employment Output Open- per Below cast . Above Output Man-Year Ground Working Ground Total (mn. tons) (tons) 1961 229.5 60.5 121.2 411.3 56.1 136 1962 245.0 63.9 124.0 432.9 61.4 142 1963 261.1 63.2 126.4 450.7 65.9 146 1964 253.3 52.8 124.6 430.8 62.4 145 1965 252.3 47.8 124.4 424.5 67.2 158 1966 254.4 48.0 123.1 425.5 68.0 160 1967 248.3 46.2 119.4 413.8 68.5 166 1968 236.0 45.2 114.1 395.4 70.7 179 1969 236.6 48.6 111.1 396.4 74.6 188 1970 235.4 45.6 110.6 391.5 73.6 188 1971 228.3 43.0. 110.9 382.2 72.6 190 19721 236.5 48.6 124.7 409.8 73.6 180 1. Provisional. SOURCE: Employment data are from Government of India, Department of Labor and Employment, Indian Labor Statistics, 1973. Output figures for the calendar years from 1961 to 1966 are from Coal Controller, Monthly Review of Coal Production and Distribution. For the years from 1967 to 1972, the calendar year estimates here have been derived by simple interpolation from the figures for financial years given in Table 14. From the table it appears that employment in coal mining reached a peak of just over 450,000 in 1963. Between then and 1971 it fell by over 10 per- cent. Between 1971 and 1972 this trend was reversed, and increases in employment were recorded for all three categories of workers shown in the table, particularly for workers in opencast mines and above ground for which the increase exceeded 10 percent. For the industry as a whole, the recorded increase in employment between 1971 and 1972 was about 7 per- cent. A possible explanation for this is given below. Over the ten-year period from 1961 to 1971 output per man-year, as shown in the last column of Table 16, rose slowly but almost without a break, from 136 tons to 190 tons or by about 40 percent. As between 1971 42 THESETTING and 1972, however, the increase in output was very small, while as has been seen employment rose by 7 percent. As a result, output per man-year fell to 180 tons, a level which it had reached in 1968. Despite the increase which is shown in Table 16, labor productivity in In- dian coal mines is low. The figure for output per man-year in 1972, of 180 tons, compares for example with an equivalent figure for Britain in 1972173 of 480 tons. Output per man-shift in India in 1970 in a sample of mines was 0.66 tons for all types of mine taken together, with a slightly higher figure of 0.73 tons for mechanized collieries alone. The corresponding British figure for 1972/73 was 2.32 tons. There are many factors which help to account for theselow levels of output per head, but a basic underlying reason is that in all aspects of the industry's operations and processes it is the general prac- tice to make use of highly labor-intensive methods. In drawing up man- power plans for new mines in India, the norms generally used at present are 0.80 tons per man-shift in underground mines and 4.5 tons per man-shift in opencast mines. In existing mines, however, it has been seen that recorded output per head fell somewhat between 1971 and 1972. For reasons that are mentioned just below, it is possible that when the data become available a further fall will be shown, at any rate between 1972 and 1973. Despite the low levels of labor productivity, coal prices in India are low by European though not U.S. standards, since wage and salary rates are also low. Some recent illustrative figures for unit costs are shown in Table 17, in which the first column relates to the Singareni Collieries Company com- prising 25 mines, for the period from March to September 1973, while the second column gives recent data for a typical month for the Saunda Central Colliery, which is in the South Karanpura field of Bihar. As would be ex- pected, wages and salaries formed much the largest single item of expen- diture in both cases. Wage levels were comparable, at Rs. 15 to 16 per day,3 but the wage costs per ton were lower at Singareni because of higher output per head. The relatively high figure for administrative costs for the Singareni Company includes costs of prospecting and the construction costs associated with the company's expansion and the building of townships. In both cases the figures for depreciation and interest charges appear low. It is interesting to note that for the group of collieries which comprised the former National Coal Development Corporation, the average costs of pro- duction are given in the corporation's Annual Report for 1972/73 as just under Rs. 35 per ton, which is somewhat lower than the corresponding figures in Table 17. For depreciation, however, the average cost per ton was just over Rs. 4.6 per ton, which is appreciably higher. It seems likely that since nationalization there has been a considerable in- crease in unit labor costs. In part, this is due to wage increases which were 3. This figure would now be appreciably higher as a result of increases awarded in 1974. THE FUEL AND POWER INDUSTRIES 43 TABLE 17. Unit Costs of Coal Production in 1973: Singareni Collieries Company and Saunda Central Colliery (Rs. /ton) Singareni Saunda Collieries Central Cost Heading Company Colliery Wages and salaries 20.50 25.65 Stores 5.86 4.29 Power 2.05 1.11 Royalties and cessI 1.90 1.94 Contractor's costs - 0.59 Miscellaneous costs 2.03 0.05 Administrative costs 5.25 1.05 Depreciation 2.08 1.38 Interest 1.62 0.36 Coal transport 0.77 0.50 Total costs 42.06 36.92 Coal: realization from sales 44.01 37.00 Profit 1.95 0.08 Coal board subsidy - 0.89 Final profit 1.95 0,97 1. Cesses have been charged for various purposes such as financing the Mines Welfare Commission, Rescue Stations, and the pay- ment of subsidies through the Coal Board. Subsidies have been paid in respect of sand slowing costs, and to offset for particular mines such disadvantages as depth, more difficult seams, pump- ing costs, and high costs of transport to the rail head. SOURCE: Data supplied by the two organizations referred to. associated not only with the change in ownership but with the general rise in prices and the cost of living. For example, the minimum monthly wage was increased as an interim measure from Rs. 222 to Rs. 261 in November 1973, and a further increase to Rs. 340 came into effect on April 1, 1974. However, three additional factors have in many cases affected mines which have passed from private to public ownership. First, the statutory wages and provident fund payments were not always met by private owners, whereas they are now paid in full. Second, there was for various reasons systematic under-recording in private mines of the numbers actually employed. Thus for example when the Jharia coal field came into public ownership the official level of manpower in the mines affected was said to be just under 88,000, whereas the numbers actually found to be in employment came to just over 123,000. Third, in view of the fact that the records were so defective, it was possible for many men whose 44 THE SETTING status was unclear to claim and secure employment with the new public sec- tor companies, with the support of trade unions who were anxious to in- crease their membership. From Table 16, it appears that the recorded employment figure showed an increase of 7 percent between 1971 and 1972, following a period of eight years in which employment had fallen and despite the fact that output was virtually unchanged. It seems likely that for the period 1972 to 1974 the official figures will also show an appreciable in- crease in coal mining employment. Part of this will reflect only a more ac- curate recording practice' rather than an increase in numbers actually employed; but part may also result from a genuine increase in total num- bers employed which did not correspond to any additional need for labor. In Tables 18 to 20, some figures are given relating to the price of coal in India. Table 18 shows historical data for average value in rupees per ton for the industry as a whole, and also the index number of the wholesale price of coal for 1965/66, 1968/69, and the three most recent years for which data are available. The figures for average value relate to all mines and all grades of coal, and as shown in the table are derived by dividing total value figures, which presumably relate to realizations by collieries, by total production. It can be seen from the table that the unit value of coal rose by more than two and one-half times between 1950 and 1973/74. Allowance for quality change would probably result in the increases being larger than those shown in the table. From 1960 to 1973/74, the average unit value increased by 80 percent, which implies an average annual rate of increase of about 4.7 percent. A somewhat smaller annual increase occurred in the wholesale price of coal, as shown in the last column of Table 18. For the whole period of over 13 years, this increase for coal was less than for wholesale prices of all commodities. In the two years from 1970/71, the average wholesale price of coal rose rather more than the average unit value, and by much the same amount as the wholesale price index for all commodities. Coal prices at the pit head naturally vary with quality. Up to March 1974, prices were determined according to the grade of coal concerned. Separate grading systems exist for coking and non-coking coal, the basis of both systems being the ash content of the coal, but with a distinction also made in the case of non-coking coals between steam coal (which is coal that has been screened out) and slack. A new price structure came into effect on April 1, 1974. While prices are still quoted according to much the same grades, the basis on which they are now determined is the useful heat value of each grade of coal. Hence although almost all prices rose-the exceptions being very inferior grades-the increases were by no means uniform. Information concerning the old and the new prices is set out in Tables 19 and 20. These compare, for the main grades.of coking and non-coking coal, the prices which obtained up to March 31, 1974, and which had prevailed since December 1972, with those which were established with effect from April 1, 1974. THE FUEL AND POWER INDUSTRIES 45 TABLE 18. Average Unit Value of Coal Production for Selected Years Index of Wholesale Unit Value Price Value of Absolute Index of Coal Production Production Amount (1960 (1961/62 (mn. tons), (Rsemn.) (RsJton) - 100) - 100) 1950 32.8 467 14.2 69 1955 38.8 560 14.4 70 1960 52.6 1,089 20.7 100 1965/66 67.6 n.a. n.a. n.a. 125 1968/69 71.4 2,315 33.3 161 163 1970/71 71.9 2,615 35.9 173 168 1971/72 71.91 2,599 36.0 174 175 1972/73 2 76.4 2,743 35.9 173 188 1973/742 77.9 2,908 37.3 180 n.a. 1. This figure differs slightly from the one given in Table 14 for production in 1971/72, since it comes from a different source. The discrepancy is of no importance here, since what is of interest in Table 18 is not production as such, but unit value. 2. Provisional. SOURCES: For 1950, 1955 and 1960, data for volume and value of production are taken from Government of India Planning Commission, Third Five-Year Plan, 1961. The figures given there have been converted here into metric tons. For 1968/69 on- wards, these figures are from Coal Controller, Provisional Coal Statistics, and from information supplied by the Department of Mines. The index of average wholesale prices of coal is taken from Government of India Economic Survey, 1973/74, and relates to the last week of each of the financial years for which values are given. It is understood that in deriving the new levels and structure of prices, as set out in Tables 19 and 20, a particular reference grade was taken as the basis or starting point for both coking and non-coking coals. For the former, the reference grade was the lowest shown in Table 19, namely Grade HH. In the case of the non-coking coals, both low moisture and high moisture, it was Grade III that was taken as the basis. Once the new prices had been determined for each of these reference grades, the prices of all higher grades were determined in accordance with the proportionate difference in useful heat value. Thus for example the new pithead price of Grade A coking coal is Rs. 68.70 per ton. This exceeds by one-eighth the new price of coking coal of Grade HH quality, which is Rs. 56.00 per ton, and this difference is the same as the difference in useful heat value between the two grades. From Tables 19 and 20, it can be seen that the largest increases in price under the new arrangements have been those for coking coals, which varied between 34 and 42 percent. In the case of non-coking coals, the increases were greater for the low moisture than for the high moisture coals. For the former, the increases (except for the lowest grade) ranged from 23 to just over 30 percent, whereas for the latter the increases (again with the excep- tion of the lowest grade) lay-between 10 and 18 percent. The figures given 46 THE SETTING TABLE 19. Coking Coal: Prices Before and After April 1, 1974 Prices up to Prices from March 31,1974 April 1 1974 % (RsYton) (Rslton) Increase Grade A 50.95 68.70 34.8 Grade B 48.04 67.25 39.6 Grade C 48.04 66.15 37.7 Grade D 45.82 65.00 41.9 Grade E 45.82 63.70 39.0 Grade F 44.43 62.35 40.3 Grade G 43.30 61.05 41.0 Grade H 42.18 59.80 41.8 Grade HH 41.68 56.00 34.4 SOURCE: Information supplied by the Department of Mines. TABLE 20. Non-Coking Coal: Prices Before and After April 1, 19741 Prices up to Prices from March 31, 1974 April 1 1974 % (Rsiton) (RsJton) Increase (a) Low moisture coals Selected "A" 48.00 59.00 22.9 Selected "B" 45.00 56.90 26.4 Grade 1 42.00 54.00 28.6 Grade 11 38.00 49.60 30.5 Grade III 35.89 44.20 23.2 Grade III B 34.74 37.55 8.1 (b) High moisture coals Selected "A"2 48.00 54.75 14.1 Selected3 46.50 52.95 13.9 Selected "B"2 45.00 52.95 17.7 Grade I and Assam coals: Bengal/Bihar 42.00 48.95 16.5 Outlying fields 44.25 48.95 10.6 Grade 11: Bengal/Bihar 38.00 43.15 13.6 Outlying fields 42.25 43.15 2.1 Grade 1113 41.25 36.80 -10.8 Ungraded coal According to 28.35 contracts 1. Figures refer to steam coal only. The corresponding prices for slack of each grade are typically Rs. 1-2 ton lower. 2. These grades of high moisture coals applied only to Bengal/Bihar. 3. These grades of high moisture coals applied only to the outlying fields. It will be seen that in the new price structure a number of distinctions between Bengal/Bihar and the outly- ing fields with respect to grading or pricing have been removed. SOURCE: As for Table 19. TUIE FUEL AND POWER INDUSTRIES 47 above exclude the output of the Singareni fields, for which it has been stated that as from April 1, 1974 the average price will be Rs. 50.5 per ton. This may be compared with the figure shown in Table 17 above for average realization from sales by the Singareni Company, which is Rs. 44 per ton. Hence the average percentage increase for Singareni coals seems to be of the order of 14 percent. For the coal mining industry as a whole, the average increase in prices resulting from the changes which took effect on April 1, 1974 was probably in the region of 20 to 25 percent. Although this is a substantial rise, it is probably low in relation to the increase which has occurred since the begin- ning of 1973 in wage and salary costs, mainly as a result of wage awards but also perhaps, as noted above, because of an increase in the industry's labor force. Hence it is possible that the coal mining companies may now face a rather difficult financial situation despite the price increases. At the time when these increases were announced it was staled that the new prices would be maintained for one year from the date of the change.4 A feature of the price structure which was in force up to April 1, 1974 was that differences in price between better and inferior coals were rather small. In several respects the new arrangements have introduced a wider divergence according to quality. The higher grade coking coals have now become more expensive in relation to non-coking coals; the low moisture non-coking coals have become more expensive in relation to the high moisture ones; and prices of the very lowest grades of non-coking coal have been raised least of all, or actually lowered. It is possible, however, that a case exists for increasing still further the relative prices of better grades, in order to reflect market forces. For example, as noted in footnote I to Table 20, the difference for non-coking coals between steam coal and slack re- mains extremely small. Some questions of energy pricing are taken up again in Chapter 7 below. The distribution of coal to consumers is subject to a system of allocation according to priorities. In the past, responsibility for operation of this system rested with the Coal Controller, but increasingly in practice alloca- tions have been made through the railways which move the bulk of the coal which goes out from the mines. Distribution to the steel plants and thermal power stations is carried out through a system of planned linkages, and in the case of power stations a standing Linkage Committee is responsible for ensuring that the appropriate links between user and supplier are estab- lished and maintained. In order to reduce coal transport by rail and to pro- mote the use of lower grade coal, many new thermal stations are to be sited close to collieries. 4. An ofricial committec to revicw thc level and struclurc ol coal prices was appointed by the Government of India in January 1975. 50 THE SETTING ent units of the Steel Authority of India Limited. Both the CMAL and Singareni came under the Department of Mines, though the latter was and is regulated through the State Government of Andhra Pradesh. As a result of the administrative changes which accompanied the Cabinet reshuffle in October 1974, responsibility for the coal industry-including coking coal, non-coking coal and lignite-has now been concentrated in a single department which forms part of the newly created Ministry of Energy. This Ministry is also responsible for the power industry, having assumed in this respect the functions of the former Ministry of Irrigation and Power. THE OIL INDUSTRY The growth and composition of demand As was seen in Chapter 3,-the demand for energy derived from oil grew during the period 1953/54 to 1970171 at an average annual rate of some 8.6 percent per annum. Not all petroleum products are used for meeting energy demands: the main exceptions are naphtha (which is mainly used as a feedstock for the petrochemical and fertilizer industries), bitumen, lubes and greases, and petroleum coke. But although the share of these non- energy items in the total consumption of petroleum products has been in- creasing, it is still relatively small: in 1970/71 it came to about one-eighth. Hence the growth of total consumption of refined petroleum products has been fairly closely in line with that of the demand for petroleum-based energy products. In Table 21 estimates are given of consumption in India of all petroleum products, both in total and for principal products and product groups,. for selected past years and for a sequence of recent years. It can be seen that total consumption increased almost six-fold between 1951, the earliest year covered in the table, and 1974 which is the latest. Consumption approxi- mately doubled in the ten years from 1951 to 1961, and further increased by a factor of about two and one-half in the following decade. Since then the rate of increase has slowed down, and between 1973 and 1974 total con- sumption actually fell slightly, by about 3 percent. Aggregate consumption in India in 1973, inclusive of refinery boiler fuels, as shown in the last line of Table 21, was approximately 23.5 million tons. Despite the rapid rate of increase over the past quarter of a century, this represents less than one percent of total world consumption. Table 22 shows average annual rates of growth of consumption for all products taken together, for the four main product groups, and also for selected products within each of these groups. TABLE 21. Consumption of Petroleum Products (thousand tons, calendar years) rn 1951 1961 1965 1968 1970 1971 1972 1973 19741 Z 0 Light distillates :i Naphtha - - 30 460 837 1,107 ),280 1,405 1,609 m Motorspirit2 820 876 1,093 1,256 1,411 1,516 1,586 1,606 1,261 x Other 90 121 238 245 326 370 415 437 402 : Total 910 997 1,361 1,961 2,574 2,993 3,281 3,448 3,272 c Middle distillates Kerosene 1,059 2,192 2,525 2,816 3,262 3,457 3,506 3,460 2,851 High speed diesel oil 271 1,396 2,327 3,189 3,735 4,221 4,620 5,183 6,234 Light diesel oil 442 650 725 987 1,047 1,190 1,385 1,350 1,130 Other 118 347 609 673 1,126 889 1,006 1,006 960 Total 1,890 4,585 6,186 7,665 8,870 9,757 10,517 10,999 11,175 Fuel oils 900 1,889 3,191 4,087 4,651 4,974 5,549 5,882 5,572 Bitumens - 408 589 623 751 949 1,144 1,130 871 Lubes and greases 175 359 444 487 535 564 588 611 475 Other products 13 18 97 184 206 252 325 274 310 Net total, all products 3,888 8,256 11,868 15,007 17,587 19,489 21,404 22,343 21,675 Refineryboilerfuel3 25 138 411 822 1,147 1,150 1,210 1,145 1,077 Gross total, all products 3,913 8,394 12,279 15,829 18,722 20,639 22,614 23,488 22,752 1. Provisional. 2. Including power alcohol up to 1956. 3. Including fuel used for power generation in captive plants at five of the nine refineries at present in operation. SOURCE: Data supplied by the Ministry of Petroleum and Chemicals. 52 TIIE SETTING TABLE 22. Consumption of Petroleum Products: Rates of Increase for Main Product Groups and Selected Products, 1951-73 (Average annual compound rates of growth, calendar years, in percentages) 1951-1971 1951-1961 1961-1971 1968-1973_ Product groups Light distillates 6.1 0.9 11.6 12.2 Middle distillates 8.6 9.3 7.8 7.5 Fuel oils 8.9 7.7 10.2 7.5 Other products2 14.0 15.8 12.2 8.2 All products2 8.7 7.9 9.4 8.2 Selected products Motor spirit 3.1 0.7 5.6 5.1 Kerosene 6.1 7.5 4.7 4.3 High speed diesel oil 14.7 17.8 11.7 10.2 Fuel oils (nland consumption)3 10.7 9.0 12.4 8.8 1. Provisional. 2. The total of all products is defined to include refinery boiler fuels, i.e., the gross total shown in the last line of Table 21 is taken. Refinery boiler fuels are thus included above under "other products." 3. That is, excluding international bunker fuel oil. SOURCE All figures are derived from the data presented in Table 21, except for inland con- sumption of fuel oils which has been derived by subtracting from total consump- tion of fuel oils, as given in Table 21, estimates of international bunker fuel oil cornsumption derived from company sources and from the Indian Institute of Petroleum. Taking the twenty-year period from 1951 to 1971, the average annual rate of growth of total consumption was 8.7 percent. As between the two decades within this period, the annual rate of increase was 7.9 percent in the .period 1951 to 1961, and rose to 9.4 percent in the following decade. For the most recent five years, from 1968 to 1973, the corresponding figure has been 8.2 percent, mainly because the growth in the final year of the period, from 1972 to 1973, was only 3.9 percent. Wide variations are apparent in the rates at which consumption of different products and product groups has grown in particular periods. For light distillates, the rate of growth was extremely low between 1951 and 1961, but very high in the following decade. This mainly reflects the ex- tremely rapid growth from the mid-1960s in the use of naphtha as a feedstock; but as can be seen from the last half of Table 22, there was also a considerable increase in the rate of growth of consumption of motor spirit, from a negligible figure in the 1950s to over 5 percent per annum between 1961 and 1971. Naphtha and motor spirit between them accounted for seven-eighths of the consumption of light distillates in 1973, and for 13 per- cent of total! consumption of petroleum products. THE FUEL AND POWER INDUSITRIES 53 For middle distillates taken together, the rate of growth has been fairly stable at between 7.5 percent and 9.5 percent per annum. Within the total, there are three main products-namely, kerosene, high speed diesel oil, and light diesel oil-which between them accounted for over 90 percent of con- sumption of middle distillates in 1973. Kerosene, which was the largest single item in consumption until the early 1960s, is mainly used for house- hold lighting and cooking. For many years, however, a considerable though unknown quantity was illegally used in vehicles as a substitute for or a sup- plement to high speed diesel oil, which was more expensive because of a higher rate of duty. In November 1973 the rates of duty on the two products were equalized. Because of this diversion to vehicle use, the rate of growth in kerosene consumption as shown in Table 22 is probably higher than the rate of in- crease in the consumption for household use alone. Total consumption has grown only at moderate and declining rates, so that the share of kerosene in consumption of all middle distillates fell from 56 percent in 1951 to 48 per- cent in 1961, and was less than 32 percent in 1973. In 1974 it fell to just over 25 percent, while the share of high-speed diesel oil rose corresjondingly, following the equalization of the rates of excise duty. By contrast, the rate of increase in the consumption of high speed diesel oil has been extremely rapid, as is shown in the lower part of Table 22. This has been very largely associated with the growth of road transport, and also with the replacement of steam by diesel locomotives on the railways. In 1970, the latest year for which information is available, some 78 percent of consumption of high speed diesel oil was in road transport, and 12 percent on the railways. The rate of growth of consumption has slowed down over time, but even in the five years from 1968 to 1973 it was over 10 percent per annum. In 1973 high speed diesel oil formed 47 percent of consumption of middle distillates and 22 percent of total consumption of petroleum prod- ucts, and these proportions are likely tc increase in the future. The third main product within this group is light diesel oil, which in 1973 was about one-eighth of the total consumption of middle distillates. Of the estimated consumption of light diesel oil in 1970, some 40 percent was in agriculture, where it is used for energizing pumpsets. Almost 7 percent went into power generation, and nearly 5 percent to transport, the remaining 48 percent being consumed in a wide variety of industries. The rate of growth in the consumption of light diesel oil between 1968 and 1973 was about 6.5 percent per annum. * As is evident from Table 22, the rate of increase in fuel oil consumption has been high, particularly in the 4960s. The rates of increase become even higher if as shown in the lower half of the table internal consumption only of fuel oils is taken, with international bunker fuel excluded. In 1970, the latest year for which information is available, the leading consumers of fuel 54 THE SETTING oil were (1) power generation, with 25.9 percent; (2) textiles, with 10.5 per- cent; (3) transport (very largely shipping), with 10.0 percent; and (4) iron and steel, with 8.3 percent. Fuel oil is also used in a wide variety of other indus- tries for steam raising. Finally, consumption in the category of "other products" has also grown fast. This mainly resulted from a big increase in the consumption of bitu- men, together with a rapid growth in refinery boiler fuels, from an initially very small total, as oil refining capacity in India was built up. The changes in relative shares of different product groups over the same period are summarized in Table 23. It can be seen that during the decade 1951-61 the share of middle distillates rose to well over 50 percent, and that of "other products" also rose, both at the expense of the share of light dis- tillates. During the following decade, the shares of light distillates, heavy fuel oils, and other products all increased moderately, and that of middle distillates became correspondingly lower. TABLE 23. Consumption of Petroleum Products: Relative Shares of Product Groups (percentages, by weight; calendar years) 1951 1961 1971 19731 19741 Light distillates 23.3 11.9 14.5 14.8 14.5 Middle distillates 48.3 54.6 47.3 46.9 49.2 Fuel oils 23.0 22.5 24.1 25.0 24.5 Other products2 5.4 11.0 14.1 13.3 11.9 1. Provisional. 2. Including refinery boiler fuels. SOURCE: Based on data presented in Table 21. In Table 24, the shares of these four broad product groups in total con- sumption in 1972 are compared for India, the United States and Western Europe. The comparison brings out the unusually large share of Indian de- mand which goes to middle distillates. This reflects the continued use of kerosene for domestic purposes, as well as the growth of consumption of diesel oils. The table also provides evidence of the extent to which, through choice of crude oils and refinery processes, the product yield of crude oil can be adapted to meet different patterns of demand-though the pattern of consumption in different countries is also matched to the pattern of refinery outputs through international trade in petroleum products. THE FUEL AND POWER INDUSTRIES 55 TABLE 24. India, U.S., and Western Europe: Comparative Shares in Consumption of Main Petroleum Products, 1972 (percentages) Western US. Europe India Light distillates 43 17 14 Middle distillates 29 32 47 Fuel oils 6 37 25 Other products' 22 14 14 1. Including refinery boiler fuels. SOURCE: For India, the figures are taken from those in Table 21. For the U.S. and Western Europe, they are taken from the BP Statistical Review of the World Oil Industry, 1972. Domestic production and imports The rise in consumption of petroleum products in India has increased the degree of dependence on imports in relation to the total demand for energy. At the same time, however, the extent of this dependence within the petroleum sector itself has been affected by the growth (a) in domestic pro- duction of crude oil, and (b) of refinery capacity, and hence the output of refined products, within India. As refining throughput has increased, the volume of imports of products as opposed to crude oil has been pro tanto diminished, while part of the crude which makes up this refinery throughput has come from rising domestic production rather than imports. Crude petroleum in India is at present produced by three organizations. These are: (a) The Assam Oil Company (AOC), which is a wholly owned sub- sidiary of Burmah Oil Company and which operates the Digboi fields in Assam. (b) Oil India Limited (OIL), which as noted in Chapter 2 is a joint sector enterprise. It was formed in 1959. The Government of India and Burmah Oil Company each hold a 50 percent share in the compa- .ny, which operates the fields of Nahorkatiya and Moran in Assam and is prospecting for oil in certain adjoining areas which are leased out to it. (c) The Oil and Natural Gas Commission, which is a statutory public sector enterprise formed in 1956. ONGC has exclusive rights of exploration and production in all onshore basins within India, except for the very limited areas in Assam which are assigned to AOC and OIL, and also in the offshore Bombay High area. The output of crude from each of these, and total crude production within India for selected years in the period 1951. to 1974, is shown in Table 25. the origins of the industry to about 1966, has been drawn on at a number of points in this sub- section. 56 THE SETTING TABLE 25. Production of Crude Petroleum in India, by Company (thousand tons, calendar years) 58 THE SETTING TABLE 26. Crude Throughput of Indian Refineries: Private, Public, and Joint Sectors 1960 1965 1970 1971 1972 1973 1974' Throughiput (million tons) Private sector 6.09 8.21 7.47 8.39 7.83 9.032 5.68 Public sector - 1.54 6.34 6.62 6.84 7.01 7.28 Joint sector - - 4.65 4.58 5.00 4.47 * 7.85 Total 6.09 9.75 18.46 19.59 19.67 20.52 20.81 Respective shares (percentages) Private sector 100.0 84.2 40.5 42.8 39.8 44.0 27.3 Public sector - 15.8 34.3 33.8 34.8 34.1 35.0 Joint sector - - 25.2 23.4 25.4- 21.9 37.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1. Provisional. 2. This total includes the following quantities imported by the Indian Oil Corporation for processing in private sector refineries on a conversion basis: (thousand tons) Burmah Shell (Bombay) 735 Esso (Bombay) 317 Caltex (Vishakhapatnam) 29 Total 1,081 SOURCE: Data supplied by the Ministry of Petroleum and Chemicals. million tons. This implies an average level of capacity utilization in 1973 of some 90 percent. The rate of utilization was higher in the public and joint sectors than in the private sector. This was mainly because disagreements between the Government of India and the private companies, relating both to the amount of capacity which the companies were properly authorized to create and to sources, prices, and amounts of crude to be processed, had the effect of causing throughput to remain below the levels that were tech- nically realizable. These issues have now been satisfactorily resolved, so that higher utilization rates should be attainable in future.' The present Indian refineries are not complex. They comprise basically atmospheric and vacuum distillation units with varying secondary process- ing capacity of cracking, reforming and vis-breaking units. The secondary processing units now in operation are directed to increasing the yield of the light and middle distillates and improving the quality of the gasoline. The total cracking and vis-breaking capacity is equivalent to about one-eighth of total distillation capacity, while reforming capacity is only 4 percent. Thus the flexibility of the Indian refineries, apart from possible variations in the 7. As stated in the footnote to Table 27, crude imported by IOC is now being processed in the three refineries that were involved in these disagreements. THE FUEL AND POWER INDUSTRIES 59 TABLE 27. Estimated Refinery Throughput Capacity, September 1974 (million tons) A. By refiveery and ownership 1. Public sector Koyali 4.301 Barauni 2.80 7.90 Gauhati 0.80 2. Joint sector Cochin 3.30 Madras 2.50 9.30 Hindustan Petroleum (Bombay)2 3.503 3. Private sector Burmah-Shell (Bombay) 5,253 Caltex (Vishakhapatnam) 1.553 7.30 Digboi (Assam) 0.50 4. Total 24.50 B. By location 1. Inland refineries 8.40 2. Coastal refineries 16.10 1. This is the present rated throughput capacity of Koyali, but the de facto processing ability of the refinery is at present limited to 3.8 million tons because of problems of availability of indigenous crude. Allowance for this would bring down the estimate for total capacity to 24.0 million tons. 2. Until recently this refinery was owned by Esso, and was therefore in the private sector. The Government of India has now acquired a 74 percent equity interest in all of Esso Eastern's operations in India, in- cluding the Bombay refinery. From March 1974, this refinery therefore passed into the joint sector category. In the final column or Table 26 above, its 1974 throughput has been assigned in full to the joint sector. 3. The recognized capacities of these three refineries, on the basis of which the private companies are permitted (or in the case of Esso at Bombay, were permitted) to import crude, are as follows: (million tons) Burmah-Shell (Bombay) 3.75 Esso (Bombay) 2.75 Caltex (Vishakhapatnam) 1.25 Total 7.75 From June 1973 the balance of 2.55 million tons throughput, be- tween recogni2ed and actual capacity, became available for utiliza- t[on by Indian Oil Corporation on a conversion basis. SOURCE: Data supplied by the Ministry of Petroleum and Chemicals and by oil companies. type of crude to be processed, is limited. The possible future extension of secondary processing facilities is taken up in Chapter 7. Taking into account the trends in domestic crude production and in the output of refinery products within India, it is possible to show the extent of TABLE 28. Domestic Production and Imports of Crude Oil and Refined Products (million tons, calendar years) 19S1 1956 1961 1965 1968 1970 1971 1972 1973 I Refinery throughput 0.27 4.21 6.44 9.75 16.10 18.46 19.59 19.67 20.52 2. Domestic crude production 0.27 0.40 0.51 3.02 5.85 6.81 7.18 7.37 7.20 3. Imports of crude - 3.77 S.97 6.81 10.45 11.66 12.69 12.31 13.44 4. Consumption of products (net)' 3.89 5.23 8.26 11.87 15.01 17.59 19.49 21.40 22.35 5. Domestic refinery production (net)l 0.25 3.89 6.09 9.11 14.92 17.18 18.23 18.20 19.37 6. Imports of products 3.49 1.81 2.48 2.88 0.93 0.97 1.93 3.26 3.98 7. Total imports, crude and products 3.49 5.58 8.45 9.69 11.38 12.63 14.62 15.57 17.42 8. Total availability 3.76 6.02 8.92 12.63 17.03 19.43 21.52 22.93 24.50 1. That is. net of refinery boiler fuel and losses. SOURCE: Figures in lines I and 3 and 5 and 7 are taken from Indian Perroleurm and Chemicals Statistics, 1972, while those in line 4 are taken from Ta- H ble 21. -4 THE FUEL AND POWER INDUSTRIES 61 dependence on petroleum imports and the way in which this has changed over time. Some figures bearing on this are set out in Table 28. The first line of the table shows refining throughput in India. The crude thus processed must come from domestic or imported sources, and the amounts derived from each are set out in lines 2 and 3 respectively. Similarly, consumption of refined products in India, which is shown in line 4, has to be met either from the output of Indian refineries or from imports of products; and the amounts supplied from each of these sources are set out in lines 5 and 6. The last two lines of the table show totals derived from these figures. In line 7 total imports are shown, this being the sum of line 3 (crude imports) and line 6 (product imports). Line 8 shows what may be called "total avail- ability," which is defined as refinery throughput (from line 1) plus product imports (from line 6). From these series it is possible to show the degree of dependence on im-- ports in the petroleum sector, and this is done in Table 29. TABLE 29. Petroleum Sector: Extent of Dependence on Imports (percentages) 1951 1956 1961 1965 1968 1970 1971 1972 1973 1. Crude petroleum: ratio of crude imports to refinery throughput - 90 93 70 65 63 65 63 65 2. Petroleum products: ratio of product imports to net consumption 90 34 30 24 6 5 10 15 18 3. Total:' ratio of imports of crude and products to total availability 93 93 95 77 67 65 68 68 71 1. It may at first sight seem surprising that this last set of figures should in all cases exceed those for crude and for products considered separately, rather than being some kind of weighted average of the two. That this is correct can be seen from the following reason- ing. So long as there are any product imports, the ratio of imported crude to total throughput must understate the degree of overall dependence on imports, since it takes no account of imports of products. Similarly, as long as there are any imports of crude, the ratio of products imports to consumption must understate the degree of overall depen- dence on imports, since it makes no allowance for the crude import content of domestic refinery production. SOURCE: Table 28. The first line of the table shows the degree of dependence on imports with respect to crude oil alone. This is measured by the ratio of crude im- ports to refinery throughput-i.e., by dividing the figures in line 3 of Table 62 THESETTING 28 by those in line 1. The second line shows dependence with respect to petroleum products alone, and shows imports of refined products (from line 6 of Table 28) as a percentage of net consumption of products in India (from line 4 of Table 28). In the third line, the degree of overall dependence on im- ports is shown by expressing total petroleum imports, of crude and prod- ucts combined, as a percentage of total availability, which is defined as domestic refinery throughput plus imports of products. It can be seen that during the 1960s the extent of dependence on imports of products was greatly reduced, as a result of the refinery program described above, from about 90 percent in 1951 to 30 percent in 1961. Since however the refineries established in the 1950s were almost entirely depen- dent on imported crude, the overall degree of dependence on imports, ac- cording to the measure used here, remained much the same. During the 1960s there was a marked reduction in the extent of dependence on import- ed crude oil, as domestic production increased, while by 1968 imported products had become a very small part of total consumption. Hence the degree of overall dependence on imports was reduced, reaching its lowest point so far in 1970. In the last few years, product imports have increased, while domestic crude output has levelled off and has therefore become a smaller proportion of total refinery throughput. Hence the dependence on imports appears to have slightly increased. The main source of imported crude in 1973 was Iran, which supplied almost 70 percent of total imports into India. About one-quarter came from Saudi Arabia, and the remaining 5 percent from Iraq. This pattern of im- ports is now undergoing some change. Iran will remain the dominant sup- plier, but as a result of the agreement referred to in Chapter 5 the share of imports from Iraq is likely to increase. Imports of petroleum products are very largely from the Soviet Union and Romania. The ownership and control of the industry It is apparent that the role of the government and of public enterprise in the Indian petroleum industry has been greatly extended over the past fif- -teen years. There is no integrated state owned enterprise, corresponding for example to those of Brazil or Mexico or Indonesia, which operates at all stages of the industry from initial exploration to marketing. In all these stages, however, the public sector is aLready dominant and is in the course of becoming more so. With respect to onshore exploration and development, the private sector is represented only in the Assam Oil Company. This company is restricted to the single field of Digboi in Assam, which is unimportant and declining. Private interests are also involved in Oil India Limited, which is a joint sec- tor company; but Oil India is at present restricted to an area comprising less THEFUEL AND POWER INDUSTRIES 63 than 3 percent of the Assam basin, and it is planned that the Government of India's present 50 percent share in the company will soon be increased. Thus ONGC is the only organization which can 'expand the area of its ex- ploratory and development activity and its production, at any rate until such time as the Government acquires a majority holding in Oil India. In offshore exploration and development, two of the offshore basins on the west coast of India have been reserved for ONGC. One of these con- tains the very promising Bombay High area, where as seen in Chapter 2 the initial results of the current program of exploratory drilling have been en- couraging. In the nine other offshore basins, the Government of India has accepted the principle of foreign collaboration with ONGC. Accordingly, overseas companies-which may be public or private concerns-will be permitted by agreement to explore in a number of areas on the Continental Shelf, and two collaborative agreements were in fact signed with U.S. con- tracting firms in April 1974. It is possible that further agreements of a simi- lar kind may be arrived at. The decision of the Government of India to allow foreign participation is a considerable innovation in policy. However, the form of the agreements that have been made ensures that the Govern- ment, through the agency of the ONGC, will retain control over operations and the disposal of the crude that is produced. In refining, the present share of the public sector in total throughput capacity, taking account not only of IOC but of the Government of India's holdings in the three joint sector enterprises, is already some 57 percent. By the time that the new IOC refinery at Haldia has come into full operation, and effective capacity at Barauni has been increased, this share would be raised to about 63 percent; further increases will later result from the sub- stantial additions to IOC's capacity that have now been set under way or ap- proved. At the same time, the private sector element in refining has begun to decline in absolute as well as relative terms, following the agreement that was concluded in March 1974 between the Government of India and Esso, and soon afterwards given legislative effect. As a result of this agreement the Government of India has acquired a 74 percent holding in a new joint company, the Hindustan Petroleum Corporation, in which the remaining 26 percent is held by Esso. The new company combines into one what were previously three separate undertakings: the former Esso Eastern refinery company; the marketing branch, which was also 100 percent owned by Esso; and Lube India Limited, in which the Government of India and Esso each held a 50 percent share. After a period of seven years, the Government of India is to acquire the remaining 26 percent share still held by Esso. The agreement with Esso has been followed by discussions with Burmah-Shell and Caltex, with a view to reaching a-settlement along similar lines. On the marketing side, public sector operations also began in the 1950s with the establishment in 1959 of the Indian Oil Company. In 1964, as al- 64 THE SETTING ready noted, this company was merged with the public sector refining com- pany to form the Indian Oil Corporation, which now controls all downstream operations in the public sector of the Indian petroleum indus- try. With respect to marketing, IOC has a virtual monopoly of all product imports, and of the output of all refineries in the public sector and joint sec- tor. It also markets the output at present produced by private sector refin- eries, on a fee paying basis, from crude imported on government account. From 1968 the private sector marketing companies were not permitted to expand their existing units, or to increase the number of their filling sta- tions. Under the new arrangements with Esso referred to above, the mar- keting of the products of the Esso refinery has become the responsibility of the new joint enterprise that has been established. If similar agreements are made with Burmah-Shell and Caltex, the public sector share in marketing activities as well as refining will thereby be still further increased. Prices of crude oil and petroleum products in India Broadly speaking, the price of domestically produced crude petroleum in India was determined until recently on the basis of parity with imported crude. However, with the recent sharp increases in petroleum import prices it appears that this method of determination is no longer in use. In line with crude import prices, the price of indigenous oil was raised in August 1973 to $2.48 per barrel, and again at the beginning of November 1973 to $3.58 per barrel.8 Despite the very large further increases which then took place in import prices, this latter figure was maintained for some months. In the an- nual Report of the Ministry of Petroleum and Chemicals for 1973/74, which was issued in April 1974, it was stated in relation to the Indian Oil Corpora- tion that "the estimate of profit for the year 1973/74 is uncertain and will depend very much on the price of imported crude oil and on the principles on which indigenous crude oil will be priced." This wording suggests that a new basis of valuation for domestic crude had not then been finally decided. The decision was later taken to raise the price of domestic crude again as from August 1, 1974, since when the price has been $4.58 per biarrel. This is still well under half the current price of imported crude. The main object of fixing what in present circumstances is a very low price is to keep down the average cost to Indian refineries of both forms of crude-domestic and im- ported-taken together, so as in turn to keep the prices of refined products from increasing further. To this end, a price equalization account for crude oil has been established. A standard refinery price, intermediate between the average import price and the new domestic price, is now taken as the 8. The evolution of fo.b. prices of Iranian Light crude, which is the main type of crude im- ported into India, is set out in Chapter 5, Table 48. THE FUEL AND POWER INDUSTRIES 65 basis for determining ex-refinery product prices. The difference between the cost of indigenous crude and the standard price is credited to the equalization account, from which payments are made to refineries depen- dent on imported crude. Until the establishment of this new system, ex-refinery prices of petroleum products were nominally fixed with reference to import parity alone. A formula still in use relates the permitted price for each product to the f.o.b. price in the Gulf in March 1969, with adjustments for subsequent changes in the price of crude oil and in freight charges. In principle, each change of 10 percent in the price of crude was to be reflected in a corre- sponding 4 percent adjustment in the controlled ex-refinery prices of prod- ucts. The actual operation of this import parity formula was for some time a continuing source of friction between the Government of India and the pri- vate companies; but the main causes of friction now seem to have disap- peared with the changes in the international oil market in recent months, which as will be seen below have led to a situation in which the private companies became for a period the cheapest source of imported oil for In- dia. Selling prices of most petroleum products, as distinct from ex-refinery prices, are as in most countries considerably affected by import duties. In Table 30 figures are given for a number of points in time and for six major products of (a) ex-refinery prices, (b) excise duties, and (c) ex-storage point selling prices. The selling prices ex-storage point are either identical with or very close to final selling prices. They are largely made up of the ex-refinery price and the duty, though such items as local taxes and transport and dis- tributive margins also enter into the ex-storage point selling price and are not shown in Table 30. In the case of two of the products shown, namely kerosene and high speed diesel oil, the selling price does not now cover the sum of the ex-refinery price plus the excise duty, so that the marketing companies do not at present recover their costs on these products. Thus the present price structure contains an element of cross-subsidization, in- troduced in order to keep down so far as possible the prices of kerosene and diesel oil. It can be seen from the table that for certain petroleum products, particu- larly gasoline and high speed diesel oil, excise duties have always been an important element in the selling price. The duty now accounts for some two-thirds of the selling price of gasoline, after being almost doubled in November 1973 to a level of over Rs. 2 per liter or about 95 cents per U.S. gallon. The retail price of gasoline is now about Rs. 3.25 per liter, which is just over $1.50 per U.S. gallon. In the case of kerosene and high speed diesel oil, duties now account for almost half the selling prices. In November 1973 the duty on kerosene was raised by about 30 percent, while at the same time the duty on high speed diesel oil was lowered so as to bring the two rates TABLE 30. Prices Ex-Refinery and Ex-Storage Point,' and Excise Duties, for Six Major Petroleum Products at Selected Dates (Rs. per kiloliter) April 1, April 1, June 1, April 1, Aug. 31, Nov. 30, Sept. 18. 1960 1965 1970 1972 1973 1973 1974 1. Motor Spirit (a) Ex-refinery price n.a. n.a. 98 135 187 251 539 (b) Excise duties 332 554 805 985 1,063 2,046 2,046 (c) Ex-storage point price 568 702 971 1,205 1,411 2,457 2,847 2. Kerosene2 (a) Ex-refinery price n.a. n.a. 148 152 215 293 645 (b) Excise duties 68 219 280 329 329 428 428 (c) Ex-storage point price 250 360 470 541 541 717 9144 3. High speed diesel oil (a) Ex-refinery price n.a. n.a. 120 124 172 232 502 (b) Excise duties 308 451 505 512 512 413 413 (c) Ex-storage point price 429 599 681 708 737 697 8954 4. Light diesel oil (a) Ex-refinery price n.a. n.a. 99 119 165 221 477 (b) Excise duties 82 198 188 178 178 178 178 (c) Ex-storage point price 251 361 318 346 373 429 880 5. Fumace oil (a) Ex-refinery price n.a. n.a. 66 75 100 131 273 (b) Excise duties 49 78 112 108 108 108 108 (c) Ex-storage point price 141 141 207 233 249 280 654 6. Naphtha (for fertilizer use)3 (a) Ex-refinery price n.a. n.a. 95 101 201 236 323 (b) Excise duties (c) Ex-storage point price 114 144 252 252 486 -' m 1. Ex-storage prices vary a little with the particular storage point. Figures in this table are for Bombay. 2. Superior kerosene. - 3. Figures for naphtha are in Rs. per ton. z 4. In the last column, in the cases of kerosene and high speed diesel oil, the sum of the ex-refinery price and the excise duty exceeds the ex-storage 0 point price, as there is an element of under-recovery in the selling price. SOURCE: Data supplied by the Ministry of Petroleum and Chemicals. THE FUEL AND POWER INDUSTRIES 67 into line. This removed the incentive to use kerosene illegally as a fuel for diesel-powered motor vehicles and engines. The duties on other petroleum products have not been altered since the changes in the international oil market in October 1973, but as can be seen from line (c) under each of the six products listed in Table 30, higher crude prices have resulted in higher ex-refinery prices for all products. The price of naphtha to petrochemical plants was drastically increased in early 1974 to Rs. 1,000 per ton, in order to discourage consumption and conserve naphtha supplies for use in the fertilizer industry, for which the current price of naphtha, as shown in Ta- ble 30, is less than one-third of this amount. Some issues concerning the prices of petroleum, both crude and products, are briefly considered in Chapter 7 ELECTRIC POWER The growth of output, capacity, and consumption In Chapter 3 it was seen that in the past the rate of growth in electricity consumption in India has exceeded that of the two other main commercial fuels, coal and petroleum, so that the share of electricity in total energy con- sumption. has steadily increased. Table 31 gives figures of total electricity generated, gross and net, and of electricity consumption, for a number of past years. The total for gross generation is subdivided into generation by utilities, both public and private, and by non-utilities. Subtracting from this total the consumption of power station auxiliaries gives net generation, and in turn subtraction of line losses gives the series for electricity consumption by ultimate consumers. The figures shown for losses include consumption that is not metered. From the table, it appears that between 1951 and 1960/61, in just over nine years, gross electricity generation almost trebled, while in the follow- ing 10 years it increased again by a factor of just over three. This corre- sponds to an average annual growth rate over the whole twenty-year period of about 11.6 percent. In the period since 1960/61, electricity consumption by ultimate consumers has grown at a somewhat slower rate than gross gen- eration. This has been associated with an increasing ratio of line losses and energy not accounted for, as shown in the penultimate line in each half of Table 31, to gross generation. While the average annual growth rate of gross generation over the eleven-year period from 1960/61 to 1971/72 was about 11.5 percent, that of electricity consumption by ultimate consumers was 10.6 percent. During recent years, the rate of growth of gross generation has fallen off, and during the five-year period of the Fourth Plan, from 1968/69 to 1973/74, the average rate of increase was about 7 percent per annum. From a, TABLE 31. Electricity Generated, Gross and Net 1951 1956 1960/61 1965/66 1968/69 1970/71 1971/72 1972/73 1973/741 1. Absolute amounts (GWh) Utilities: Public sector 2,458 5,294 11,016 26,072 40,391 49,561 53,990 57,346 60,205 Private sector 3,400 4,368 5,921 6,918 7,043 6,267 6,935 7,200 6,008 Total, utilities 5,858 9,662 16,937 32,990 47,434 55,828 60,925 64,546 66,213 Non-utilities2 1,656 2,210 3,186 3,835 4,208 5,384 5,459 5,970 6,208 Total gross generation 7,514 11,872 20,123 36,825 51,642 61,212 66,384 70,516 72,421 Less consumption of power station auxiliaries 218 386 722 1,647 2,944 3,433 3,723 4,036 n.a. Total net generation 7,296 11,486 19,401 35,178 48,698 57,779 62,661 66,480 n.a. Less line losses 864 1,135 2,486 4,621 7,645 9,306 10,862 12,230 n.a. Electricity consumption 6,432 10,151 16,915 30,557 41,053 48,473 51,799 54,250 n.a. 2. Relative shares (percentages) Utilities: Public sector 33 45 55 71 78 81 82 81 83 Private sector 45 37 29 19 14 10 10 10 8 Total, utilities 78 81 84 90 92 91 92 92 91 Non-utilities 22 19 16 10 8 9 8- 8 9 Total gross generation 100 100 100 100 100 100 100 100 100 Total net generation 97 97 96 96 94 94 94 94 n.a. Line losses 11 11 12 13 15 15 16 17. n.a. Electricity consumption 86 86 84 83 79 79 78 77 n.a. 1. Provisional. 2. For non-utilities, the figures for 1951, 1956 and 1960/61 exclude the amounts generated by the railways, which however are a very small fraction of the total. SOURCE: Government of India, Ministry of Irrigation and Power, Central Water and Power Commission, Electricity Supply Industry: Salient Data -, (February 1974), and other data supplied by the CWPC. C2 THEFUEL AND POWER INDUSTRIES 69 1971/72 to 1972/73 the increase was only just over 6 percent, and since gross generation in 1973/74 is provisionally estimated at rather over 72 GWh, the increase between 1972/73 and 1973/74 was probably no more than about 2.5 percent. These slower rates of increase are the result of difficulties with respect to electricity surpply, and cannot be taken as evidence that the un- derlying rate of growth of demand has fallen correspondingly. Within total gross generation,. the share of public sector utilities has steadily grown from one-third in 1951 to over 80 percent today. This in- crease has mainly been at the expense of the share of the private sector util- ities, which is now down to about 10 percent. In absolute terms, however, the amount of electricity generated by privately owned utilities has con- tinued to increase, and is now more than double the 1951 figure. The share of non-utilities in total generation declined up to 1968/69, since when it has been roughly constant at around 8 percent. In this case also the absolute amount generated has risen considerably. It can be expected to increase further as a result of current plans for expanding the number of captive plants owned by the railways and by industrial enterprises, though most of these plans are still in the early stages and will take some time to come to fruition. For utilities only, it is possible to show the total of gross electricity gener- ated according to the type of primary fuel used. Table 32 gives a breakdown by four categories of power stations: hydro; conventional thermal; nuclear; and gas turbine and diesel taken together. Throughout the period since 1951 hydro and conventional thermal sources have accounted for 95 percent or more of total electricity generated by utilities. Their respective shares have not altered greatly over this period, with hydro power coming to some 45 percent and conventional thermal generation to a little more than half of the total. The decline in the share of hydro power from 1971/72 to 1972/73 results from the pOOr monsoon of 1972, which led to an actual fall in hydro generation of some 3 percent between the two years. The conventional thermal stations are mainly but by no means entirely based on coal. For 1971/72, the latest year for which data are available, Ta- ble 33 shows the amounts of each of the principal fuels consumed by con- ventional thermal stations, and the relative share of each fuel in the pri- mary energy consumed by these stations. Lignite is used in the big power station at Neyveli in Tamil Nadu, though it is now to be supplemented by fuel oil because of lignite supply problems. Fuel oil is used as the sole or main fuel in four power stations: onein Bom- bay, two in Gujarat at Ahmedabad and Dhuvaran, and one at Barauni in Bihar. (The stations at Uttaran and Dhuvaran in Gujarat are the main con- sumers of natural gas for power generation.) In addition to these, a certain amount of fuel oil is also used as a supplementary fuel in all coal-based con- ventional thermal stations, partly for starting up but mainly as fuel burned TABLE 32. Gross Electricity Generated According to Primary Fuels (utilities only)' 1951 1956 1960/61 1965/66 1968/69 1970/71 1971/72 1972/73 1973/742 1. A bsolute amounts (GWh) Hydro t 2,860 4,292 7,837 15,225 20,723 25,248 28,024 27,196 28,797 Conventional thermal 2,779 5,135 8,732 17,372 26,394 27,798 31,237 35,614 34,554 Nuclear - - - - - 2,417 1,189 1,132 2,395 Other3 219 233 368 393 317 365 475 603 467 Total 5,858 9,662 16,937 32,990 47,434 55,828 60,925 64,546 66,213 2. Relative shares (percentages) Hydro 49 44 46 46 44 45 46 42 43 Conventional thermal 47 53 52 53 56 50 51 55 52 Nuclear - - - - - 4 2 2 4 Other3 4 2 2 1 1 1 1 1 1 Total 100 100 100 100 100 100 100 100 100 1. Almost all generation by non-utilities is from conventional thermal stations. 2. Provisional. 3. Gas turbine and diesel m -I THEFUEL AND POWER INDUSTRIES 71 TABLE 33. Conventional Thermal Stations: Consumptioni of Principal Fuels, 1971/72 Shares in Primary Energy Amounts Consumed Consumed (%) 1. Coal (inn. tons) 16.19 80 2. Lignite (in. tons) 3.02 6 3. Fuel oil (mn. kiloiiters) 1.42 . 12 4. Natural gas and refinery gas (inn. cubic meters) 142 2 SOURCE: For the first column of the table, the figures are taken from Government of India, Ministry of Irrigation and Power, Central Electricity Authority, Public Electricity Supply: All India Statistics, 1971/72. For the second column, a rough computatiofl of relative shares was made from data on heat input into steam power stations by State. when the load falls below a certain critical level of capacity, which depends on the type of boiler installed. Consumption of fuel oil for this purpose is at present some 250,000 tons a year. Table 34 shows the growth of installed capacity over the period since December 1950. Total installed capacity is broken down into that owned by utilities, public and private, and by nonutilities; and within the total for util- ities only, separate figures are again given for hydro, conventional thermal, nuclear and other installed capacity. Over the period as a whole, total installed capacity has increased at a slightly lower rate than electricity generated, with an average growth rate over the 20 year period from December 1950 to March 1971 of 10.3 percent per annum. As was.the case for power generation, the share of publicly owned utilities in total installed capacity has greatly increased, and now ex- ceeds 80 percent. The buildup of installed capacity was particularly rapid during the eight-year period from March 1961 to March 1969, during which the total increased by a factor of two and one-half, with an annual average growth rate of over 12 percent. However, for the last five years shown in Table 34, from March 1969 to March 1974, the increase in capacity came to less than 30 percent, and the annual average rate of increase slowed down to just over 5 percent. Within the total of installed capacity, the share of hydro stations came to about 42 percent in March 1973, and that of conventional thermal stations to 52 percent. As would be expected, there were wide variations between States and regions in the relative importance of hydro and thermal capacity. The percentage of hydro was highest in the southern region, and in the northern region states excluding Uttar Pradesh, where it was 66 percent and TABLE 34. Electricity Supply: Installed Capacity (MW) December December March March March March March March March 1950 1955 1961 1966 1969 1971 1972 1973 19741 1. Utilities (a) By ownership Public 628 1,518 3,287 7,288 11,335 13,222 13,769 14,812 15,240 Private 1,005 1,177 1,356 1,739 1,622 1,487 1,485 1,469 1,413 (b) By type of stations Hydro 559 940 1,917 4,124 5,907 6,383 5,612 6,785 6,965 Conventional thermal 1,005 1,547 2,436 4,417 6,640 7,508 7,818 8,468 8,661 Nuclear - - - - - 420 420 620 620 Other2 149 208 300 486 410 398 404 428 407 Utilities total 1,713 2,695 4,653 9,027 12,957 14,709 15,254 16,281 16,653 2 Non-utilities 588 723 1,001 1,146 1,339 1,562 1,635 1,708 1,803 3. Total 2,301 3,418 5,654 10,173 14,296 16,271 16,889 17,990 18,456 1. Provisional. 2. Diesel and gas turbine. SOURCES: As for Tables 31 and 32 above; and S. Swayambu, Power Development (Government of India, Ministry of Information and Broadcasting, 1972). m (4 -I THE FUEL AND POWER INDUSTRIES 73 64 percent respectively. Thermal power accounted for 85 percent of capacity in the eastern region, and for 76 percent (inclusive of nuclear power capacity) in the western region. Tables 35 and 36 give further details of electricity consumption. In Table 35 the relative shares are given for selected years in total consumption, as shown in Table 31, of each of six main categories of consumer. TABLE 35. Relative Shares in Net Electricity Consumption' (percentages) 1960/61 1965/66 1968/69 1970/71 1971/72 Agriculture and irrigation 4.9 6.3 8.5 9.2 9.6 Railway traction 2.7 3.5 3.0 2.8 3.1 Industry 73.7 72.8 71.0 7O0C 69.2 Commercial and government 5.0 5.5 5.2 5.3 5.7 Public lighting 1.0 0.9 0.9 1.0 0.9 Domestic 8.8 7.8 7.8 7.9 7.9 Public water works, drainage and miscellanecus 3.8 3.2 3.8 3.8 3.3 1. Including non-utilities, of which the output goes almost entirely to industry. SOURCE: Data supplied by the CWPC. It can be seen that industry is overwhelmingly the main single consumer of power, and that its share was still 69 percent in 1971/72 although it had slightly fallen over the previous ten years. The sector which considerably increased its share of consumption over this period is agriculture, because of the rapid spread of electric pumps for irrigation purposes. The rate of growth of agricultural consumption in the ten years from 1960/61 to 1970/71 was over 14 percent per annum. In Table 36 the amounts consumed by the eight largest consuming indus- tries are given for selected years in the period 1960161 to 1971/72, while the last column of the table shows the average annual compound rate of growth for each of these industries over the period as a whole. Throughout the period the combined consumption of these eight industries formed about half of total industrial consumption, which is shown in the last row of the table. The two series therefore grew at much the same average rates, which were 10 percent per annum for total industrial consumption and 9.6 percent for the consumption of the eight listed industries. As between the eight ma- jor consumers, however, there were notable variations in the rate of growth of electricity consumption. In aluminum, which by 1971/72 had become the largest consumer, and in the engineering industry, the rate of increase for the period as a whole was over 20 percent per annum, while in fertilizers (17.4 percent) and chemicals (14.6 percent) it was also much higher than the average for all industries. By contrast, in each of the four industries which were the leading consumers in 1960/61 the rate of growth of consumption 74 THESETTING has been relatively low. In cotton textiles and cement it was between 3 and 4 percent per annum; in iron and steel, 6.4 percent; and in paper, 7.2 per- cent. TABLE 36. Electricity Consumption in Selected Manufacturing Industries (GWh) Average Annual Growth Rate 1960/61 to 1971/72 1960/61 1965/66 1968/69 1970171 1971/72 (%) I. Aluminum 448 1,566 2,495 3,375 3,555 20.3 2. Iron and steel 1,613 2,545 3,035 3,195 3,178 6.4 3. Cotton textiles 2,088 2,783 3,048 3,138 3,128 3.8 4. Fertilizers 477 1,828 2,156 2,531 2,791 17.4 5. Chemicals 404 642 1,030 1,614 1,810 14.6 6. Cement 936 1,059 1,148 1,371 1,448 3.5 7. Paper 508 666 812 899 1,096 7.2 8. Engineering n.a. 298 456 839 989 22.1 Total, industries listed above 6,4741 11,387 14,180 16,962 17,995 9.6 9. Total consumption by industry 12,659 22,698 27,057 34,200 35,823 10.0 1. Excluding engineering. SOURCE: Data supplied by CWPC. The rapid growth of electricity consumption in agriculture has been ac- companied by the electrification of an increasing proportion of villages in India. In Table 37, the growth in the number of villages that have been electrified is shown both in absolute terms and as a proportion of the total number of villages in India, which is just under 570,000. In the third col- umn of the table the number of irrigation pumpsets and tubewells energized is also shown. By March 1974 over one-quarter of the total number of villages in India had been electrified, and the number of irrigation pumpsets and tubewells had risen to almost two and one-half million after having increased by a fac- tor of nearly five over the previous eight years. In one State, Haryana, the stage had been reached by the end of 1972/73 where eyery village had been electrified. In three other States the proportion of villages electrified had risen by then to over one-half, namely Kerala (85 percent), Punjab (55 per- cent) and Tamil Nadu (97 percent). The program of rural electrification has been actively supported, and in part financed, by the central government. After 1967 there was an increase THE FUEL AND POWER INDUSTRIES 75 TABLE 37. Number of Villages Electrified and Irrigation Pumpsets/Tubewells Energized Irrigation Proportion Pumpsets/ Number of Total Tubewells of Villages Villages Energized Electrified (%) (thousands) 1950/51 3,100 0.5 21 1955/56 7,300 1.3 56 1960/61 21,700 3.8 198 1965/66 45,100 8.0 509 1968/69 73,700 13.0 1,081 1970/71 104,900 18.7 1,619 1971/72 122,100 21.6 1,890 1972/73 139,200 24.5 2,168 1973/74 156,000 27.5 2,440 1. Numbers are as at the end of each year,e.g., the figure for 1950/51 is for March 31, 1951. The figures in the first column are rounded to the nearest hundred, while as stated in the table the number of ir- rigation pumpsets and tubewells energized is given to the nearest thousand. SOURCE: CWPC, Electricity Supply Industry, Salient Data, February 1974, with figures for 1973/74 supplied directly by CWPC. in the scale of support, and attention was increasingly concentrated on agri- cultural demand for irrigation as opposed to public and domestic lighting. The main channel of central support, both technical and financial, is now the Rural Electricity Corporation, a public sector financing institution es- tablished in 1970 which lends money to the State Electricity Boards (SEBs) on a project basis for the financing of rural electrification schemes which meet specified criteria of acceptability. Finally, Table 38 gives figures for per capita consumption of electricity by States in 1960/61, 1965/66, 1971/72, and on a provisional basis for 1972/73. The data cover 17 States and the Union Territory of Delhi, with only the smaller northeastern States and the Union Territories other than Delhi excluded. It can be seen that average per capita consumption for the whole of India increased from 38 KWh in 1960/61 to an estimated 97 KWh in 1972/73, that is by a multiple of about two and one-half, with an average cumulative an- nual rate of growth of just over 8 percent. Much the highest figure throughout the period was for Delhi, where however it was only about three times the national aveltagefn 1972/73 whereas it had been five times the na- tional average in 1960/61 Wide differences occurred in the rates of increase in consumption per head as between different States. In three cases where the figure had been 76 THE SETTING TABLE 38. Per Capita Electricity Consumption by States (GWh) 1960/61 1965/66 1971/72 1972/73' Andhra Pradesh 19 31 57 59 Assam 4 8 25 27 Bihar 42 57 65 68 Gujarat 52 83 140 152 Haryana2 111 121 Himachal Pradesh 44 43 Jammu and Kashmir 14 30 40 40 Karnataka (Mysore) 44 55 115 119 Kerala 29 39 74 81 Madhya Pradesh 20 36 58 64 Maharashtra 73 106 168 173 Orissa 43 79 97 97 Punjab2 33 102 169 165 Rajasthan 12 21 53 58 Tamil Nadu 51 89 135 130 Uttar Pradesh 15 30 60 64 West Bengal 84 114 115 121 Delhi 187 206 283 301 All India 38 61 94 97 1. Provisional. 2: For 1960/61 and 1965/66, the figure shown for Punjab covers Punjab and Haryana together. SOURCE: CWPC, ElectricitySupply Industry, Salient Data, February 1974. extremely low in 1960/61, namely Assam, Rajasthan and Uttar Pradesh, the rate of increase was much greater than the national average. This was also true of Punjab and Haryana, though for these two States separate figures are not available for the early 1960s. In 1960/61 consumption per head in Punjab was probably close to the national average, and in Haryana considerably below it. In 1971/72 consumption per head in Punjab exceeded the national average by 70 percent, and in Haryana by 30 percent. Surpassed only by Delhi and Maharashtra, Punjab had by 1971/72 reached the posi- tion of third highest in the ranking of per capita electricity consumption by States. In all the five States just mentioned, consumption per head increased over the whole period of 12 years by a factor of four or more, compared with the national average of just over two and one-half. Next below them comes an intermediate group where the consumption per head rose slightly faster than the national average, so that',oVer the wh'ole period it approxi- mately tripled. This group includes some Starcs-with1-rather low consump- tion per head, namely Andhra Pradesh, Jammu and Kashmir, Kerala and Madhya Pradesh, and also Gujarat where consumption per head was and THEFUEL AND POWER INDUSTRIES 77 remains high in relation to most other States. In Tamil Nadu the rate of in- crease in consumption per head was very slightly higher than the national average, while the absolute figure in 1972/73 was about 40 percent above that for India as a whole. Relatively low increases were registered in only five States including, however, two very large consumers of power, Maharashtra and West Bengal. In Maharashtra and Orissa, the rate of increase was slightly below the national average. The lowest increases for the twelve-year period were in Delhi (where however as noted above per capita consumption even in 1972/73 was three times the national average), Bihar, and West Bengal. In West Bengal, consumption per head rose by only 44 percent in the 12-year period from 1960/61 to 1972/73, and by a little more than 5 percent in the seven years from 1965/66; the corresponding increases for Bihar were 62 percent and under 20 percent. These are low rates of increase, which may be rather disturbing evidence of slow economic development as well as of difficulties in supply. In 1960/61, West Bengal ranked third in per capita ,consumption of electricity, after Delhi and Maharashtra. By 1972/73, it had been overtaken by Gujarat, Haryana, Punjab and Tamil Nadu, and had therefore fallen to seventh place. In Bihar, consumption per head in 1961 somewhat exceeded the average for all India, whereas by 1972/73 it was only 70 percent of the national average. Organization and characteristics of the industry The way in which the electricity supply industry is at present organized was broadly determined by the provisions of the Electricity (Supply) Act, 1948. In particular, the Act provided for the establishment of what are now the principal agencies in the industry, the State Electricity Boards. The Boards were assigned responsibility for the generation, transmission and distribution of electricity within each State, and for the, control and regula- tion of other supply undertakings which were private licensees. This responsibility includes the construction of new power stations and the operation and extension of the system in each State. As noted in connection with Tables 31 and 34, the public sector is now dominant in the electricity supply industry. Within the public sector, the State Electricity Boards supply much the greater part of the electric power that is sold, though a number of other agencies are also involved. Table 39 gives a breakdown for the year 1971/72, the latest for which figures are available, of sales to ultimate consumers by both public and private utilities. -It can be seen from Table 39 that in 1971/72 the SEBs were responsible for 66 percent of total sales by utilities. In addition, most of the remaining 34 percent was provided by organizations which also operated within partic- ular States and are subject to the control of the State Authorities. This is 78 THE SETTING true of all the private utilities, which supplied over 20 percent of energy sales by utilities: their scale of operations, and their continued existence after the periods of existing licenses have come to an end, are for the State governments to decide.9 Most of the municipalities, which in 1971/72 sup- plied between 5 and 6 percent of energy from utilities, are also subject to State control, with Delhi an important exception. Some of the energy pro- vided by suppliers in the fourth category shown in the table, namely "cor- porations and government departments," also comes from State organiza- tions, though the main producers under this heading are the Damodar Valley Corporation and the Bhakra Management Board which are not State enterprises. Hence the State authorities effectively own or control the sources of well over 90 percent of electricity supply by utilities, and in addi- tion their sanction is required for all captive planrs within their borders. TABLE 39. Sales of Energy to Ultimate Consumers by Different Supplying Agencies, 1971/72 Amounis Relative Supplied Shares (GWh) (%)0 1. State Electricity Boards 31.28 66 2. Other public sector 6.12 13 (a) Municipalities (2.58) (5½2) (b) Corporations and government departments (3.54) (7M) 3. Total, public sector 37.40 79 4. Private sector 9.66 21 Total, atl utilities 47.06 100 SOURCE: CWPC, Public Electricity Supply: A4tIndia Satistics. 1971172. As originally conceived, the State Electricity Boards were to be autonomous public corporations, responsible for running their own opera- tions subject only to broad instructions and guidance in policy matters from State governments. In practice, the Boards have been very much under the control of the State governments, rather along the lines of the Public Works Departments in which many of them had their origin. One symptom of this dependence, and at the same time a factor which helps to maintain it, is the chronic financial weakness of most Boards. Because of political pressures and in the absence of strictly enforced financial targets, power tariffs have generally been set at levels which made it difficult for the Boards to earn revenue surpluses. Since because of this their own internal cash generation has normally been low, they have been heavily dependent on borrowing, 9. The largest private utilities are the Calcutta Electric Supply Corporation in West Bengal and the Tala group of power companies in Maharashtra. THE FUEL AND POWER INDUSTRIES 79 either from or with the sanction of the State governments, in order to fi- nance their capital programs. In recent years there was an improvement in the finances of many SEBs, partly as the result of pressure from the Centre, but their position is still unsatisfactory; and with the recent substantial rises in input prices associated with inflation their position may well by now have worsened again. Under the constitution of the Republic of India, electricity is a concur- rent subject, and while the Act of 1948 assigned extensive responsibilities to the State authorities, it also provided for broad guidance and coordination from the Centre. These were to be supplied by a Central Electricity Author- ity, which was to be responsible for developing a national policy for power development and for coordinating the activities of the various planning agencies involved in electricity supply. But although the Central Electricity Authority was formally created in 1950 and still maintains a rather shadowy existence, it has up to now remained for the most part inoperative, without staff of its own and with no clear and accepted function to per- form .' Under the present arrangement, various forms of supervision, assistance and liaison from the Centre are provided by a number of departments and agencies. For most of the electricity supply industry, the central govern- ment department which deals with its affairs was until recently the Minis- try of Irrigation and Power. As a result of the administrative changes that were introduced in October 1974, responsibility for power now comes under the Ministry of Energy, which is also in charge of the coal mining in- dustry. Irrigation has been transferred to the Ministry of Agriculture. For atomic energy, and hence for nuclear power generation, there was and re- mains a separate Department of Atomic Energy which comes directly under the Prime Minister. At the planning and technical level, various ser- vices are provided centrally by the Power Wing of the Central Water and Power Commission. The Commission is a technical advisory agency which until the recent changes came under the Ministry of Irrigation and Power, and which will now presumably be shared by or divided between the Minis- try of Agriculture and the Ministry of Energy." The Commission is respon- sible through its its Power Wing for the implementation of central as op- posed to State or private power schemes, of which the Bhakra project is one instance. In relation to other schemes, it undertakes such functions as ap- praisal of projects proposed by the State Electricity Boards, provision of technical advice and consultancy services on'all aspects of.power design and engineering, and continuous review of the programs for commissioning new generating units. It has, however, no formal status independent of the 10. The Power Wing of the CWPC has now been designated as the staff of the Central Electricity Authority. 11. See preceding footnote. 82 THESETTING are nominally subject to the Central Electricity Authority, but in practice they function mainly in an advisory role to the State Electricity Boards, over which they have no power, and which are strongly represented on them. Thus the extent to which regional planning can be undertaken de- pends on the interests and attitudes of the individual constituent SEBs and of their State governments. The progress of collaboration seems to have been greatest in the southern region, where the regional load dispatch center at Bangalore has successfully encouraged the exchange of power be- tween State networks and made possible a higher utilization of plant capacity within the region. As a source of finance and through their participation in project deci- sions, the central authorities have been able to influence the development of the power industry, and have tried to promote not only collaboration and concerted action between States but also greater efficiency and financial stability on the part of State Electricity Boards within the States. However, a greater degree of central initiative may now be necessary if these aims are to be effectively pursued. A first step in this direction would be to breathe new life into the Central Electricity Authority, by giving it a clear set of func- tions and assigning to it as staff the Power Wing of the Central Water and Power Commission. To provide the CEA with a more active and positive role would not require new legislation, and might indeed be regarded as fulfilling one of the main intentions of the Act of 1948. However, what pre- cisely should be the future role of the Centre in relation to the Regional Electricity Boards and the States remains a debatable issue, to which further reference is made in Chapter 7. An interesting feature of the electricity supply industry in India has been the emphasis given to nuclear power, and to the development of a strong nuclear power industry with a full supporting research program and with the greatest possible reliance on indigenous technology. The basic strategy for the development of nuclear power in India was laid down in the 1950s by Dr. Homi Bhabha, the first Chairman of the Atomic Energy Commis- sion, and still remains in force. As noted in Chapter 2, it involves a sequen- tial development from conventional thermal reactors to fast breeder reac- tors based on the ample reserves of thorium in India. The first nuclear power station to be installed in India was commissioned in 1960 at Tarapur in Maharashtra. It consists of two units of 200 MW each, and the reactors are boiling water (BWR) versions of the type developed in the U.S. by General Electric. In the early 1960s, however, it was decided that subsequent nuclear power stations should be based on the Canadian CANDU design with heavy water as coolant and moderator. One reason for the change was that the CANDU reactor uses natural uranium rather than enriched uranium as a fuel, so that fuel requirements could be met from within India. Under the terms of a collaboration agreement with THEFUEL ANDPOWER INDUSTRIES 83 Atomic Energy of Canada Limited, the Atomic Energy Commission bought design rights to a commercial power station of the type then under construction in Canada, while financing of imported equipment and techni- cal assistance was provided from Canadian sources. Under the terms of this agreement a station was constructed in Rajasthan withi two reactors of 235 MW each, the first of which is now delivering power. From the outset of this collaborative program, it was agreed that one of its main objectives would be the achievement of self-sufficiency within In- dia with respect to design, fabrication, and manufacture of fuel and equip- ment. In the second CANDU-type station, at Kalpakkam in Tamil Nadu, almost complete self-sufficiency has in fact been attained, particularly with respect to the second of the two 235 MW reactors, though at some sacrifice in the form of a longer construction period and higher costs incurred. Following the nuclear test explosion which took place in India in May 1974 under the auspices of the Atomic Energy Commission, the Canadian au- thorities suspended their remaining program of assistance to the Indian nuclear power industry. This decision is likely to give rise to some delays in the program of development, but these should not be serious because as planned the present extent of Canadian assistance is limited. Plans have now been approved for the construction of a fourth nuclear power station at Narora in Uttar Pradesh. As part of the program to achieve self-sufficiency, the production of nuclear fuels is now undertaken in India at the Nuclear Fuel Complex in Hyderabad. The heavy water requirements of the CANDU-type reactors are produced in part from a plant at Nangal in Punjab, and three further plants are at present under construction at Kota in Rajasthan, Baroda in Gujarat, and Tuticorin in Tamil Nadu. The whole of the Indian nuclear power program, including research and development, construction and the actual operation of nuclear power sta- tions after they have been commissioned, comes under the control of the Atomic Energy Commission. This concentration of functions and respon- sibilities within a single agency seems to be unique to India. As in most other countries, the progress and performance of nuclear power stations in India have fallen below expectations, while construction costs have been higher than projected. The Fourth Plan target for installed capacity in nuclear power stations by the end of 1973/74 was 980 MW, while the realized figure is only 580 MW. In the case of the Tarapur station, high on-line availability was achieved in the early stages, but as can be seen from the final columns of Table 32 it was not possible to maintain this high level, and power supplied by the station was considerably lower in 1971/72 and 1972/73. During 1973/74 there was a considerable improvement in power supply from Tarapur, while output from the Rajasthan station, where there have also been initial problems of operation, has now begun to 86 THESETTING TABLE 40. State Electricity Boards: Average Revenue per Unit of Power Sold, 1971/72 (paise per KWb} Agriculture Total, and Bulk All Domestic Commercial Irrigation Industrial Supply Sales Haryana 29.6 23.7 16.3 10.4 10.4 10.5 Punjab 23.5 19.9 8.8 10.4 4.0 8.2 Rajasthan 37.7 38.7 14.8 11.4 29.1 13.7 Uttar Pradesh 31.5 30A 19.7 10.1 13.7 13.6 Gujarat 32.6 28.6 IB.I 12.2 12.8 14.7 Madhya Pradesh 28.0 26.6 221 11.7 11.1 13.8 Maharashtra 27.3 26.4 17.9 10.9 6.3 9.8 Andhra Pradesh 32.4 31.5 14.7 13.4 33.8 18.0 Karnaiaka 25.3 39.4 14.1 5.6 6.9 8.0 Kerala 39.4 41.2 11.9 6.0 4.0 9.5 Tamil Nadu 32.7 33.4 10.0 8.3 9.8 12.3 Bihar 41.7 43.9 26.0 17.0 7.9 15.9 Orissa 23.6 28.3 12.2 6.2 10.5 7.4 West Bengal 33.0 16.1 13.3 13.1 9.2 11.7 Assam 33.1 51.1 14.0 7.6 26.1 16.2 D.E,S.U. 17.2 21.4 13.9 15.5 11.5 15.2 Average for above undertakingst 30.5 31.3 15.5 10.6 12.9 12.4 1. Unweighted arithmetic means. SOURCE The table is derived from figures given in Central Water and Power Commission, Financial and Physical SJatistacs of State Electricity Boards, 1971/12. In the case of all 16 undertakings included in Table 40, the lowest figure for average revenue per unit sold was either for industry or for bulk supply. Within each of these categories, however, there were wide variations be- tween different States. Thus for sales to industry the average revenue per unit in Bihar was over three times that in Karnataka, while for bulk supply the figure for Punjab was as low as 4.0 paise per KWh, as compared with 29.1 for Rajasthan and 33.8 for Andhra Pradesh. The general level of tariffs is supposed to be high enough in the case of each SEB to enable it to avoid a loss. The wording of the 1948 Act made it possible for avoiding a loss to be interpreted as merely covering operating expenses with no provision for depreciation, interest, loan capital repay- ments or surplus. As a result of pressure from the Centre over the past 10 years, a less permissive doctrine has come into effect and the individual SEBs now work to specific financial targets. Though some of these targets have not yet been reached, there has been some improvement in the finan- cial position of most SEBs, largely through general increases in tariffs. The question of electricity tariffs has been taken up in the Draft Fifth Plan, which has emphasized the need to secure an adequate rate of return in the industry; and it is referred to again in Chapter 7. THE FUEL AND POWER INDUSTRIES 87 Table 41 presents summary information for 1970/71, the latest year for which data are available, concerning sales, revenue and operating costs of power utilities. Separate data are shown for the public and private sector. The last three rows of the table give figures for revenue per unit of sales, total operating costs per unit of sales, and operating expenses only (ex- clusive of depreciation and interest charges) per unit of sales. TABLE 41. Revenue and Operating Costs in Total and per Unit Sold, 1970/71 (utilities only) Public Private Total Sales to ultimate consumers (GWh) 34,616 9,108 43,724 Revenue(Rs. million) 6,228 1,412 7,640 Operating costs (Rs. million) Expenses 3,297 1,122 4,419 Depreciation 841 89 930 Interest 1,353 59 [412 Total operating costs 5,491 1,269 6,760 Surplus (revenue less costs, Rs. million) 737 143 880 Revenue per unit sold (Rs./KWh) 0.180 0.155 0.175 Operating costs per unit sold (Rs./KWh) Total operating costs 0.159 0.139 0.155 Expenses only 0.095 0.123 0.101 Depreciation and interest charges 0.064 0.016 0.054 SOURCES& CWPC, Public Electricity Supply:A lll ndia Statistics, 1971/72 for finan- cial data, and the corresponding volume for 1970/71 for units sold. It can be seen that while revenue and total operating costs per unit sold were somewhat higher for public than for private utilities, operating ex- penses only were appreciably lower. These differences are accounted for by the much larger share of the costs of publicly owned utilities, in which the SEBs were responsible for more than four-fifths of total sales, which con- sisted of depreciation and interest charges. As the last line of Table 41 shows, these items of cost were four times as high per unit sold for public utilities as for private. For the public sector, depreciation charges in 1970/71 came to 15 percent of operating costs, and interest charges to 25 percent. The corresponding shares for the private utilities were 7 percent and 5 per- cent. The higher depreciation charges in the public sector may be partly ex- plained by the fact that while publicly owned utilities made 79 percent of sales to ultimate consumers in 1970/71, their share of installed capacity at the end of that year was 90 percent. It is also probable that much of the plant in private utilities is older and has now been fully written down. The high interest charges probably arise from the heavy borrowings made by 88 THE SETTING the SEBs, particularly in earlier years when their financial position was much weaker. The reason why expenses per unit should be lower for publicly owned utilities is not clear. Part of the explanation may be that a higher proportion of sales by public utilities came from hydro sources, where running costs are lower than in thermal stations. Capital expenditure by the SEBs is financed in part and on the whole in- creasingly from internal sources, but mainly by borrowing through four principal channels, namely (1) loans from the State governments; (2) bonds issued by the SEBs themselves, with State authorization; (3) loans from the Life Insurance Corporation of India; and (4) loans from the public sector Rural Electricity Corporation. In Table 42 figures are given for the year 1971/72 of the borrowings from each of these sources by each of six State Electricity Boards for which an analysis was carried out in connection with a recent credit from the Interna- tional Development Association. The share of each borrowing source is shown in the final column of the table for the six SEBs taken together, while the last two lines of the table show the capital expenditure incurred in the year and the extent to which this was financed by borrowing and from internal sources. For all six States taken together, the State governments were the main source of borrowed funds, with 45 percent of the total; but in two cases, namely Assam and Karnataka, the amount raised from SEB bonds was greater. The proportion of capital expenditure financed from net internal cash generation varied from 15 percent for Orissa to 32 percent in the case of Madhya Pradesh, while the combined proportion for all six States was 23 percent. Part of the explanation of slippage in power projects is apparently to be found in the financial procedures followed. Uncertainty over financing, and delays in the authorization for capital expenditures, have sometimes resulted in delayed ordering of equipment. With rising costs and a conse- quent need to get periodical approval for higher expenditure estimates, this has probably become a more serious problem, and it has received special mention in the Draft Fifth Plan, =m TABLE 42. Borrowing and Capital Expenditure of Six State Electricity Boards, 1971/72 r Madhya Tamil TOTAL Assam Karnataka Kerala Pradesh Orissa Nadu Amount Share X (Rs. mn.) (Rs.mn.) (%) z A mounts borrowed (Rs. mn.) 1. State governments 8 64 138 73 67 130 480 45 m 2. SEB bonds 30 70 40 55 40 85 320 30 u: 3. Life Insurance Corporation loans 20 20 30 25 17 45 157 IS 4. Rural Electricity Corporation loans 1 20 9 35 20 20 105 10 Total 59 174 217 188 144 280 1,062 100 Capital expenditure (Rs. mn.) 80 220 259 276 169 372 1,376 Shares of capital expenditure (percentages) Borrowing 74 79 84 68 85 75 77 Internalcashgeneration' 26 21 16 32 15 25 23 1. Internal cash generation is here defined as net of debt service payments. SOURCE: Figures are taken or derived from World Bank, Project Report No. 35a-IN, February 1973, in which tables were prepared from data sup- plied by the Ministry of Irrigation and Power. cc '0 90 THE SETTING *o ,- r-. 030'0 ~4, VEIII 4FGAISwN l- * =e w o 9W19 C,W I/1 31 ,/ '-SA'ANAe /t - - _ OF Sg. /veW A.^ \t 2 '5-, fA>~ r L.- -'5 of power output and consumption. Z SOURCES: Govemment of India, Ministry of Irrigation and Power, PowerSupply Position in the Country. ri/ I- ENERGY SHtORTAGE ANDIMMEDIATE PROSI'ECTS 95 factors. The table does, however, permit one comparison to be made be- tween similar periods of the year, since the data for the quarter from Febru- ary through April are given for both 1973 and 1974. Between these two quarters, availability and requirements for India as a whole rose in much the same proportion, so that the deficit remained approximately the same. In February-April 1974, the estimated requirement exceeded availability by about one-sixth. Among different regions, however, the position altered over the year. It improved in the southern region, mainly because of the effects on hydro generation of the favorable 1973 monsoon, and worsened in the eastern region, where there was a marked fall in availability arising from the operating problems with thermal power stations which have been referred to. For the last two quarters covered by Table 43, which is the period from February through July 1974, the availability of power in India as a whole came to about 85 percent of estimated requirements. As between these two recent quarters, the position deteriorated in Uttar Pradesh, where avail- ability fell to less than two-thirds of the estimated requirement, and also in the southern region, in part because of seasonal factors. There was, however, an improvement in the balance between demand and supply in the eastern region. Within each region, the circumstances of particular States and power systems have varied appreciably. Throughout this period of general short- age and restrictions, power supplies have been adequate for most or all of the time in a number of areas. The main examples are Himachal Pradesh, Rajasthan and the Delhi system in the northern region; Orissa and the Bihar State Electricity Board system in the eastern region2; Madhya Pra- desh in the western region; and Kerala in the south. None of these is among the largest consumers. Together they accounted for rather more than one- sixth of total estimated requirements for India as a whole in the quarter from May through July 1974. The main consuming areas in the western region, Gujarat and Maharashtra, have generally in this period been in an intermediate situa- tion, with frequent problems of supply which however were for the most part less prolonged and severe than in the other areas affected by power shortage. In Maharashtra for example it was often the case that the shortage was only of peaking capacity. The estimated requirements of these two States in the quarter from May through July 1974 were 23 percent of the total. 2However, part of p-ower consumption in Bihar is supplied rrom Phe stations of the Damodar Valley Corporation, and these supplies have fallen generally below requiremenis. From thle latter part of 1974 the position in the DVC stations improved considerably. In Orissa however lhe power situation became diflicult as a resull of 1he poor 1974 mnonsoon. 96 CURRENT PROBLEMS AND FUTURE POSSIBILITIES At the least favored end of the spectrum, a number of important consum- ing areas, with some 56 percent of estimated requirements in this same quarter, have been seriously and more or less chronically deficient in power supplies during the past two years or so, though their precise situation has naturally varied from time to time. In the northern region, much the worst affected areas have been Punjab and Haryana, where shortages became crit- ical in the spring and summer of 1974. The position in Uttar Pradesh has also in general been extremely bad, despite a certain amount of assistance from neighboring power systems more fortunately placed. Availability of power in U.P., which as seen in Table 43 was lower in mid-1974 than it had been fifteen months earlier, has been affected both by poor utilization of thermal stations and by low rainfall in the catchment area of the large hydro station at Rihand. The situation in West Bengal and parts of Bihar has been chronically unsatisfactory, and combined power availability from the West Bengal and Damodar Valley Corporation systems in the quarter from May through July 1974 was some 8 percent below the level recorded fifteen months earlier. Finally, drastic shortages and restrictions, though with varying degrees of severity mainly in accordance with availability of hydro power, have affected the three large southern States of Andhra Pra- desh, Karnataka and Tamil Nadu. In handling shortages of power, the policy of the Government of India and the States has been to try to meet agricultural loads as fully as possible, though restrictions have been imposed on the times at which agricultural pump sets could be operated. The main burden of dislocation has fallen and continues to fall on industrial production. It is not possible to.estimate at all precisely the loss of industrial output attributable to restricted or inter- rupted power supplies, but it is clear that certain particular industries, as well as the majority of industries in the worst affected areas, have suffered considerably.3 In Table 44, some figures are presented of changes in industrial produc- tion between comparable periods in 1972 and 1973, in the first column, and 1973 and 1974 in the second. In each of these industries there has been loss of production because of failure or unreliability of power supplies, though the importance of this factor in relation to other constraints cannot be pre- cisely judged and varies from case to case. Since aluminum is a heavy con- sumer of electric power, the considerable fall in output shown in Table 44 seems to be almost entirely attributable to power shortage which has also prevented recent increases in capacity from being commissioned. Produc- tion of jute textiles has also been badly affected by the power shortages in West Bengal, while lack of power has been one of the main factors explain- 3Most of the evidence referred to here and later in this study about shortages and their con- sequences is taken from reports in Commerce Research Bureau, Monihly Review of the Indian Economy. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 97 TABLE 44. Percentage Changes in Production in Selected Industries for the Period January-August, 1972 to 1974 Percentage Change in Output January through August 1973 over 1974 over 1974 over Industry 1972 1973 1972 Aluminuml -16.0 -19.5 -32.4 Jute textiles2 -9.5 -14.1 -23.3 Cotton yarn3 -6.7 +1.3 -5.5 Cotton fabrics3 -6.5 +0.4 -6.4 Cement2 -6.9 -6.0 -12.5 Ingot steei4 +3.3 -9.9 -6.9 Nitrogenous fertilizers -6.6 +7.8 +0.7 1. Figures relate to January-June. 2. Figures relate to firms accounting for more than 90 percent of total production. 3. Mill sector only. 4. Figures relate to major steel producing plants which account for about 85 percent of total production. SOURCES: For all industries except fertilizers, figures are from Commerce Research Bureau, Monthly Review of the Indian Economy. Data concerning nitrogenous fertilizers were supplied by the Fertilizer Association of India. ing the failure of nitrogenous fertilizer output to increase over this period despite an expansion in the industry's capacity.4 In the case of cement the fall in production was due in part to shortages of coal, and in steel to prob- lems of coal supply and trarisport, as well as to interruptions of power sup- plies. The prospects for 1975 and 1976 partly depend on the extent to which new generating capacity can be commissioned and brought into service. It is already clear that the additions to installed capacity during 1974/75 will be considerably greater than in the last few years, and it is now expected that for utilities these additions will reach some 1,600 to 1,700 MW, which would imply an increase of possibly 10 percent over the capacity available at the end of March 1974. Although if achieved this would be a considerable improvement on recent performance, it is in proportionate terms some- what below'the past long run trend increase in power demand. For 1975/76, the corresponding projected increase is some 2,600 MW, which would further expand the installed capacity of utilities by some 15 percent. These newly commissioned units will inevitably take some time to reach their full capacity. Thus even if total installed capacity increases at the rate 4A recent illustration of this problem is the announcement that the World Bank is to fi- nance the import of turbo-generating sets which will go into captive power units to be installed at existing plants belonging to the Fertilizer Corporation of India. It has been stated that the Corporation suffered in 1973/74 a loss of production in its plants, through interruptions of power supply, of almost 50,000 tons of nitrogen. 98 CURRENT PROBLEMS AND FUTURE POSSIBILITIES that is currently projected, the corresponding increase in power output from the new units would be appreciably smaller. If therefore the general power supply position is to improve over the next two years, an increase in output will also be needed from existing units. The prospects for such an increase are uncertain. It is already clear that because of the highly unfavorable 1974 southwest monsoon the output of hydro power is unlikely to reach the 1973/74 level. Apart from Kerala and Tamil Nadu, the 1974 rainfall has been well below normal in all catchment areas. In the Bhakra system, on which the Punjab in particular is very largely dependent, the water level in the storage lake in October 1974 was at its lowest level ever for this time of year; and the outlook is also highly un- favorable in Andhra Pradesh, Karnataka, Maharashtra, and the Orissa hydro stations. Hence any increase in total power supplies in India from ex- isting units over the coming months must come from the conventional thermal stations. This would require an improvement on their average per- formance in 1973/74. For some time now, the problems of these thermal stations have been the subject of regular and detailed review by the Centre and the SEBs. The performance of each station is monitored, and a number of measures have been introduced with a view to securing improvements. In the case of slow- moving spares, a central inventory has been established under the control of the main domestic manufacturer of heavy electrical equipment. Steps have been taken to try to reduce long maintenance periods, to improve dis- tribution links, and to improve the training and increase the incentives of power station engineers.5 It appears that an increase in power supply has recently been achieved in the power systems of the Damodar Valley Cor- poration and the West Bengal SEB, so that for the eastern region at any rate the outlook is somewhat better. As part of the program to raise the output and utilization rates of thermal stations, a general target has been set for each station, except those whose utilization rates are already high, of a 25 percent increase in power gener- ation. Although this is doubtless an optimistic figure, it appears that for In- dia as a whole an appreciable increase in output could be obtained from con- ventional thermal stations with rates of utilization not much higher than those that have been realized in the past. In Table 45 some figures are given for the average utilization rates of thermal stations in 1968/69 and for the four years from 1970/71 through 1973/74. These are shown as percentages in the last line of the table. Although these may appear to be low figures for utilization of capacity, they must be judged according to what it is reason- able to expect. This will depend on a variety of factors, including load pat- terns and the extent to which thermal stations are operated in conjunction SA program has also been initiated to reduce the present high level of transmission losses. ENERGY SHIORTAGE AND IMMEDIATE PROSPECTS 99 with hydro stations which can be used to meet peak demands. It is interest- ing to note that in projections made by the Energy Survey Committee of In- dia in its Report, an average plant factor for thermal stations for India as a whole of only just over 50 percent was projected for 1970/71, in conjunction with a figure for total thermal capacity very close to that of 1973 and 1974.6 It is probably fair to say that under existing conditions in India a na- tional average of 55 percent would be satisfactory, and a figure of 60 percent would be very good. TABLE 45. Utilization Rates for Thermal Stations in India, 1968/69 to 19731741 1968169 1970/71 1971172 1972/73 1973/74 Capacity (mid-year, MW) 6,307 7,352 7,663 8,143 8,564 Capacity output (TWh) 55.2 64.4 67.1 71.3 75.0 Actual output (TWh) 26.4 27.8 31.2 35.6 34.62 Plant factor (percentages) 47.8 43.2 46.5 49.9 46.12 1. Utilities only. 2. Provisional estimates. SOURCES: For all years except 1970/71, capacity figures could be derived from Table 34, the mid-year figure here being estimated as the average of the beginning and end-year figures shown there. For 1970/71, capacity data were taken also from India: Pocket Book of Economic Information, 1972 (Government of India, Ministry of Finance, Department of Economic Affairs). Figures for annual power generation are from Table 32. From the last line of Table 45 it can be seen that the average plant factor attained in 1973174, despite the numerous operating problems of thermal stations which have been mentioned above, was not low by past standards, though it represented a decline from the 1972/73 figure which was the high- est in recent years. It is also apparent from these figures that a considerable increase in the power supplies from existing thermal stations could be realized in 1974/75 if utilization rates could be brought up even to a level not much higher than what has recently been attained. If for example in relation to the capacity already existing in March 1974 an average plant fac- tor of 52 percent could be established in 1974/75, this would be a propor- tionate improvement of less than 5 percent over the level reached two years before. But it would mean that power output from existing thermal generat- ing capacity in 1974/75 would be about 39.6 TWh, an increase of some 13 percent over the estimated level of 1973/74. On the basis of recent evidence, gross generation of power in 1974/75 will prove to be some 5 to 7 percent higher than the estimated figure of just over 6Report ofthe EnergySuirvey Committee ofl Idia, pages 179 and 181. 100 CURRENT PROBLEMSANDFUTURE POSSIBILITIES 72 TWh for 1973174. For India as a whole, such an increase probably im- plies some further deterioration in the existing unsatisfactory balance be- tween power demand and supply. While the position has improved in areas where thermal generation could be increased sufficiently, both from addi- tions to capacity and through better utilization rates, it has worsened in those States where a fall in hydro generation could not be made good from thermal sources. As to the further outlook, this also depends largely on the rate at which additions can continue to be made to installed generating capacity and the associated transmission and distribution systems; the extent to which bet- ter utilization rates can be attained; and the 1975 monsoon. On present in- dications, it can be expected that the condition of general or at any rate widespread power shortage will continue to prevail in 1975176. PROBLEMS OF COAL PRODUCTION AND COAL TRANSPORT Although coal shortages have been less pervasive and less damaging than the shortages of power, they have occurred despite the fact that a modest increase in output was apparently achieved over the-past two years of the Fourth Plan Period. One possible explanation, which is referred to in the Government of India's official Economic Survey for 1973/74, is that part of the recorded increase in coal output during this period may be more ap- parent than real, and is accounted for by the fact that the under-recording of output in earlier years by private mines has ceased since nationalization. Whether or not this is so, there is evidence that the coal supply position became more difficult, particularly with respect to the output from the main producing areas of Bihar and West Bengal. Cement production has suffered as a result, especially in plants in Tamil Nadu and Gujarat which have to be supplied over long distances, and shortages have arisen during recent months -in steel plants, textiles, paper, engineering and brick manufacture. In certaihl cases supplies to thermal power stations have also fallen short: a fairly recent example was the Bandal station in West Bengal, which at one stage in November 1973 had to be shut down completely for lack of fuel. The problem of making more coal available has two main aspects, pro- duction and transport, which it is convenient to consider separately though transport facilities are one of the possible constraints on production. The present productive capacity of the coal mining industry is generally put at some 90 million tons per year, as compared with the 1973(74 level of output of rather under 80 million tons. It is not easy to define and measure capacity in the coal industry, and this figure may be no more than a broad indication. There is so much evidence of collieries that are producing sig- nificantly below capacity that an appreciably higher figure than 90 million ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 101 tons could be nearer the mark. This would imply that the current extent of utilization of capacity is lower than it is generally put at present. In the re- cent report on the industry by Mr. H. L. Rhodes, which was referred to in the introduction to this book, the suggestion was made that a thorough scientific investigation into its capacity should be undertaken as a matter of urgency. The reasons why in many cases recent production levels have fallen well below capacity are.many, and there is too little systematic quantitative in- formation to permit any assessment of the relative importance of different factors. It is however possible to list (hose which seem to have been chiefly responsible for holding back production. Possibly the main single factor, at any rate in the Bengal/Bihar area, has been interruptions to power supply. Load shedding has been a regular oc- currence, and has seriously disrupted production. In one colliery in the Jharia field three whole weeks of production were lost in May 1973. For the Central Division of the Coal Mines Authority, which consists mainly of the Raniganj field, it was calculated that in November 1973 some 40,000 tons of raw coal and a further 37,000 tons of washed coal were lost as a result of power cuts. As noted above, the power situation in the eastern region still remains difficult, and it is quite possible that interruptions of power supply will continue to be a regular feature of coal production in Bengal and Bihar. Fortunately, the latest figures for power output in the area are encouraging, and at the time of writing the position in the mining areas appears to be bet- ter than for some time past. It is not clear, however, whether this improve- ment will be maintained. Power is not the only input which has caused production to be held down. Two other instances where shortages have been experienced are steel supplies, particularly but not only of rails, and sand for stowing. As in many other industries, shortages of spares for equipment have also been a com- mon cause of inability to achive a high level of capacity utilization. In one extreme example, an opencast mine which has been operating at about 50 percent of capacity has had much of its equipment out of action for over five years because spares were not available. Another common cause of lost production is inadequacy of underground transport systems, arising from shortages of rails, tubs or mine-cars, carrying equipment and haulages. A full inquiry into this problem, directed towards immediate improvements as well as the investment needed for the Fifth Plan target output, could yield very useful results. It has sometimes been suggested that an additional though possibly tran- sitory cause of lower output has been the change of management and ownership in the period 1971-73, when first the coking coal and then the non-coking coal mines in the private sector passed into public management, which was followed by formal nationalization. Although there appears to 102 CURRENT PROBLEMSANDFUTURE POSSIBILITIES be no clear evidence on the point, it would be surprising if such a large ad- ministrative and organizational upheaval had not given rise to some short- run problems in maintaining output. Over the longer period, however, unified management of these fields, and the improvements in working which this permits, should lead to more effective exploitation and increases in output. It may be hoped that this effect will soon begin to make itself felt. In present circumstances, however, any appreciable increase in produc- tion in the Bengal/Bihar area might well be choked off by the inability of the railways to transport the extra coal. Even at current levels of output, there have been frequent instances in the recent past of mines having to curtail production because coal already won had not been removed, and storage facilities at the mine had been exhausted. For example, in the Central Division of the Coal Mines Authority, it was estimated that in the five months ending in October 1973 the average losses due to shortage of wagons were over 150,000 tons per month. In November 1973 this figure was a good deal lower, but only because production itself was badly affected-as was seen immediately above-by interruptions of power sup- ply. The problems of coal transport in this area are complex and deep-seated. In part they seem to arise from inadequacy of loading facilities at many of the collieries, and the existence still of a larger number of loading points than should be necessary in the longer run. Poor utilization of wagons can also be caused by delays at the receiving end, as a result of inadequate unloading facilities or inefficient procedures. In addition, there are frequent dislocations and delays in the actual rail movements, arising from a number of causes not all of which are fully under the control of the railways them- selves. Possibly more than anything else, however, what is required is an improvement in working relationships and in day-to-day coordination at the local level between the mines and the railways, in order to ensure that coal is moved expeditiously when it is ready for shipment and that rolling stock is not kept idle in the loading areas. Whatever the precise diagnosis of the problem, its seriousness is evident from the figures for wagon loadings of coal, which are set out in Table 46. This gives average daily loadings, in terms of four-wheeler wagons, for the five financial years from 1969/70 through 1973/74, and for each of the quar- ters for 1973/74 and the first nine months of 1974/75. Separate figures are shown for Bengal/Bihar and for the outlying fields. It can be seen from the first column of the table that wagon loadings in Bengal/Bihar fell off after 1969/70, when coal production in the area also reached a maximum figure which has only recently been surpassed. But while recorded production has increased from 1971/72 onwards, wagon loadings fell off appreciably during 1973/74. For the year as a whole, the average daily figure for loadings was a little over 5,100, as against a target ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 103 TABLE 46. Coal Transport: Daily Average Wagon Loadings, 1969/70 to 1974/75 (in terms of four-wheeler wagons) Bengal/Bihar Outlying Fields Total Annual series 1969170 6,242 1,934 8,176 1970/71 5,542 2,015 7,557 1971172 5,646 2,183 7,829 1972/73 5,698 2.336 8,034 1973/74 5,113 2,247 7,360 Quarterly series 1973/74 April-June 5,404 2,390 7,793 July-September 5,089 2,176 7,265 October-December 4,964 2,136 7,100 January-March 4,990 2,286 7,276 1974/75 April-June 5,210 2,470 7,68I July-September 5,524 2,747 8,271 October-December 5,602 2,886 8,488 SOURCE: Data supplied by the Ministry of Steel and Mines, Department of Mines. which had been officially set at 6,600. While some fall in loadings also oc- curred during 1973/74 in the outlying fields as well as Bengal/Bihar, the problems there are in general much less serious though they do exist in some fields. One result of deficient and irregular coal movements from the Bengal/Bihar fields was a crisis in steel production in March 1974, arising mainly from shortages of coking coal though failures in power supplies were also a contributing factor. This alarming deterioration in the performance of the two railway systems involved in the Bengal/Bihar area, the Eastern and the South- Eastern Railways, appears to have been mainly due to acute and pervasive labor difficulties, which caused frequent dislocation and delays in rail movements. It is believed that one factor now affecting coal traffic is that under private ownership railway staff received unofficial payments from collieries for prompt collection and movement of coal, and these have been discontinued under public ownership. Fortunately, some improvement in the position has occurred in the cur- rent financial year. In May 1974 there was a major strike on the Indian rail- ways, which gave rise to a direct confrontation between the Government of India and the railway workers. Despite the strike, coal movements in May were fairly well maintained, and since the return to work the monthly figures for wagon loadings have shown an increase over the low levels which prevailed during most of 1973/74. Taking the six-month period from June through December and comparing 1974 with 1973, average daily wagon loadings in Bengal/Bihar were more than 10 percent higher. At the 104 CURRENT PROBLEMS AND FUTURE POSSIBILITIES time of writing, however, it is too soon to judge whether and to what extent these higher figures will be maintained or further increased. Despite the fact that for the time being at least the coal transport situa- tion looks somewhat better, it is clear that the two coal mining companies and the two railway companies in the Bengal/Bihar area are still faced with an extremely urgent and difficult set of problems. Failure to tackle these effectively would mean that coal shortages would continue, and they could even become increasingly severe, with serious effects on the output of steel, cement, electric power, and other key commodities. It would also mean that the policy of substituting indigenous coal for imported petroleum, in response to the rise in oil prices and the present acute balance of payments problems for which this rise is partly responsible, could not be put into effect. More efficient transport of coal by rail from Bengal/Bihar fields therefore remains a critical factor in the present economic situation of India. Considerable efforts have been made in recent months to deal with the complex of problems now presented by coal production and transport, and as in the case of the power situation there is a close and continuous review of progress. For coal production, a target of 95 million tons was originally set for the year 1974/75. Although the consumption of coal is most unlikely to reach this figure, the achievement of such a target would enable the level of stocks to be built up as well as eliminating current shortages; and it might also make possible an increase in coal exports over their present level, which is almost negligible, at prices which would now be very remunera- tive. On present evidence, however, it seems unlikely that such an output will be produced by the mines, or that even if produced it could be handied by the railways, and it is understood that a lower official target for 1974/75 has now been adopted, of 88 million tons. Even this may well prove to-have been optimistic. However, results for the early part of 1974/75 suggest that in this financial year a useful increase in coal production over the level of 1973/74 is likely to be attained. lAs noted below in the postscript to this book, it now appears that the revised production target for the year, of 88 million tons, has in fact been attained.] Recent developments in relation to coal production, coal transport, and thermal power generation in the coal field areas have been encouraging. By the end of 1973/74, there was depressing evidence of a vicious circle in Bengal and Bihar, in which coal output was held down by power cuts, power stations were handicapped by shortages and poor quality of coal, while both alike suffered from the inadequacy and deterioration of the rail transport services on which they depended. Although the position is still far from satisfactory, there is at least some sign that the unfavorable trends of the previous year may have been reversed. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 105 THE OIL SITUATION: AVAILABILITY AND PRICES The supply of petroleum products up to early 1974 Until recently supplies of petroleum products in India were in general more readily available, and less subject to shortages or interruption, than was the case with either coal or electric power. Certain local shortages are reported to have arisen in 1972 with respect to middle distillates and fuel oil; but these were not serious, and consumption for the year as a whole, as shown in Chapter 4, Table 21, was almost 10 percent above that of 1971. The corresponding increase from 1972 to 1973 was a good deal smaller, at only 3.9 percent. This slower growth may have been due in part to supply difficulties, rather than a lower rate of increase in effective demand, but there does not seem to be much evidence of this. In the early part of the year, because of deficiencies in power supply, there was an unusually high demand for diesel oil for agricultural use, and shortages developed particu- larly in Haryana and Punjab. In order to meet this demand, refinery output of diesel oil was temporarily increased at the expense of kerosene, of which as a result there were also shortages for a while. Apart from these develop- ments, however, there were apparently few signs of shortage at any rate before the final quarter of 1973. The Government of India had already accepted in 1972, following the recommendations of an officially appointed committee, that steps should be taken to curb the rate of increase in the demand for petroleum products in order to reduce dependence on imports. But although it had thus become official policy to curb demand, it could still be assumed that by and large supplies would be made available to match whatever the future increases in demand might be. Shortages could therefore be regarded as temporary phenomena, arising from unforeseen changes in the short-run balance of demand and supply. This situation was abruptly altered by the developments in the interna- tional oil market which were initiated in mid-October 1973, when nine out of the ten Arab petroleum exporting countries agreed to restrict their ex- ports in total and to prohibit altogether exports to certain countries, while at the same time the Gulf members of the Organization of Petroleum Export- ing Countries (OPEC) decided to raise unilaterally the Gulf posted prices by 70 percent, and established a link between posted prices and market prices under which the former would exceed the latter by 40 percent. The immedi- ate effect of these actions, in India as in other oil importing nations, was to create anxiety concerning the future supply position. From the trade data for 1973, it now appears that in the event the volume of petroleum imports was well maintained: in the last quarter of the year it was in fact almost 25 percent higher than the average of the first three quarters. It seems however 106 CURRENT PROBLEMS AND FUTURE POSSIBILITIES that towards the end of 1973 there were some serious shortages of furnace oil for industrial use, particularly in the Bombay area. Since the beginning of 1974 the international position with respect to physical availability of petroleum imports has become clearer and more assured. Although in the early part of the year there were shortages, especially of diesel oils which affected both transport and agriculture, and also of kerosene, there was no longer any reason to think that the main problem was the physical one of assuring a basic minimum flow of imports. Instead, the problem has become one of judging what level of imports can reasonably be afforded, given the general situation with respect to the bal- ance of payments and the need to ensure what are regarded as minimum supplies both of other imports which also enter into production and of food grains. The extraordinary increase in petroleum prices which has taken place since October 1973 has made it impossible to regard the level of petroleum imports into India as any longer determined by the need to meet the pro- jected level of domestic demand. Mainly though by no means entirely because of the rise in oil prices, an already difficult balance of payments situation has become critical. As a result, it has become necessary to in- troduce (1) drastic curbs on the consumption of petroleum products, which would reduce the extent of reliance on imports, or (2) some form of direct limitation on the imports of crude petroleum and petroleum products, or (3) some combination of both. Thus the conditions of endemic shortage which have for some time prevailed in the case of both coal and power appear now to have been extended to petroleum products also. Oil prices and the cost of petroleum imports As was seen in Table 28 the amount of petroleum imports, taking crude and products together, increased between 1970 and 1973 by over one-third. In Table 47 petroleum imports for this four-year period are shown in volume and value, and with the corresponding unit values that can be derived. Separate figures are given for the three main groups of products and for crude imports. The last two lines of the table show the figures for total commodity imports for each year on a c.i.f. basis, and the percentage share by value of petroleum imports in total imports. From the last line of the table, it is apparent that there was a striking in- crease of 38 percent in the value of total petroleum imports between 1970 and 1971. The increase in volume was over 15 percent, and the increase in value 19 percent. The share of petroleum imports in total imports into In- dia, as shown in the next line above, consequently rose from 8.3 percent in 1970 to just over 10 percent in 1971. Between 1971 and 1972, the increase in petroleum imports was much smaller: in quantity it was only 6.5 percent, C., TABLE 47. Petroleum Imports by Quantity, Value and Unit Value, and Total Commodity Imports, 1970 to 1973 - 1970 1971 1972 1973 ° Quan- Unit Quan- Unit Quan- Unit Quan- Unit tity Value value tity Value value tity Value value tity Value value O ('000 (Rs. (Rs./ (l00 (Rs. (Rs.t (W0 (Rs. (Rsl (1000 (Rs. (Rs.l m tons) mn.) ton) tons) mn.) ton) tons) mn.) ton) tons) innJ) ton) > Inports of products Light distillates 23 10 435 72 37 520 68 20 300 236 89 373 3 Middle distillates 327 76 234 877 211 240 1,303 285 215 1.617 560 346 m Other products 620 219 353 983 187 190 1,886 262 141 2,122 355 168 9 Total, all products 970 305 315 1,932 435 225 3,257 567 174 3,975 1,004 253 m Imports ofcrude oil 11,665 1,024 88 12,688 1,399 110 12,310 1,442 117 13,444 2,445 182 ; 0 Total, crude plus products 12,635 1,329 105 14,620 1,834 125 15,567 2,009 129 17,419 3,449 198 Total commodity imports 15,940 18,162 17,108 23,079 Share of oil imports in total imports (percentages) 8.3 10.1 11.7 14.9 Increase in total imports of petroleum over previous year (percentages) n.a. n.a. n.a. 15.7 38.0 19.0 6.5 9.5 2.8 11.8 71.8 53.8 SOURCES: For petroleum data in the period from 1970 through 1972, Annual Reports of the Ministry of Petroleum and Chemicals; for 1973, direct communication from the Ministry. The value of commodity imports for 1970 through 1973 is taken from International Monetary Fund, International Monetary Statistics. 108 CURRENT PROBLEMS AND FUTURE POSSIBILITIES and in unit value less than 3 percent (partly because of the temporary favor- able effect on rupee prices of oil of the U.S. dollar devaluation). Hence the total increase in value between the two years was less than 10 percent, though the share of petroleum imports in the value of total imports again increased, to 11.7 percent. Between 1972 and 1973, there was a further in- crease in volume of almost 12 percent, while the unit value of these imports increased by over 50 percent. In consequence, there was an increase of over 70 percent in the value of total petroleum imports. Since the total value of all imports also rose considerably between the two years, the share within it of petroleum imports rose to no more than 14.9 percent for 1973 as a whole; but it was steadily rising over the year, particularly in the final quarter, as a result of the sudden increases in oil prices. For the financial year 1973/74, it has been estimated in the 1974 Economic Report on India prepared by the World Bank that the ratio of petroleum imports to total imports was 18 per- cent. For 1974/75, both the value and the share of petroleum imports are bound to be considerably greater than for 1973/74, since the higher prices of oil will apply to the year as a whole. The evolution of the price of crude oil to India up to the beginning of 1974 is shown in Table 48. The prices shown in this table relate to Iranian Light, which together with the Arabian Light oils for which prices are closely comparable, forms the great bulk of crude petroleum imports into India. From the table it can be seen that the f.o.b. price of Iranian Light crude to India in January 1974, as shown in the second column, was over four times the level it had been just a year earlier, and over three times its value in July 1973. Since January 1974 the figure has increased further, despite the fact that posted prices have remained unchanged. It appears from the provi- sional trade data that for the first six months of 1974 the average c.i.f. price of crude petroleum imports into India was of the order of Rs. 640 per ton, which implies an average fo.b. price of possibly $10.30 per barrel. Since as TABLE 48. Iranian Light F.O.B. Prices and Tax Paid Costs ($ per barrel) Posted Prices paid Tax paid Gross Price by India Cost Margin October 1972 2.48 1.85 1.55 0.30 January 1973 2.58 1.92 1.62 0.30 April 1973 2.73 2.25 1.72 0.53 July 1973 2.94 2.55 1.84 0.71 October 1973 5.34 3.82 3.29 0.53 January 1974 11.87 8.351 7.25 1.101 l. Estimated figures. The gross margin is the difference between tax paid cost and the fo.b. prices paid. SOURCE: Bank estimates. ENERGY SFIORTAGE AND IMMEDIATE PROSPECTS 109 shown in the final column of Table 48 the corresponding c.i.f. price of crude in 1973 was Rs. 182 per ton, the increase between the two years was by a factor of more than three and one-half. The c.i.f. price of a given grade of crude oil delivered to India is built up of a number of elements, of which some are affected by the source from which the crude is purchased. At present, crude supplies broadly come from two distinct sources, for each of which there is more than one supplier. The first of these sources is the governments or the national oil companies of producing countries in the Middle East: for India the countries involved are Iran, Iraq, and Saudi Arabia. The second source is the private oil companies, which in the case of India are Burmah-Shell, Esso, and Caltex. For imports derived from the former source, the f.o.b. price is now deter- mined as a proportion of the posted price in the Gulf of the grade con- cerned. Hence it can vary if either the posted price itself alters or the pro- portion is changed. Posted prices have not in fact changed since the begin- ning of 1974. As to the ratio of actual prices to the posted prices, it is under- stood that in the agreements recently arrived at by India with Iran and Iraq, which are referred to immediately below, the selling price was fixed at 93 percent of the posted price.7 This would imply an f.o.b. price in the Gulf for Iranian Light of some $11.00 per barrel, while a figure of $10.86 per bar- rel has been reported in connection with the credit that was recently signed with Iraq. To these f.o.b. prices must be added transport and other costs to the port of entry in India, which may in present conditions be put at $0.60 to $0.70 on average depending on the port of origin, the general level of freight rates, and the port to which shipment is made. For imports which come from company sources, the determination of f.o.b. prices since January 1974 has been a more complex matter. The cost to the company has depended on how far the oil it sells consists of "equity" crude, which is available to it at tax-paid cost, or alternatively of "participa- tion" crude obtained from the national companies of producing countries on a "buy-back" basis or equivalent arrangement. In the case of equity crude, the f.o.b. selling price consists of tax-paid costs and the gross margin of the company concerned. As seen in Table 48, tax-paid costs in the Gulf for Iranian Light crude at the beginning of 1974 came to about $7.25 per barrel. As a result of a recent decision by the OPEC countries, which came into effect on October 1, 1974, the tax and royalty obligations of the international companies have been substantially in- creased by $1.15 per barrel.8 Hence the corresponding figure for tax-paid 7For purchases from Iran in the first half of 1974, a rather higher ratio seems to have ap- plied: apparently the f.o.b. price charged by the National Iranian Oil Company (NIOC) for sales to the Madras refinery was raised to St 1.29 per barrel from January 1, 1974. (This figure is taken from Industrial Outlook Report, Minerals and Petroleun, India 1973, prepared by Charles W. Sweetwood and V. Subramaniam at the U.S. Embassy in Delhi.) tSee Petroleum Intelligence Weekly, September 23, 1974. 110 CURRENT PROBLEMS AND FUTURE POSSIBILITIES costs may now be put at some $8.40. If the average gross margin has re- mained at the figure suggested in Table 48, of $1.10 per ton, then the average f.o.b. price of equity crude from this source may be estimated to have been some $8.35 for the first nine months or so of 1974, and some $9.50 after the recent increase in taxes and royalties. In the case of participation crude, it appears that the buy-back prices at which the companies will obtain oil under the participation agreements with Middle Eastern producers may stabilize at 93 percent of the posted price. As seen above, this implies an average f.o.b. price in the Gulf of some $11.00 per barrel. However, a somewhat higher ratio, of 94.8 percent, has been obtained by certain Gulf countries. Whatever increases in the revenue per barrel that accrue to governments of producer countries as the result of participation agreements will also be applicable to Iran, where there is no question of a similar agreement since Iranian crude is already under full na- tional ownership; and they will be reflected accordingly in the prices at which crude is sold by NIOC to the international consortium of companies which markets the bulk of the Iranian production.9 Thus the selling prices of crude by the private international oil companies in 1974 have been a function not only of the price of equity crude, but also of the price of participation crude and the relative shares of the two in total sales: the price is in fact a weighted average. Considerable problems have arisen in trying to determine this price, because of uncertainty relating to (1) the share of participation crude in total company purchases; (2) the price at which participation crude would be sold to the companies under buy-back arrangements; and (3) the dates at which participation agreements would be deemed retrospectively to have come into formal effect. The recent decision on the part of OPEC to increase tax and royalty pay- ments by $1.15 per barrel would in itself raise the average tax-paid costs of all crude that is acquired and marketed by the international cormpanies by only two-fifths of this amount-i.e., by 46 cents per barrel-since the share of the equity crude in the total may be put at 40 percent. The OPEC coun- tries have suggested that this average increase is in fact likely to be only 33 cents per barrel, on the ground that under the new arrangements there would be a small reduction in the buy-back price of participation crude, which would now be no more than 93 percent of the posted price. As negotiations on participation agreements have proceeded, and because of the recent increase in tax-paid costs that was referred to above, each of the three private companies supplying crude to India has made a number of price increases during 1974. As a result, the gap between the average f.o.b. price of crude from company sources and that which is sup- 91n the case of Saudi Arabia, negotiations are currently in progress which will lead to a 100 percent acquisition or Aramco. When this change has been effected the situation will be broadly similar to that which already exists in Iran. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS III plied by national oil companies has narrowed appreciably, though some difference still remains. As seen above, the f.o.b. price of Iranian Light, if supplied at 93 percent of posted price, could be put at around $11.00 per bar- rel. By contrast, a rough estimate of the average f.o.b. prices charged by the three private companies taken together for their sales to India, in each of the four quarters of 1974, might be as follows: January to March: $8.70 per barrel April to June: $9.60 per barrel July to September: $9.75 per barrel October to December: $10.25 per barrel Hence by the end of the year the price advantage of crude purchases from company sources may have fallen to no more than some 60 to 70 cents per barrel. As to the further outlook beyond 1974, it appears probable that the pres- ent gap between the prices of crude from company sources and from na- tional sources will be further narrowed, and possibly eliminated. This could be brought about by (1) further increases in tax or royalty rates, which would raise the level of tax-paid costs; (2) further extension of participation; and (3) a reduction in the ratio of prices charged under participation agree- ments or by national oil companies to posted prices, which is generally 93 percent. On the whole, the most likely eventual outcome seems to be a single effective market price which will be at or possibly somewhat below the 93 percent level. This might imply a further increase in crude import prices into India, but not by a large amount: at an average f.o.b. price in the Gulf of say $11.00 per barrel, the c.i.f. price per ton would be of the order of Rs. 680 per ton, as compared with an average figure of perhaps Rs. 660 per ton for the financial year 1974175. Assuming that a unified market price is established, with a ftxed and gen- erally uniform relationship to posted prices in the Gulf, then the future course of f.o.b. prices will depend on what is decided by the OPEC coun- tries concerning the level of posted prices themselves. This depends on a number of factors which are subject to considerable uncertainty. Perhaps the most reasonable assumption is that an attempt will be made to maintain a stable relationship between the price of crude and the average price of the industrial imports which are brought by the producing countries. Hence the general level of posted prices may follow closely the estimated index of world export prices of manufactured products. For illustrative purposes, an average c.i.f. price for imported crude of Rs. 660 per ton, equivalent to about $11.30 per barrel (about $10.60 per barrel on an f.o.b. basis), may be taken as applicable to the financial year 1974/75. The corresponding average price for imports of petroleum products will depend in part on the relative amounts that are imported of the more expensive 112 CURRENT PROBLEMS AND FUTURE POSSIBILITIES middle distillates and the less expensive heavy ends. Again for illustrative purposes, a figure of Rs. 760 per ton is assumed here. The implications of these prices for the petroleum import bill in 1974/75, and hence for the balance of payments, are extremely serious. In the ab- sence of measures either to cut consumption or to limit directly the volume of petroleum imports, the total consumption of petroleum products in In- dia, which as seen in Table 21 was some 23.5 million tons in the calendar year 1973, might have been expected to be at least 25 million tons in the fi- nancial year 1974/75.10 Since immediate possibilities for raising the domestic production of crude petroleum are very limited," this would im- ply a minimum level of petroleum imports, taking crude and products together, of some 18 million tons.12 Assuming that within this total crude petroleum was 15 million tons and petroleum products 3 million tons, and taking the c.i.f. prices given above, the totail cost of petroleum imports in 1974/75 would come to about Rs. 12.2 billion. This would be about three and one-half times the corresponding figure for the calendar year 1973, and equivalent to over one-third of what at present may be estimated as total receipts of merchandise exports from India in 1974/75. In this situation a difficult choice has to be made. On the one hand, there are the possible costs of failing to meet the demand for petroleum-based energy products and feedstocks at a time when the supplies of alternative fuels are themselves not fully dependable. On the other hand, there are the acute financing problems that have arisen because of the worsening of In- dia's trade position, which at the time of writing has become even more difficult because of the anticipated effect on food grain production of the 1974 monsoon. In these circumstances some direct limitation of the volume of petroleum imports has in fact been imposed for 1974/75. It is not clear how stringent this limitation will prove to be, but a reasonable guess is that the total volume of petroleum imports entering into consumption, taking crude and products together, will come to perhaps 16.5 million tons.'3 This is just over 5 percent below the level of the calendar year 1973, compared with a small increase which could have been expected in the absence of limitation. 10These figures relate to gross consumption-i.e., they are inclusive of reiinery boiler fuels and losses. As seen in Table 21, actual estimated gross consumption for the calendar year 1974 was some 22.75 million tons only. tAs seen in Table 56, a target of 8.35 million tons was apparently set for domestic produc- tion of crude in 1974175, but actual production in the calendar year 1974 was 7.49 million tons. 12This would be a minimum, since it would refer only to retained imports for use in domestic consumption. Allowing for some exports of products, which take place though nor- mally on a small scale, total imports of petroleum exceed estimated retained imports. t3Actual imports could well be somewhat higher than this, allowing for exports of products which have recently been estimated for the calendar year 1974 at a value of Rs. 100 million. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 113 Assuming some modest rise in domestic crude production, this level of im- ports would make possible total consumption of perhaps 23 million tons, which would be slightly below the 1973 level. In considering what level of petroleum imports it would be possible to maintain, one relevant factor is that special financing terms have been negotiated for certain iniports of crude for 1974 and 1974/75. These terms form part of bilateral agreements covering trade, investment, and financing arrangements which have been made by the Government of India with two Middle Eastern suppliers, Iran and Iraq. Full details of the terms of these agreements have not been published,'4 but it is believed that somne 5.2 million tons of crude imports are involved, 2.4 million tons from Iran and 2.8 million tons from Iraq. As already noted just above, a price of $10.86 per barrel f.o.b. has been reported as that which will be applicable to imports from Iraq, while the corresponding figure for Iranian supplies is apparently about $11.00. Hence there is no concessional element in the selling prices, which are above those at which the companies have been able so far to sup- ply India and other customers. In both cases, however, it appears that only part of the price will be payable in cash, with the rest supplied on credit with easy financing terms. In the case of Iran, it is believed that the initial cash payment will be no more than $3.50 per barrel, while the corresponding amount in the case of Iraq has been put at $5.86 per barrel. Assuming that the respective f.o.b. prices of the Iranian and Iraqi crude are $11.00 and $10.86 per barrel respectively, this implies that the amounts that are subject to deferred payment are $7.50 in the case of Iran and $5.00 in the case of Iraq. Repayment terms in both agreements are understood to include a grace period of five years and a rate of interest of 2.5 percent. In the case of Iran, repayment is apparently to be made after five years, while in the case of Iraq repayment is to be spread over a further period of five years. Discount- ing at a rate of interest of 10 percent, it seems likely that the grant element implied in these terms comes to about 28 percent for the purchase from Iran and 39 percent for the purchase from Iraq; that is, on this basis of reckoning that part of the price which is not payable in cash carries the equivalent of a subsidy or discount of 28 percent for the oil from Iran and 39 percent for the oil from Iraq. The total concessional element in each agreement, taken as a whole, de- pends not only on the grant element but on the purchase price and on the proportion of that price which is subject to easy repayment terms. In the case of Iran, it has been seen that the estimated amount to be financed on concessional terms is $7.50 per barrel. With an assumed grant element of 28 ;4The sumrmary given here is based on reports in the Indian press, the Petroleum Inielligence Weekly (March 4 and April 8, 1974) and Ihe Financial Times. 114 CURRENT PROBLEMSAND FUTURE POSSIBILITIES percent, the concessional element in this amount comes to $2.10 per barrel. Subtracting this latter amount from the estimated purchase price of $11.00 per barrel yields a Figure of almost $8.90 per barrel as the f.o.b. price after allowing for the favorable terms of repayment. In the case of Iraq, the amount to be financed on concessional terms appears to be $5.00 per barrel. Of this the concessional element, assuming it to be 39 percent, comes to $1.95 per barrel. Since the f.o.b. price is believed to be $10.86 per barrel, the price after allowing for this concessional element would be $8.91 per barrel, much the same as in the case of the purchases from Iran. Thus even taking account of the concessional financing arrangements, the prices of crude im- ports from Iran and Iraq under the terms of the recent agreements appear to be not very different from the prices at which the companies were able to supply crude to India in the first.half of 1974, since when however as noted already their prices have further increased. In addition to these bilateral financing arrangements for the purchase of crude petroleum imports, India together with the other members of the In- ternational Monetary Fund which are importers of petroleum is eligible to draw on the temporary oil facility which the Fund has established. The pur- pose of this facility is precisely to enable member countries to meet the fi- nancing problems which are liable to arise from the steep increase in the cost of petroleum imports. Drawings under the facility are to be repaid as and when the timing of the borrower's balance of payments situation per- mits, and in any case within a period of from three to seven years. The rate of interest depends on the period of the loan, and varies from 6-718 to 7-1/8 percent. It has been announced that the Government of India plans to take up its drawing rights under the terms of this facility, which will come to $200 million (or Rs. 1.6 billion). Because of their concessional element and the fact that they provide im- mediate relief in terms of foreign exchange, these various new financing ar- rangements have certainly been helpful. The loans however will have to be repaid, and even allowing for the concessional element the stark fact re- mains that India is one of the countries for which the recent extraordinary rise in the price of oil has made an already difficult balance of payments situation considerably worse. It is in response to this change that the at- tempt is being made to limit, so far as practicable, the extent of dependence on petroleum imports.'5 This in turn implies a limitation of domestic de- mand, either by direct measures or indirectly by restricting the volume of petroleum imports. Some possibilities and implications of curbing domestic consumption are considered in the sub-section which follows. 15The relation between India's external payments problems and the energy situation is con- sidered more broadly in the concluding section of Chapter 7. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 115 Curbing tire immediate demand for oil A basic difficulty in trying to hold down the consumption of petroleum products in India is that only a small part of the demand, possibly amount- ing to one-sixth in terms of tonnage, enters directly into household con- sumption. Within this amount, only a very small fraction consists of easily dispensable luxuries. As was seen in Table 21 above, motor spirit (gasoline) accounted in 1973 for less than 7 percent of total gross consumption. Of this, a substantial though unknown part was used for goods transport and in vehicles owned by business or government agencies: one recent assessment, which however may be on the low side, is that only 10 percent of motor spirit is consumed by private households. The main item entering into domestic consumption is not motor spirit but kerosene. This came to rather less than 15 percent of total consumption in 1973, of which as noted in Chapter 4 a part was probably used in the transport sector rather than in private house- holds. Since kerosene is widely used for lighting and cooking, a substantial reduction in its use would involve considerable inconvenience or even hardship unless substitutes were easily available. In general, however, the closest substitute is firewood, the consumption of which is regarded as al- ready excessive because of its effects on forest resources. For both kerosene and motor spirit, substantial increases in excise duties were imposed in November 1973, as already recorded in Chapter 4: the duty on motor spirit was almost doubled, to a level of over Rs. 2 per liter or about 95 cents per U.S. gallon, while the duty on kerosene was raised some 30 per- cent to almost 43 paise per liter or about 20 cents per U.S. gallon. It is under- stood that in consequence a reduction of some 25 percent has been effected in consumption of motor spirit. The selling price of motor spirit is now rather more than double what it was in October 1973, while the selling price of kerosene has risen by about two-thirds. There have also been periodic reductions in the output of kerosene from Indian refineries in order to meet demand for other middle distillates. Thus very severe measures of restraint have already been applied to the products which enter directly into house- hold consumption. The remaining consumption of petroleum products, which is almost four-fifths of the total, consists of inputs of energy or feedstock into pro- duction, mainly as has been seen in the industrial and transport sectors. Hence it is difficult to reduce consumption without a corresponding effect on the output of these sectors. Given the existing pattern of production, it is possible to increase output without an equivalent increase in the input of petroleum products only to the extent that greater efficiency of energy use can be achieved in the main consuming sectors, or alternative forms of energy can be utilized in them and made available for use. 116 CURRENT PROBLEMS ANDFUTURE POSSIBILITIES As in other countries, there is considerable scope for India both for in- creasing the efficiency with which fuels are consumed and for substituting coal or electric power for petroleum products in a number of uses. For these possibilities to be realized, however, they must be clearly perceived by con- sumers, who must then take the steps that are necessary to effect economies such as installing new equipment, establishing better mainte- nance systems, and training workers in the use of these. Hence the short- run possibilities for savings through greater efficiency are probably very limited. The most promising way of reducing dependence on petroleum products, which is now being actively pursued, is the replacement of fuel oil by coal for steam raising in industry and in those thermal power stations which use oil as a primary fuel. As seen in Table 33, consumption of fuel oil in thermal stations in 1971/72 was about 1.4 million kiloliters. Most of this was used as primary fuel in a relatively small number of power stations, and conversion of these to coal firing would if feasible probably save about one million tons of fuel oil a year.'6 Conversion to coal is also technically possible in a num- ber of major industries, such as iron and steel, cotton textiles, and cement. Although it is not possible to give an exact figure, it seems likely that out of the total inland consumption of fuel oils, which is at present on the order of 5.5 million tons per year, something like one-half could in time be replaced by coal without undue technical difficulty, and in many cases at a saving in cost after the change in relative prices which has occurred in recent months. A number of measures have been taken to speed up this process of con- version. A survey of industrial consumption of fuel oil has been made to determine where conversion to coal could most readily be carried out, and it is likely that a program of graduated reductions will be imposed in fuel oil allocations. At the same time, development rebates have been introduced under the 1974/75 Budget in respect to coal-fired boilers and machinery or plant for conversion from fuel oil to coal. Plans are also being made for a similar conversion in power stations. The speed with which these various measures can actually be carried out depends, however, on two main fac- tors. The first of these is the availability of equipment for burning and for storing and handling coal, while the second is the availability of coal itself, particularly in the regions which are farthest from the coalfields which are precisely those where the dependence on fuel oil is greatest. Much therefore depends on how far and how soon the present plans for increasing the pro- duction of coal and improving.the coal transport situation begin to show results, and on whether recent and encouraging trends can be maintained. '6For technical reasons, however, the maximum that can be achieved is likely to fall short of this figure. ENERGY SHORTAGE AND IMMEDIATE PROSPECTS 117 It seems clear that a significant reduction in the demand for petroleum products, so as to limit consumption in 1974/75 to the level of 19?3 and then to hold down the rate of growth in demand over the next few years, will be extremely difficult to achieve. In this situation, and unless and until there is an improvement in the general balance of payments position, further increases in the prices of petroleum products may be called for. This possibility is further examined in Chapter 7. 6. ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD INTRODUCTION IN VIEW of the difficult and problematical supply position described in Chapter 5, attempts are being made to expand the capacity and output of the fuel and power industries within India, and to reduce further the degree of dependence on imported petroleum. The most recent official statement of policies and programs for these industries is contained in the Draft Fifth Five Year Plan, 1974-79, which was published in December 1973. Although it seems clear that in the light of more recent events the Draft Plan will have to undergo substantial modifications before it can emerge in final form, it seems likely that there will be few major changes in what has al- ready been proposed for "core sectors" including the energy industries. Thus the various targets and projections made in the Draft Plan are taken as the starting point in this section. The proposed Plan outlays, and the principal production targets for the fuel and power industries, are set out in broad terms in Tables 49 and 50. All figures for outlays are in 1972/73 prices. A more detailed account of the different proposed expansion programs for each industry is given in the three sections which follow. TABLE 49. Fifth Plan Program: Proposed Plan Outlays in the Energy In- dustries, 1974/75 to 1978/79 Amountsi RelativeShares (Rs. billion) (%) Coal mining and lignite 8.g02 10.1 Petroleum 9.52 12.0 Electricity supply 61.90 77.9 Total 79.42 100.0 1. At 1972/73 prices. 2. This is an approximate figure. The identifiable plan outlay for the industry is Rs. 7.77 billion, to which must be added a share of the proposed outlays for science and technology programs by.the Department of Mines and the Department of Steel, which together come to Rs. 490 million. SOURCE. Governmentof India, PlanningCommission,DraftFifth Five YearPlan, 1974-79. Total proposed Plan outlays, covering the five-year period from 1974/75 through 1978/79, are summarized in Table 49. For the energy industries taken together, the total comes to almost Rs. 80 billion, or about $10 billion, at 1972/73 prices. This is just under 15 percent of the total proposed Fifth Plan outlays, and it is possible that this ratio will be somewhat increased as a result of modifications to the proposals set out in the Draft Plan. Within II& ENERGY SUPPLIES IN THE FIFTII PLAN PERIOD 119 the total, the planned outlay for electricity supply has a dominant share of almost 80 percent. This reflects the expected rapid growth of electricity de- mand, the need to make good existing shortages of capacity, and the capital intensive character of the electricity supply industry. Some principal targets for production and capacity are set out in Table 50, together with the corresponding estimated figures for 1973/74 and the planned percentage increase over the Fifth Plan period up to 1978/79. TABLE 50. Fifth Plan Program: Proposed Plan Targets for the Energy In- dustries, 1973/74 to 1978/79 Estimated Target % Increase, Figure, Figure, 1 973/74 to 1973/74 1978179 1978/79 Coal production (mn. tons) 78 135 73 Domestic production of crude petroleum (mn. tons) 7.21 11.42 58 Domestic refining capacity (mn. tons of crude throughput) 24.5 39 59 Electricity generating capacity (MW) 18,456 35,424 92 I. Calendar year 1973. 2. The Draft Fifth Plan gives a target of 12 million tons, but this appears to include 0.6 million tons from the Rustam field in Iran, referred to in Chapter 4. SouRcEs: The figures in the first column, reading down, are taken respectively from Tables 14, 25. 27 and 34. Target figures for 1978/79 are from the Draft Fifth Five Year Plan. Even in the case of the petroleum industry, which has the least ambitious targets, the planned percentage increases considerably exceed what was realized during the Fourth Plan period, especially for production of crude. For coal, the planned increase of 73 percent in the Fifth Plan period com- pares with a realized 11 percent increase in the previous five years, while as noted already the expansion of generating capacity in the Fourth Plan period was only 29 percent, as compared with the Fifth Plan target of 92 percent. TARGETS AND PROSPECTS IN COAL The prospective growth of demand The target production of 135 million tons of coal in 1978/79 is linked with a corresponding projection of demand by principal users. In Table 51 a broad comparison is made of estimated consumption in 1973/74 with pro- jected consumption in 1978/79. 120 CURRENT PROBLEMS AND FUTURE POSSIBILITIES TABLE 51. Coal: Estimated Consumption in 1973/74, and Projected De- mand in 1978/79, by Main Consumers Mn. Tons 1973/74 1978/79 Steel plants and merchant coke ovens I5.5 32E Railways 14.5 13 Thermal power stations 20.02 452 Soft coke 4.5 9 Industry, colliery consumption and exports (23)3 36 Total consumption/demand 77.54 135 1. In terms of raw coal. 2. Excluding washery middlings. A figure of 43 million tons for 1978/79 is given in Part 11, Chapter S, of the Draft Fifth Plan, but the figure of 45 million tons used here is also to be found in the Draft Fifth Plan, Part 11, Chapter 4. 3. Derived as a residual. 4. Consumption for 1973/74 was a little less than production, and a small increase in coal stocks occurred over the year. SOURCES: Data supplied by the Planning Commission. While the planned increase in total consumption of coal is virtually equal to that in production, namely 73 percent, the consumption of the railways is expected to continue to fall as the stock of steam locomotives dwindles. Ex- cluding railways, the increase in consumption is not far short of 100 per- cent, from 63 million tons to 122 million. Of the three main sources of de- mand, consumption by steel plants is expected to slightly more than double in the Fifth Plan period, and consumption by thermal power stations to in- crease by a factor of two and one-half. About 44 percent of the planned in- crease in output is to go to power stations. Consumption by industries other than steel is expected to increase by rather more than 50 percent. Within the industry sector, fertilizer plants are expected to becomne an important source of demand, as the three coal-based plants at present under construc- tion come into full production. The likelihood of increases in the demand for coal of this order of mag- nitude thus depends to a large extent on three related factors, namely: (a) whether the steel industry can expand output as planned after a long period of difficulties and stagnation, partly arising from short- ages of power and transport; (b) the increase achieved in the output of power from conventional thermal stations, which will partly depend on whether the ambitious target for installation of thermal generating capacity is realized; and (c) the rate of growth of the main coal-consuming industries, such as textiles, cement and brick kilns, which is itself dependent on fuel and power supplies as well as on the rate of growth of the economy as a whole. ENERGY SUPPLIES INTHE FIFTH PLANPERIOD 121 Although it is probable that some at least of the forecast increases in de- mand will not materialize, it does not follow that the currently planned in- crease in production should be reduced on this account. Present levels of consumption are held down by chronic shortages of coal, so that the 1978/79 figure for demand of 135 million tons is not strictly comparable with the figure of 77.5 million tons at which consumption in 1973/74 is put. Moreover, stocks of coal cannot be regarded as adequate, especially in view of the long distances often involved between colliery and final consumer and the frequent unreliability or failure of transport. Hence for as far ahead as can be foreseen at present, increases in coal production could be ab- sorbed in making good current shortages, speeding up the rate at which coal can be substituted for fuel oil in power generation and industry, and build- ing up stocks. If as has happened in the past the supply of coal begins to out- strip demand, the use of strategic stocking as a buffer between the two should be closely examined. Produetion: plans and constraints The prospective increase in production over the Fifth Plan period, from 78 million tons to 135 million tons, is shown in Table 52 broken down in three different ways: by coking and non-coking coal, by main coalfields, and by the three public sector colliery companies which between them pro- duce at present some 97 percent of the output of the industry. It can be seen that the largest expansions have been planned for coking coal and for the outlying fields as opposed to Bengal/Bihar. By inference from these figures, it appears that the planned increase in the output of non-coking coal from the Bengal/Bihar fields is relatively small, and that a substantial rise in the output of coking coal is projected from mines owned by the Coal Mines Au- thority. According to the Draft Fifth Plan, some 115 million tons out of the target figure of 135 million in 1978/79 will come from existing mines, and the re- maining 20 million from new mines. Some of the latter will be opencast, for which the construction period is relatively short. The proportion. of output coming from opencast mines is due to increase under the Plan proposals. The likelihood that these various production targets will be achieved varies to some extent according to the company and coalfields concerned. A number of possible constraining factors, however, are common to all or most coalfields. The most generally felt constraint is likely to be that of equipment sup- ply. Because of the slow rate of growth in the demand for coal from the mid-1960s, and also in the case of private mines because of uncertainty about the future organization and ownership of the industry, the rate of in- vestment of coal mining has been low for a number of years. This has 122 CURRENT PROBLEMS AND FUTURE POSSIBILITIES TABLE 52. Coal Production in 1973/74 and 1978/79 by Type of Coal, Coalfields and Public Sector Colliery Companies Estimated Projected % Increase, Output, 1973174 Output, 1978/79 1973174 to (mn. tons) (mn. tons) 1978179 1. Type of Coal Coking coal1 16 34 112 Non-coking coal 62 101 63 2. Main coallields Bengal/Bihar 53 83 67 Outlying fields 25 52 108 3. Public sector companies Bharat Coking Coal 16.3 26.5 63 Coal Mines Authority 53.5 94.0 76 Singareni Collieries Company 5.4 10.0 85 1. Including blendable coal. SOURCES: For estimated output in 1973174. figures for coking coal and non-coking coal, and for BengailBihar and outlying fields, are taken from Table 14. The figures for the three public sector mining companies were supplied by the Department of Mines for 1973/74 and for 1978179. They exclude the output of the captive coking coal mines of the Tata Iron and Steel Company and the Indian Iron and Steel Compa- ny. Figures for coking coal and non-coking coal are given in the Draft Fifth Plan (Part 11, page 147), while those for BengallBihar and the outlying fields in 1978/79 were supplied by the Planning Commission. naturally affected the output and capacity of the firms producing mining equipment in India. The most striking instance is the public sector Mining and Allied Machinery Corporation at Durgapur, which was established to produce 45,000 tons per year of underground mining equipment at a time when the demand for coal in 1978/79 was projected at between 180 and 200 million tons. As a result of the failure of the demand for mining equipment to materialize, the Corporation diversified into a variety of other types of equipment. Its current output is some 20,000 tons, of which only about one- tenth consists of mining equipment. In Table 53 a comparison is made for underground and opencast coal mining equipment of the projected demand over the whole Fifth Plan period of five years and the expected domestic production in 1974/75, the first year of the plan period. It is evident that for most items a large increase in production would be necessary in order to meet projected requirements, though the position looks a good deal better with respect to opencast than to underground equipment. For 1974/75, the coal mining industry has been assured of a sufficient allocation of foreign exchange to cover imports of machinery and spares. ENERGY SUPPLIES INTHE FIFTH PLANPERIOD 123 TABLE 53. Coal Mining Equipment: Projected Demand for the Fifth Plan Period and Anticipated Domestic Production in 1974/75 (numbers of units) Planned Demand, Anticipated 1974/75 through Production, Items 1978179 1974/75 Underground equipment Skid mounted coal cutters 1,250 70 Crawler mounted coal cutters 200 Haulages 1,500 300 Cutter loaders 130 Chain conveyors 1,700 50 Belt conveyors 1,250 250 Locomotives 200 10 Ventilators 150 20 Booster fans 1,400 ISO Friction props 400,000 12,000 Hydraulic props 130,000 4,000 Winders 100 20 Drills 3,500 700 Tubs and cars 50,000 10,000 Opencast equipment Draglines 20 Shovels 70 11 35-ton dumpers 200 40 Bottomhaul dumpers 125 25 Dozers 100 20 Scrapers 5 1 Coal drills 20 Overburden drills 40 SOURCE: Bank estimates, based on information mainly supplied by companies. In building up production, the manufacturers of mining equipment are faced with the shortages that are felt everywhere in India. At present steel, copper, aluminum castings and forgings, power, electrical steels and foreign exchange are all scarce, and shortage of any one is liable to affect produc- tion programs. In the case of the Mining and Allied Machinery Corpora- tion, additional problems exist. The Corporation has to redeploy its efforts so as to concentrate on its original purpose of supplying mining equipment. Moreover, it has suffered from overemployment, low productivity, and poor industrial relations, so that a considerable task of rehabilitation lies ahead. Taking into account its past history and present situation, a further two years or so are likely to be needed before it can become an efficient pro- ducer of mining equipment. 124 CURRENT PROBLEMS AND FUTURE POSSIBILITIES Apart from equipment, the most widely felt constraints are likely to be the supply of explosives and sand for stowing. The planned increase in the use of explosives appears to be not far short of 90 percent, and it is doubtful whether production will be able to keep pace with this. Problems of sand supply may arise in a number of areas, particularly the Jharia field of Bharat Coking Coal and the Central and Western Divisions of the Coal Mines Au- thority. In the Bengal/Bihar area, though generally not in the outlying fields, both power supply and rail transport may continue to act as constraining factors. It is planned to install two captive power plants for the industry, one in the Jharia field for Bharat Coking Coal and one in the Raniganj field for the Coal Mines Authority; but even if these are commissioned within the Plan period, it is possible that meanwhile losses due to failure of power supply will hinder progress towards the planned targets in both these areas, and also in the Bihar collieries of the Central Division of the Authority. For any large and sustained increase in output from the Bengal/Bihar fields, an improvement in the present rail transport situation is a necessary condition. As was seen in Table 46, the average monthly rate of wagon load- ings in the Bengal/Bihar area is even now not much over 5,500, as compared with a target figure of 6,600 and a previously attained level in 1969/70 of 6,200. It is estimated that the corresponding figure for 1978/79, if the coal production target for the Bengal/Bihar fields of 83 million tons in that year were to be achieved, would be about 9,200. This would be an increase of some 75 percent over the recent inadequate and precariously maintained level. Although the Indian Railways' own Fifth Plan program makes provi- sion for the coal movements that are envisaged, their ability to realize these objectives, or even to improve their operations sufficiently for any continu- ing increasing in output to be attainable by the coal mines and steel plants of Bihar and West Bengal, still remains to be established. In order to relieve congestion on the railways, and to reduce the delays and unreliability associated with long haulages of coal, it is proposed in the Fifth Plan period to develop coastal shipping of up to 6.5 million tons of coal per year. This amount would be shipped from the Bengal/Bihar fields through the port of Haldia, mainly to thermal stations in the south and west. This project, however, is still in the preparatory phase. Moreover, while coastal shipping would reduce the need for long rail haulages of coal, it would not necessarily reduce the local pressure on the congested railway systems in the Bengal/Bihar area, since the coal would mainly have to be shipped by rail to Haldia. The proposed Plan outlays for the three public sector colliery companies, as given in the Draft Fifth Plan, are set out in Table 54. For 1974/75 the budgeted outlay for coal production is Rs. 970 million, a figure which would presumably be somewhat lower in 1972/73 prices. This is probably not far ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD 125 short of the 15 percent of fotal plan outlays which is normally anticipated for the first year of a five-year plan period. It represents a fourfold increase in value terms over the estimated investment for 1973/74. Even apart from possible delays in equipment supply which have been referred to above, it is open to doubt whether the proposed capital expenditure programs can be fully carried out during the Fifth Plan period. TABLE 54. Fifth Plan Program: Proposed Plan Outlays by the Three Public Sector Coal Mining Companies (Rs. mn., 1972/73 prices) Continuing New Schemes Schemes Total Bharat Coking Coal 770 970 1,740 Coal Mines Authority 819 4,349 5,168 Singareni Collieries Company 32 288 320 Total 1,621 5,607 7,228' 1. This figure constitutes about nine-tenths of thc total projected Plan outlay for the coal and lignite industries, which was given as Rs. 8,000 million in Table 49. Prospective plan outlays by the Neyveli Lignite Corporation came to another Rs. 400 million, and investment in an explosives plant and a low temperature carbonization plant to another Rs. 140 million. In addition there are the outlayson science and technology rererred toin the note to Table 49. SOURCE: Draft Fifth Five Year Plan, Part II, Chapter 5. The prospects of reaching the planned production of 135 million tons in 1978/79 are difficult to assess precisely. The various plans for increasing output are, as technical plans, well laid. At the same time, the various con- straining factors that have been mentioned above-the list of which is not exhaustive-will make it extremely difficult for full success to be achieved. The summary which follows of prospects in the main public sector under- takings is based on the analysis made in the report prepared for the Bank by Mr. H.L. Rhodes, referred to in the preface to this book. Of the three public sector companies, the Singareni Collieries Company seems the best placed to reach its target output for 1978/79. Although most of the increase in output has to come from new mines-which accounts for the fact that, as shown in Table 54, nine-tenths of the company's Fifth Plan outlays are for new as opposed to continuing schemes-these will be small and shallow mines, which can be developed quickly and with which the company has long experience. A figure of 10 million tons could well be at- tained in 1978/79. For Bharat Coking Coal, the major part of the very large proportionate in- crease in output that is planned will come from existing collieries, as a result of modernization and improved methods of working. Because of this, and since as already noted coking coal output is still appreciably below the 126 CURRENT PROBLEMS ANDFUTURE POSSIBILITIES level reached in 1969/70, it should be possible to increase output substan- tially over the Fifth Plan period. However, given the very sharp increase in investment that is called for by the company, and the constraints that par- ticularly affect the Bengal/Bihar fields, it seems unlikely that output can be raised by as much as is planned. If this assessment is correct, it follows that coking coal output in the Fifth Plan period will fall below the projected demand. The implications of this need to be considered. It is possible however that steel production, and hence the demand for coking coal, will itself fall short of the Fifth Plan target figure. For the Fourth Plan period the projected increase in produc- tion of ingot steel was 43 percent, while the estimated actual increase was not much over 10 percent. In the case of the Coal Mines Authority, the largest of the three public sec- tor companies, conditions and prospects vary as.between the three constitu- ent divisions. The Eastern Division is entirely made up of mines that were formerly under private ownership. The target increase in output is less am- bitious than for the other companies or divisions, and a high proportion of it is planned to come from existing mines. On the other hand, the division falls entirely within the Bengal/Bihar area, and is subject to all its problems and constraints as well as to others, such as equipment supply, which are more general. The Central Division has the largest target increase of the three divisions, and possibly half of the increase is due to come from new mines. Part of the division falls within Bihar, and has suffered considerably from difficulties with power supply and transport. The Western Division is the only one of the three with all its mines outside the Bengal/Bihar area. Apart from the general problems arising from the supply of equipment, ex- plosives and sand for stowing, the main constraint there is likely to arise from difficulties in reopening old mines, which are planned to account for perhaps one-fifth of the increase in output. For the two largest public sector companies taken together, the target out- put for 1978/79, as shown in Table 52, comes to 120.5 million tons, as com- pared with about 70 million tons in 1973/74. Given the various problems and constraints, it seems on present indications doubtful whether so high a figure can be reached. In the particular report referred to, the judgment is made that the maximum output attainable in 1978/79 by these two compan- ies taken together might be between 100 and 110 million tons. Adding to this the output of the Singareni Collieries Company, which may well reach the target figure of 10 million tons in 1978/79, gives an estimated attainable output for the three main public sector units of between 110 and 120 million tons, as compared with the target of 130.5 million tons. In order to arrive at total production for the industry as a whole, a further amount of perhaps 4.5 million tons has to be added in respect of the captive coking coal mines of the Tata Iron and Steel Company and the Indian Iron and Steel Compa- ny. ENERGY SUPPLIES IN TIlE FIFTH PLAN PERIOD 127 Hence on this assessment the maximum increase in production that is likely to be possible over the Fifth Plan period would be from the recent level of 78 million tons in 1973/74 to between 115 and 125 million tons in 1978/79. This falls short of the industry's Fifth Plan target, of 135 million tons, by some 10 to 20 million tons. In proportionate terms, it would repre- sent an increase of between 47 and 60 percent over the level of output at- tained in 1973/74. THE OIL INDUSTRY IN THE FIFTH PLAN Proposed expenditures As was seen in Table 49, the proposed Plan outlays of the petroleum in- dustry in the Fifth Plan period, in 1972/73 prices, come to just over Rs. 9.5 billion, or about one-eighth of the proposed outlays for the three fuel and power industries taken together. In Table 55 further details are given of these proposed expenditures. From these figures it appears that rather more than 45 percent of Plan outlays are intended to go to exploration and development, about one-sixth to pipelines, rather more than one-fifth to refineries, and the remainder (which comes to almost one-sixth) to various other purposes. Of the total, less than 30 percent comes under the heading of continuing as opposed to new schemes. In this case, however, the distinc- tion should probably not be taken too literally. Thus for example some of the projecis shown as continuing, such as the Mathura refinery, are still in the very early stages, while much of the planned expenditures of the ONGC and Oil India Limited, all of which are shown in Table 55 under the heading of new schemes, could perhaps equally well be classified as con- tinuing. The recent dramatic changes in the international petroleum market began to be felt only when the Draft Fifth Plan was in the final stages of preparation. Hence the balance of the programs set out in Table 55 may now be subject to some revision. In this new situation, the possibility needs to be considered of a substantial increase in the program of exploration and development in relation to crude oil, which was largely formulated at a time when the price of crude to India was about one-quarter of its present level. Both the scope and the content of the program for refinery expansion may also need to be reconsidered. These possibilities are taken up below in this sub-section, while further reference is made in Chapter 7 to some broader issues of policy in relation both to exploration and development and to petroleum refining. Domestic crude production and the program for exploration and development As already seen in Table 50, the Fifth Plan target increase for domestic production of crude is rather under 60 percent, from 7.2 million tons in 128 CURRENTPROBLEMS ANDFUTURE POSSIBILITIES TABLE 55. Fifth Plan Program: Proposed Plan Outlays in the Petroleum Industry (Rs. million, 1972/73 prices) Continuing New Schemes Schemes Total 1. Exploration and development ONGC 4,200 4,200 Oil India Limited - 161 161 Total - 4,361 4,361 2. Pipelines Salaya-Koyali-Mathura 1,200 - 1,200 Other 66 335 401 Total 1,266 335 1,601 3. Refineries Mathura 930 - 930 Koyali expansion 270 - 270 Bongaigon 150 - ]50 Two coastal refineries - 600 600 Other 86 - 86 Total 1,436 600 2,036 4. Other outlays Indian Oil Corporation (marketing) - 340 340 Reserve crude storage - 300 300 Expansion of lube capacity - 250 250 Science and technology programs - 160 160 Other 42 425 467 Total 42 1,475 1,517 Grand Total 2,743 6,772 9,515 SOURCE: Draft Fifth Five Year Plan, Part 11, Chapter 5. The grand totals for new schemes and for total outlays do not tally precisely with the figures given in the Plan document, where a very small arithmetic error seems to have been made. 1973/74 to 11.4 million tons in 1978/79. Within these totals, the combined production of Oil India Limited and the Assam Oil Company,.which came to about 3.2 million tons in 1973, is expected to remain constant or to decline very slightly over the Fifth Plan period. Hence the whole of the planned increase is due to come from ONGC fields. ONGC production of crude, which may be put at 4 million tons in 1973/74, is projected to more than double over the next five years, to reach 8.4 million tons in 1978/79. This target increase for ONGC has been set despite the fact that the out- put from its main producing well, at Ankleshwar in Gujarat, is expected to fall from its current level of 3 million tons a year to possibly 1.9 million ENERGY SUPPLIES INTY]HE FIFThI PLAN PERIOD 129 tons in 1978/79. The planned increase of 5.5 million tons from other sources is made up as follows: from new onshore fields, 2.0 million tons; from offshore production, 0.4 million; and from higher output from exist- ing fields, mainly in Assam, a further 3.1 million tons. Over a period as short as five years, the rate of increase in production is determined to a large extent by the completion of wells and the installation of field producing facilities and pipeline transport capacity. In Assam, about 60 percent of the wells are not in production, and an increase in output chiefly depends on the installation of oilfield gathering and treating facilities and the expansion of pipeline capacity, together with the comple- tion of the Bongaigon refinery. In the case of the Galeki field in Assam, which may turn out to be a major producer, the rate of development will also depend on how soon sufficient rigs capable of drilling to depths of 4,500 meters can be brought into the area. In Gujarat, on the other hand, the main production problems relate to wax and water in the formation, and various schemes have been studied to improve the recovery factor. Broadly speaking, the prospects of achieving the planned increases in output from existing fields appear reasonably good, provided that ONGC's expenditure program is not unduly delayed by foreign exchange problems, long delivery dates for equipment (especially deep drilling rigs), and late completion of pipelines and refinery facilities. For new fields, however, the target production figures seem optimistic on the basis of past performance, in which long lead times have been required to carry out drilling programs and to install oil gathering facilities. Though the need to speed up the pro- cess of field development is fully appreciated by ONGC, it seems unlikely that fields as yet undiscovered can make a contribution to production dur- ing the Fifth Plan period. In Table 56 a comparison is made for each year of the Fifth Plan period between total domestic crude production under the Plan program and a Bank estimate, based on the report by Dr. Parra referred to in the preface to this book, of the level of output that seems likely to be achieved in practice. The difference between the two series relates entirely to the production levels to be reached by ONGC. The absolute difference is small in relation to the prospective levels of consumption of petroleum products in India during this period. The proportionate increase in the output of domestic crude during the Fifth Plan period comes to only about 23 percent of the Bank estimate, as compared with the target increase of 58 percent in the Draft Fifth Plan. This lower figure would imply some increase in the degree of dependence on imported crude as compared with the present position. Beyond the next five years, the level of crude petroleum production in India will largely depend on reserves, which in turn will depend on the size and efficacy of the exploration program in the Fifth Plan period, both onshore and offshore. The ONGC Fifth Plan program lays out a series of 130 CURRENT PROBLEMS AND FUTURE POSSIBILiTIES TABLE 56. Domestic Crude Production in the Fifth Plan Period: Official Targets and Bank Estimates (mn. tons) ONGC Production Other Companies Total Production Official Bank Official Bank Target Estimates Target Estimates 1974175 5.27 4.29 3.08 8.35 7.37 1975/76 5.82 4.76 3.06 8.88 7.84 1976/77 6.61 5.30 3.04 9.65 8.34 1977178 8 00 5.77 3.02 11.02 8.79 1978/79 8.42 5.84 3.00 11.42 8.84 SOURCES. Data supplied by ONGC, and Bank estimates. yearly targets covering geological and geophysical surveys and meterage to be drilled, which in turn are related to projected additions to reserves as well as production of crude. The total proposed expenditure by ONGC for the period is put at just under Rs. 7 billion, or about $900 million. This total differs from the figure of Rs. 4.2 billion given for ONGC in Table 55, since it appears to include ex- penditures which do not come under the heading of Plan outlays, and prob- ably also because it is not expressed in 1972/73 prices. Within the total of almost Rs. 7 billion, the distribution according to area is shown in Table 57, while exploration and development expenditures are shown separately in Table 58 according to the categories of oil field in which it is proposed to un- dertake them. TABLE 57. ONGC: Proposed Distribution of Expenditures by Area in the Fifth Plan Period Amount (Rs. mn.) % Shares Within India Onshore 5,390 77 Offshore 750 11 Total 6,140 88 Outside india Iraq venturel 690 10 lran (IMINOCO)' 140 2 Total 830 12 Grand Total 6,970 100 1. These are the overseas undertakings by ONGC described in Chapter 4. SOURCE. Data supplied by ONGC. ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD 131 From Table 57 it can be seen that onshore activity within India accounts for over three-quarters of the planned expenditures by ONGC, with offshore and overseas ventures each accounting for rather more than 10 percent. In Table 58, the largest single category of expenditure is for ex- ploration in new fields, but over all fields taken together, planned expen- ditures for development exceed those for exploration. TABLE 58. ONGC: Proposed Distribution of Expenditure in the Fifth Plan Period between Exploration and Development and by Category of Field Exploration Development Total Amount % Amount % Amount % (Rs. min.) shares (Rs. mn.) shares (Rs. min.) shares Established fields 100 1 1,950 28 Z,050 29 Fields already dis- covered to be developed 500 7 1,170 1 7 1,670 24 New lields 2,600 37 650 9 3,250 47 Total 3,200 46 3,770 54 6,970 100 SOURCE: Data supplied by ONGC. With respect to the onshore program, the main need appears to be to in- tensify exploratory and development work in deeper horizons, with the help of more advanced technology. Rather than increasing the number of field parties, the Commission hopes to improve the equipment and thus better the performance of the existing number, for example by the more general use of digital equipment. For the drilling program, more rigs need to be acquired that are capable of drilling to depths of 3,000 meters or more. Without these, the programs to evaluate deeper structures and to develop discoveries in the Brahmaputra Valley and in Tripura will not go ahead in accordance with the plans that have been formulated by ONGC. As to the offshore basins, the Cambay basin which is the most promising of these has been reserved to ONGC. The Commission's recently acquired drilling vessel has begun operations at a location in the Bombay High struc- ture of the basin, and as noted in Chapter 2 the early results have been en- couraging. In the other offshore basins, the Government of India decided towards the end of 1972, in a departure from what until then had been es- tablished policy, to permit collaborative arrangements with foreign com- panies in the task of exploration and development. Two agreements were arrived at in the spring of 1974 with U.S. companies,.which are to undertake exploration work in the Gulf of Kutch and in the Bay of Bengal respec- tively. These agreements are referred to again in Chapter 7. 132 CURRENT PROBLEMS AND FUTURE POSSIBILITIES As has been seen, the sharp rise in international oil prices and the wor- sening of the Indian balance of payments position have made it desirable to reconsider the size and scope of the existing program for oil exploration. If the domestic oil sector is to make a growing contribution to energy supplies over a sustained period, expenditures above those now provided for in the Fifth Plan program will be required. Same possible implications of this are mentioned in Chapter 7. Petroleum refining A number of specific additions to refining capacity have been approved for completion during the Fifth Plan period. In Table 59 a list of these iden- tified projects is given, together with the financial years in which it is planned to complete them. It will be seen from the table that the total addi- tion to capacity expected to result from the six-projects listed in it is 13.9 million tons, which together with the existing capacity of 24.5 million tons would bring total capacity by the end of the Fifth Plan period up to a level of 38.4 million tons. This is very close to the Fifth Plan target of 39 million tons, which was quoted in Table 50. TABLE 59. Petroleum Refining Capacity: Approved Additions in the Fifth Plan Period (million tons) Existing capacity at March 31,1974 24.5 Expansion of existing refineries Barauni (1976177) 0.6 Madras (I976/77) 0.8 Koyali (1977/78) 3.0 New rerineries Haldia (1974/75 and 1975/76) 25 Bongaigon (1977178) 1.0 Mathura (1978/79) 6.0 Total of above additions to capacity 13.9 Total, existing capacity plus above additions 38.4 SOURCES: Draft Fifth Five Year Plan, together with information supplied by the Ministry of Petroleum and Chemicals and the Indian Oil Corporation. The largest of the schemes that are scheduled for completion in the Fifth Plan period are those at Koyali, in Gujarat, and at Mathura, which is south of Delhi in the western part of Uttar Pradesh. The capacity of the existing refinery at Koyali is to be increased from 4.3 to 7.3 million tons per year, by the addition of a 3 million ton distillation unit which is being designed and ENERGY SUPPLIESiN THE FIFTH PLAN PERIOD 133 constructed in India. The expansion is planned to run on both Iranian and Iraqi crudes. The refinery to be constructed at Mathura will apparently be the largest single industrial construction ever undertaken in India, with a capacity of 6 million tons per year. Like the Koyali expansion, the refinery will run on imported crudes, and since it will be some 1,200 kilometers (750 miles) from the coast it will be supplied by pipeline. This new pipeline, for which a right- of-way survey is now being undertaken, will run from Salaya in the Gulf of Kutch to Mathura, with a branch extending from Virangam in Gujarat to Koyali to supply the new distillation unit there. Some 1,400 kilometers (about 900 miles) of pipeline will be needed. From Table 55 it can be seen that the expected cost of the Koyali expansion and the Mathura refinery, expressed in 1972173 prices, is put at Rs. 270 million for the former and Rs. 930 million for the latter, making a total of Rs. 1,200 million. In addition to this the anticipated cost of theSalaya-Virangam-Koyali-Mathura pipeline is put at a further Rs. 1,200 million. In current values, each of these figures would be substantially higher. The target of 39 million tons of refining capacity by 1978/79 is described in the Draft Fifth Plan as tentative, and it may well need to be reconsidered. It is presumably related to an anticipated or target figure for consumption of petroleum products in 1978/79, but nq,explicit estimate is given for this. However, it is stated in the Draft Fifth Plan that as a result of measures to curb consumption during the Fifth Plan period, "it is estimated that with a throughput of 36 million tons of crude in 1978/79, the requirements of petroleum products would be substantially met."' Assuming a ratio of refinery boiler fuels and losses to throughput of 7 percent, this figure of 36 million tons for throughput would imply a net refinery output of about 33.5 million tons. Since from the wording just quoted it appears that some im- ports of petroleum products are foreseen in 1978/79, it may be inferred that total net consumption of petroleum products2 in that year is projected at some 34-35 million tons. Since the corresponding figure for 1973/74 may be put at about 22.5 million tons, this would imply an increase in consumption of petroleum products over the Fifth Plan period of over 50 percent, with an annual average compound rate of growth of almost 9 percent. In the light of past rates of growth, the very small increase in consumption-if any-that can be expected in 1974/75 which is the first year of the Plan period, and the possibility of further measures to restrain the growth in demand for petroleum products, this projection may be on the high side. If for example net consumption of products is taken to be 22 million tons in 1974/75, 'Draft Fifth Five Year Plan, Vol. II, p. 146. 2 That is, net of refinery boiler fuels and losses. 134 CURRENT PROBLEMS AND FUTURE POSSIBILITIES which is slightly lower than the 1973 level, and an annual average increase as high as 9 percent per annum isassumed for the remaining four years of the Fifth Plan period, prospective net consumption in 1978/79 would be 31 million tons. Thus a net consumption figure of 31 to 32 million tons, rather than the 34 to 35 million apparently assumed in the Draft Plan, might be a reasonable basis for refinery planning in the new situation. Besides setting what may be a rather high target for refining capacity in 1978/79, the Draft Plan seems to overestimate the further additions to capacity that would be required to achieve it. At one point it is stated that "the schemes already under implementation, including the Haldia Refinery and the revamping of the Barauni Refinery, will contribute to a capacity of 24.6 million' tonnes."3 But as noted above in Tables 27 and 59, existing capacity is already 24.5 million tons (or 24.0 million if the existing con- straint on crude supplies to the Koyali refinery is allowed for), and indeed on another page of the Draft Plan capacity at the end of 1973/74 is in fact put at 24 million tons. It has already been seen in Table 59 that starting from this basis, and allowing for the specific schemes mentioned in the Draft Plan together with the proposed extension to the Madras refinery which is a recent decision, capacity would be built up to 38.4 million tons. This would be adequate to meet a total net consumption level of 32 or even 33 million tons. Hence if these schemes were to be completed on schedule it is doubtful whether any need would exist to commission during the Fifth Plan period the two new unidentified west coast refineries which are men- tioned in the Draft Plan and included in the list of proposed Fifth Plan out- lays shown in Table 55.4 In any case it is unlikely that new schemes in such an early stage of preparation could be brought to fruition by the end of the Fifth Plan period. In practice the build-up of refining capacity may be slower than is indi- cated in Table 59, because of delays in completing some of the six specific projects listed there. In particular, delays may be experienced with the two largest schemes at Koyali and Mathura. In Table 60 some illustrative figures are presented to show the possible growth through the Fifth Plan period and up to 1979/80 of refinery capacity, refinery throughput, the de- mand for petroleum products and imports of products. In constructing the table it is assumed (a) that all expansion schemes except for Koyali and Mathura will be completed as planned; (b) that the Koyali expansion will be completed in 1978/79, rather than 1977/78; and (c) that the Mathura refinery will not be commissioned until 1980/81, so that it does not affect the figures in the table. 3Draf r FiJth Five Year Plan, Vol. II, p. 146. 4At another point in the Draft Plan a single new rertnery only is referred to. X TABLE 60. Fifth Plan Period: Possible Growth of Refining Capacity, Refinery Output, and Consumption and Im- X ports of Petroleum Products (mn. tons) 1973 1974/75 1975/76 1976/77 1977fl8 1978179 1979/80 ni 1. Additions to refining capacity - 1.60 0.90 1.40 1.00 3-00 - 2- Fnd-year refining capacity 24.50 26.10 27.00 28.40 29.40 32.40 32.40 r 3. Average capacity during year 24.00 25.30 26.55 27.70 28.90 30.90 32.40 z 4. Refinery throughput 20.52 20.80 23.90 26:31 27.45 29.35 30.78 r 5. Refinery boiler fuels and losses) 1.15 1.50 1.67 1.84 1.92 2.05 2.15 o 6. Domestic refinery output (net)2 19.37 19.30 22.23 24.47 25.53 27.30. 28.63 7. Consumption of petroleum products (net)2 22.50 22.00 24.00 26.15 28.50 31.05 33.85 8. Imports of petroleum products 3.98 2.90 2.00 1.90 3.20 4.00 5.50 9. Ratio of product imports to net consumption (percentages) 18 13 8 7 11 13 16 L. These are put at 7 percent of refinery throughput for 1974/75 and thcreafter. 2. That is, net of refinery boiler fuels and losses. A further deduction is made here for 1974175 onwards of I percent of domestic refinery output, to allow for losses from evaporation and handling. SOURCES& For 1973, Tables 27 and 2R. For the Fifth Plan period, the basis of the illustrative projections is described in the accompanying text. 136 CURRENT PROBLEMS AND FUTURE POSSIBILITIES The first line of the table shows additions to refining capacity year by year on these assumptions, while the second line shows the resulting end- year capacity. Line 3 of the table gives estimates of average capacity for each year. This falls short of end-year capacity, since in general additions during the year will not be fully utilized during the whole-of it. The fourth line gives estimates of refinery throughput, which after 1974/75-in which it is taken to be limited by the availability of imports of crude-is put at 90 percent of average capacity in 1975/76 and 95 percent in each year thereafter. Deducting refinery boiler fuel and losses, as shown in the fifth row of the table, yields a series for refinery output which is set out in the sixth row. Below this is given a projection for net consumption of petroleum products year by year,5 which is based on the illustrative assumption made just above, that consumption will be 22 million tons in 1974/75 and will thereafter increase at a cumulative annual rate of 9 percent per annum. Line 8 shows prospective imports of petroleum products. These are derived by subtracting net refinery output, less an allowance of 1 per- cent for losses from evaporation and handling, from net consumption of petroleum products. Finally, the last line shows changes over time in the ratio of imports of products to net consumption of products-that is, the figures in line 8 are shown as a percentage of those in line 7. It is apparent from the table that on the assumptions made here the degree of dependence on imported products would be slightly lower during the first two years of the Fifth Plan. This reflects the low level of consump- tion assumed for 1974/75, and an increase in refinery throughput between 1974/75 and 1975/76 as a result of generally higher capacity utilization as well as the addition of the Haldia refinery. From 1975/76 onwards the rate of increase in thoughput falls behind that of consumption, so that depen- dence on imports gradually increases, in relative as well as absolute terms, up to 1979/80. On the assumption that the Mathura refinery will be com- pleted in 1980/81, the degree of dependence on products imports would then be reduced, at any rate for a while. The assumptions on which Table 60 is based are very much open to debate. A faster rate of growth in demand, or a slower build-up of refinery capacity, would increase the amounts shown for imports of petroleum products. In view of this possibility it may be desirable to consider, even for the Fifth Plan period, additional refinery expansion schemes not taken into account in the table. Expansion at an existing refinery is likely to be easier and more quickly completed, and up to a point less costly in terms of the extra investment required per unit increase in capacity, than the develop- ment of an entirely new site. Now that the former Esso refinery at Bombay has become a joint sector enterprise, and with the strong possibility that the 5That is, net of refinery boiler fuels and losses. ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD 137 Bombay refinery of Burmah-Shell and the Vishakapatnam refinery of Caltex will before long acquire the same status, a previous constraint in the expansion of these plants has been or is likely to be removed. Hence plans could now be made for further growth at Bombay and Vishakapatnam, which could probably be put into effect even within the Fifth Plan period if the evidence suggested that the degree of dependence on imports of petroleum products would otherwise become excessive. However, decisions concerning the amount, location and timing ofriew refinery capacity do not depend solely on what can be done with respect to the refinery itself. Much also depends on the cost and practicability of developing the complementary transport and handling facilities. The loca- tion of the Mathura refinery was decided largely with regard to the rapid ex- pansion of the demand for petroleum products in the northwestern region of India, particularly Haryana, Punjab, Delhi and the western part of Uttar Pradesh. To supply this region from Bombay raises problems both of cost and availability, because of the distance involved and the current limita- tions of rail transport from Bombay itself and from Kandla. Expansion in Bombay would have to be accompanied by improvements in transport ar- rangements, by rail or pipeline or both,6 and also by the development of port facilities to handle larger imports of crude and coastal shipments out- ward. The illustrative projections given in Table 60 of output, product demand, and imports of products can be combined with the projections made in Ta- ble 56 of domestic crude production. It is then possible to derive a series for future imports of crude petroleum, and hence to estimate the possible future degree of dependence on imports, as shown for past years in Table 29. These further projections, which again are no more than illustrative, are set out in Table 61. The first line of the table gives the projections of refinery throughput from line 4 of Table 60. Subtracting from this series the Bank projections of domestic crude production, as shown in Table 56, enables imports of crude petroleum to be derived as a residual. These are shown in line 3 of the table. In line 7 the ratio of crude imports to total refinery throughput is shown. It can be seen that on the assumptions made here this would show little change during the Fifth Plan period, in which it would be somewhat higher than at present. The full extent of dependence on petroleum imports is shown in the last line of the table, .in which imports of products (line 4) are also taken into account. It can be seen that after 1974/75, for which some limitation of imports has been assumed, there is a moderate increase in the degree of dependence on imports. 6Construction of a products pipeline from Bombay to Poona is one of the schemes included in the Draft Fifth Plan. TABLE 61. Fifth Plan Period: Possible Growth of Crude Imports and Changes in the Degree of Dependence on Petroleum Imports 1973 1974/75 1975/76 1976/77 1977/78 1978/79 1979180 1. Rcfinery throughput 20.52 20.80 23.90 2631 27.45 29.35 30.78 2. Domestic crude production 7.20 7.37 7.84 8.34 8.79 8.84 9.50 3. Imports of crude petroleum 13.44 13.43 16.06 17.97 18.66 20.51 21.28 4. Imports of petroleum products 3.98 2.90 2.00 1.90 3.20 4.00 5.50 r 5. Total petroleum imports, crude x plus products 17.42 16.33 18.06 19.87 21.86 24.51 26.78 m 6. Total availability of petroleum - productst 24.50 23.70 25.90 28.21 30.65 33.35 36.28 S 7. Ratio of crude imports to refinery throughput (percentages) 65 65 67 68 68 70 69 8. Ratio of total petroleum imports to total availability (percentages) 71 69 70 70 71 73 74 1. Defined, as in Table 28, as the sum of refinery throughput (line 1) and products imports (line 4). SOURCE. Figures in lines I and 4 are taken from Table 60 and those in line 2, from Table 56. All other figures are derived from these. c ;X 3i ENERGY SUPPLIES INTHE FIFTH PLAN PERIOD 139 A fuller analysis of the refinery program would cover the prospective pat- tern and location of product demand in the Fifth Plan period, and the closely related issues of the balance of products in refinery output and the extent and nature of secondary processing facilities. Although these topics are not considered here, one or two general points in relation to refinery planning and secondary processing are taken up in Chapter 7. POWER DEVELOPMENT Targets for expenditure, capacity, and consumption In Table 49 it was seen that total proposed Plan outlays in the electricity supply industry during the Fifth Plan period have been put at almost Rs. 62 billion at 1972/73 prices, which is about three and one-half times the com- bined total for the coal mining and petroleum industries taken together. In Table 62 the relative shares in this total outlay of the States and of the Centre and Union Territories are shown, and also the breakdown of the total among power generation, transmission and distribution, and rural electrification and miscellaneous expenditures. TABLE 62. Fifth Plan Program: Relative Shares in Plan Outlays in the Power Sector (percentages) Centre and Union States Territories Total I. Power generation 45 9 54 2. Transmission and distribution 23 3 26 3. Rural electrification and miscellaneous 18 2 20 Total 86 14 100 SOURCE: Draft Fifth Five Year Plan, 1974/79. It can be seen that 86 percent of the planned expenditure is to he under- taken by the States, and.only 14 percent by the Centre and the Union Ter- ritories together. Over half the Plan outlays are to be devoted to power gen- eration, which is slightly more than double the amount allocated to transmission and distribution. This division of funds may give insufficient emphasis to the expansion and improvement of the transmission and dis- tribution system, which it is generally agreed has been somewhat neglected in the past. The amount allocated to rural electrification, together with miscellaneous expenditures which are a smail item, comes to 20 percent of the total. The absolute amount of proposed Plan outlays on rural electriftcation is just 142 CURRENT PROBLEMS ANDFUTURE POSSIBILITIES It is possible that the high target figure for electricity generation sug- gested in the power chapter of the Draft Fifth Plan, which as seen above would mean an increase of some 90 percent over the Plan period, merely reflects the corresponding target for installed capacity, and should not be taken to be an estimate of prospective consumption based on the planned growth of the various different consuming sectors and industries. It may thus represent a desired goal, rather than a Plan target in the strict sense. But although an increase of 90 percent in a five-year period would certainly be high, it does not look unreasonably so in the light of past relationships and the main aggregate targets laid down in the Draft Fifth Plan. As was seen in Chapter 3, Table 10, the respective growth rates of gross domestic product and of industrial production in the decade from 1960/61 to 1970/71 are estimated to have been 3 percent and 6.1 percent per annum. During the same period the corresponding rate of growth in electricity consumption was 11 percent per annum. For the Fifth Plan period, the average annual rates of growth projected in the Draft Fifth Plan for GDP and for industrial production are 5.5 percent and 8.4 percent respectively. On this basis, though it is no more than broadly indicative, a target annual rate of growth in electricity consumption appreciably higher than in the past could be ex- pected. The adequacy of a given amount of installed capacity has to be judged in relation to the prospective peak load on the system, rather than the total de- mand for electricity. No projection of peak load is given in the Draft Plan. Given the extensions that are planned in system interconnections, and the .related development of regional load dispatch centers, some improvement should be realized in the ability to meet peak demands from a given amount of installed capacity. With respect to transmission and distribution, the Draft Fifth Plan pro- vides for the completion within the Plan period of the thirty-five inter-State lines that are at present under construction, the progress of which has been considerably dplayed, mainly it appears by shortage of steel. It is stated that construction of new inter-State lines "will however have to be undertaken after comprehensive network studies have been carried out."4 Provision is also made for the completion of over 3,500 kilometers (2,100 miles) of 400 kV lines, the first of which in India is expected to go into operation in 1975. As noted already, a number of measures are to be taken to reduce energy losses in the system, which mainly arise in the sub-transmission and dis- tribution systems of 33 kV and lower voltages. The prospective growth of generating capacity As seen above, there is considerable scope in India as in many countries for making better use of existing generating capacity through (1) better 14Draft Fifth Five Year Plan, Vol. 11, p. 124. ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD 143 operating and maintenance practices, which would increase the proportion of installed capacity available for use; and (2) improvements in the existing network of system interconnections and methods of system planning, which would enable better use to be made of the capacity that is available. Even making full allowance for these, however, a rapid buildup of installed capacity is necessary if the current disabling shortages of power are to be brought to an end. Hence the main emphasis in the chapter on power in the Draft Plan is on the program for expansion of generating capacity. What is achieved in relation to this program is likely to be the main factor determin- ing the levels of power consumption over the Fifth Plan period. In Table 50 it was seen that total planned additions to capacity in this five-year period come to about 17,000 MW. This compares with-a realized total of approximately 4,200 MW in the previous five years during the Fourth Plan period. In the final two years of the Fourth Plan, from March 1972 to March 1974, the estimated increase in installed capacity was only 1,600 MW, whereas in the two final years of the Fifth Plan it is put at well over five times this level. To realize increases of this magnitude will be a most formidable task, and a number of constraining factors may limit what is actually achieved to an appreciably lower figure than the Plan target. The Draft Fifth Plan refers to four principal factors that will influence the growth of capacity, namely, (a) delivery of plant and equipment; (b) availability of steel and cement; (c) availability of financing in accordance with the needs of each project; and (d) the implementation capabilities of the State Electricity Boards. These are described as being of equal importance. As seen in Chapter 4, delays in the delivery of power equipment were one of the factors accounting for the slow rate of growth of installed generating capacity during the Fourth Plan period. The items of equipment mainly in- volved are three: hydro turbine-generator sets; steam turbine-generator sets for thermal stations; and boilers for conventional thermal stations. For the Fourth Plan program, approximately half the equipment installed measured in MW of capacity was planned to come from. imported sources, and half from indigenous manufacturers. In the event widespread delays were experienced with respect to both sources, but these were more serious for domestic equipment. In the much larger Fifth Plan program, the role of indigenous suppliers is dominant. Measured in terms of generating capacity, no more than 20 per- cent af the hydro turbine-generating plant to be installed is to come from imported sources, and less than 10 percent of the turbine-generating plant for thermal stations. It is not known precisely to what extent imports of boilers might be considered, but [t is probable that the whole of the increase 146 CURRENT PROBLEMS ANDFFUTURE POSSIBILITIES rise to problems here as in the coal mining industry, and other shortages also have led to delays in the past. Apart from materials, the other main potential causes of delays in civil works, which are interrelated, are deficiencies in financing arrangements, design, and project planning-and management. As seen in Chapter 4, con- tinuity and assurance of finance has been a problem in the past, and it is specifically referred to in the Draft Fifth Plan. Awareness of this problem should make it possible to devise and put into practice administrative pro- cedures which would contribute to preventing it from arising in the future. On the other hand, the probable need for continual adjustments in budgets and estimates to take account of rising input prices may become a serious impediment to continuity in financing arrangements. It will be difficult to reconcile the twin requirements of expeditious sanction for project expen- ditures and control over waste and abuse. Moreover, there are ominous re- cent signs that the financial situation of certain State Electricity Boards has worsened, with the result that plans for expansion are held up for sheer lack of funds. On the design side, an important step forward is the recognition of the need to standardize the layout of thermal power stations. This also is refer- red to in the Draft Plan, where it said that immediate action will have to be taken to ensure that this is effected. The problems of management appear to be more difficult and complex. The Draft Plan has some outspoken references to poor performance by the States, but this appears to be an area in which diagnosis is much easier than effective prescription. In the Planning Commission's view, a considerable reorganization of the electricity supply industry is a necessary condition for the power objectives of the Fifth Plan, including the target expansion of generating capacity, to be attained. This issue is referred to in Chapter 7. On present evidence, there is a strong probability that the planned addi- tions to generating capacity in the Fifth Plan period will not be realized because of delays arising from civil works. These are not additional to the delays which have been referred to already, which may be caused by late delivery of equipment; in fact it is quite possible that the construction program will be so delayed that no power station in the next five years will have its commissioning date put back because equipment is not available. It is impossible to form more than a rough estimate as to what installed generating capacity is likely to.be at the end of 1978/79. In the report on the power sector by Mr. Bernard Montfort, which is referred to in the preface, it is suggested that some 30 percent of the additions then planned would not be realized by the end of the Fifth Plan period. On this basis, the realized additions would be'about 12,000 MW, which added to the present installed capacity of 18,400 MW would bring the nominal total to about 30,400 MW. Allowing for plant still on commissioning trials and for retirement of older ENERGY SUPPLIES IN THE FIFTH PLAN PERIOD 147 plant, the effective capacity at this time might be 28,500 MW, of which perhaps 27,000 MW would belong to utilities. With this level of installed capacity, a total of perhaps 112,000 GWh for net generation might be possi- ble, corresponding to the projection of 130,000 GWh which is given in the Draft Fifth Plan on the assumption of an effective capacity at the end of 1978/79 of 33,000 MW. This figure of 112,000 GWh would imply an in- crease of about 60 percent over the Fifth Plan period, as compared with an estimated increase of 40 percent during the previous five years, during the latter part of which demand was constrained by shortages. The average cumulative rate of growth in net generation over the whole Fifth Plan period would thus be on the order of 10 percent per annum. Provided that system losses can be reduced as planned, this would be consistent with a slightly higher rate of growth in electricity consumption. Even so, these are not high rates in the light of past history, and are well below those referred to in the chapter on power in the Draft Fifth Plan.'7 The main problem now in meeting target additions to generating capacity seems to be the increasingly large absolute amounts that have to be added each year, even with no increase in the rate of growth, as the system becomes larger. Even with the present size of the industry, to increase in- stalled capacity by 10 percent implies the addition of almost 2,000 MW; and the corresponding figure in five years' time is likely to be at least 50 percent higher. It has not yet been established that the construction program can meet these growing requirements. Hence the medium-term and even the longer-term prospects for ending the shortage of power remain uncertain. 17However, it was seen at the beginning of this section that in Volume I of the Draft Plan an increase in electricity generation of 60 percent is referred to, from 72 TWh (72,000 GWh) in 1973/74 to 120 TWh in 1978/79. If as seems probable this latter figure refers to gross gener- ation, the corresponding figure for net generation would come close to the figure derived above, of 112 TWh (112,000 GWh). 7. SOME QUESTIONS OF POLICY AND PRACTICE IN THE ENERGY SECTOR INFORMATION AND DATA ALTHOUGH THE POSITION differs as between different industries and fuels, available data and intelligence concerning the energy sector in India are strikingly deficient in quality and scope. An adequate factual and statistical basis for planning does not exist at present, nor is there any sign that con- sideration is being given to the task of establishing one. With respect to statistical records and evidence, some of the principal gaps have been referred to above. As noted in Appendix 11 and in Chapter 3, there is virtually no recent quantitative evidence concerning the consumption of noncommercial fuels, which even now account for almost half of total energy consumption measured in coal replacement terms, and for over half if the total is measured in coal equivalent terms. Since the Eighteenth Round of the Na- tional Sample Survey in 1963, no comprehensive data have been collected on the use of fuel in the rural areas, which siill contain 80 percent of the population of India. Firewood is the principal form of noncommercial fuel, and it accounts for perhaps 30 percent of all energy consumption measured in coal replace- ment terms. It has already been remarked in Chapter 2 that little informa- tion exists about where it comes from, or about the possible ecological effects of present and prospective levels of consumption. It is widely stated and assumed that serious damage is being done through depletion of forest resources and the environmental consequences to which this depletion gives rise. Not even a broad indication exists of the possible order of mag- nitude of the social costs involved. With respect to commercial energy, no regular and systematic series is prepared and published of total energy consumption and its distribution by fuels and consuming sectors. As was seen in Chapter 3, no recent informa- tion is available concerning the consumption of energy according to pri- mary fuels. At the time of writing, the latest period for which consumption data are available according to secondary fuels-i.e., aggregate consumption for energy purposes of coal, petroleum, and electricity-is the financial year 1970/71. There is no continuing agency which is effectively responsible for ensur- ing that data concerning the energy sector as a whole, as distinct from each of the three principal industries taken individually, are fully and regularly assembled. 148 SOME QUESTIONS OF POLICY AND PRACTICE 149 As between the three industries, the availability and usefulness of data vary appreciably. A deficiency however which is shared by all of them is that little information is available concerning prices, both of inputs and of outputs, and the behavior of costs. Another lacuna common to all three industries appears to be any form of systematic quantitative analysis of the experience with past investment projects. One result of this is that estimates of future capital expenditures for projects are often based on formula calculations, which may bear little relation to what has actually happened in the past, for which the necessary records may not exist or have not been analyzed.' This point has been made in Chapter 4, in connection with the costs of power stations, but it seems to apply equally to the coal mining and petroleum industries. Not surprisingly, the coal industry is the least well documented of the three. Until recently the number of firms in the industry was very large, and some of them are believed to have had an interest in concealing or even falsifying certain kinds of information. Data concerning production and distribution for the industry as a whole are finally available only after a long delay: at the time of writing, the latest report on these subjects from the Coal Controller was dated June 1971, though provisional statistics for more recent dates had been issued. As seen above, no data concerning coal con- sumption by main consuming industries are available from currently published sources, and knowledge on the subject appears to be very in- complete. The oil industry is much more favorably placed, with a small number of well established enterprises; and the annual statistical handbook of the Ministry of Petroleum and Chemicals, Indian Petroleum and Chemicals Statistics, is a convenient and useful source. It seems unfortunate, however, that all the published data concerning the industry are given only for calen- dar years when in general in India other economic series, including those for the rest of the energy sector, relate to financial years. It would be useful also if more up-to-date information were published on the consumption by industry of major oil products. With the reservations made above concerning all three industries, published data on the electricity supply industry are informative, though because of the fairly large number of agencies involved they are often not up to date. Apart from the gaps and deficiencies in currently available statistics, there are few recent studies-whether descriptive or analytical, official or unofficial-of particular industries or aspects of the energy sector in India. Much basic factual information is therefore missing or difficult to obtain. Thus for example as was noted in Chapter 3, no systematic account exists I It should be added that this is by no means unique to India. 150 CURRENT PROBLEMS AND FUTURE POSSIBILITIES of the past relationship between commercial energy use and economic change. The basic data are there, although not in up-to-date form; but they have never been fully analyzed. Again, no clear recent account exists of the rationale of current pricing conventions with respect to energy products; and no general study of the economic aspects of the coal industry has been made. In these and other respects, the stock of accessible information on energy matters is very limited. Inadequacy of basic information and data is one cause of deficiencies in planning, but even more it is a symptom of these. The underlying cause, as in the case of other problems and other countries, is an insufficient concern for evidence. This explains the fact that many of the figures that do exist go unnoticed or little used. It helps to account for the very unsatisfactory treat- ment and presentation of data in most official reports, including even such a basic document as the Draft Fifth Plan. It is also the main reason why the gaps in existing knowledge of the energy sector remain unfilled and often unperceived. It is generally the case that significant improvements in the process of planning require simultaneous advances to be made in three distinct but in- terrelated ways: better information and data; greater concern for evidence; and more effective organization and procedures. In India as elsewhere, dis- proportionate attention is often given to the last of these, while the other two are unduly neglected. This appears to be true at present with respect to energy. THE PRICES OF ENERGY PRODUCTS Although increasing attention is now being given to questions of energy pricing, no effective mechanism seems to exist for considering the prices of different energy products in relation to one another, across industry bound- aries. With respect to the individual industries, the basis for deciding the structure of prices or tariffs is not always clear, and even when made ex- plicit is open to question. A closer look at these issues seems to be very much needed. A number of changes in energy prices have recently been made or are under consideration. As noted in Chapter 4, a general increase in coal prices came into effect at the beginning of April 1974, while at the same time a new basis was introduced for determining the relationship between prices of coal of different quality. Reference has also been made in Chapter 4, and again at the end of Chapter 5, to recent increases-in the prices of petroleum products, which reflect not only the sharp rise in the cost of imported oil but in the case of gasoline and kerosene an increase in excise duties also. The level of electricity tariffs has for some time been a source of concern to the central authorities, and in the Draft Fifth Plan there is an emphatic SOME QUESTIONS OF POLICY AND PRACTICE 151 reference to the need for the State Electricity Boards to achieve an adequate rate of return on investment by establishing suitable tariff rates.2 Despite these actions, however, the general level of energy prices does not reflect the needs of the present and prospective situation. As was seen in Chapter 5, chronic shortages now exist of virtually all forms of fuel, and this is a basic cause of waste, inefficiency and lost production. In these cir- cumstances, the value at the margin of energy products is in many uses ex- tremely high, and not surprisingly there is evidence that enterprises would often be willing to pay considerably higher prices for greater assurance of supplies. Current prices fail to reflect the contribution to output and welfare of extra supplies of fuel, with the result that the limited amounts of energy products available are not being used to the best advantage. Although various forms of administrative allocation are now used to try to ensure that "priority needs" are met, no administrative mechanism however smoothly working can take account of the complexities of the actual situa- tion and the varying needs of consumers. So long as chronic energy shortages persist, there is a strong case for mak- ing all energy products considerably more expensive in relative as well as absolute terms. This would help to promote greater economy and efficiency in the use of these products.3 It would also act as an impersonal and effec- tive rationing device, by which less urgent uses of coal, power, and petroleum products would be curtailed. Administrative regulations and controls would still be needed, especially in relation to short-term emergen- cies and dislocations: it is not suggested that higher prices should be relied on exclusively as a rationing device. But more effective use could be made of price adjustments, as a means to securing a more efficient use of scarce fuels while reducing the delays, administrative costs, and other disadvan- tages which are an inescapable feature of direct controls. Apart from helping to improve the allocation of limited energy supplies, higher prices would also enable the public enterprises producing energy products to earn larger surpluses. This would be advantageous both on gen- eral fiscal grounds and in relation to their investment programs. In the pres- ent situation, where governments both at the Centre and in the States are facing extremely serious difficulties in balancing revenues and expenditure, there is a good case for ensuring that a larger contribution is made to total domestic savings from the surpluses of public enterprises.4 Moreover, an 2Drafo Fifth Five Year Plan, Vol.1, p. 61. 3This point is explicitly made in the Draft Fifth Plan in relation to electricity tariffs: "A proper tariff situation would, apart from yielding considerable additional revenues, promote better use of electricity and eliminate its wasteful consuniption." (Draft Fifth Five Year Plan, Vol. 1, p. 61.) 4The Fuel Policy Committee in its final report has expressed the view that fuel prices should be such as to enable the fuel and power industries to earn a rate of return on their in- vestments of 10 percent. 152 CURRENT PROBLEMS AND FUTURE POSSIBILITIES increase in their operating surpluses could also enable these enterprises, in the energy sector as elsewhere, to make a bigger contribution to the financ- ing of their capital expenditure. In the existing financial climate, this may be necessary in order to ensure that investment programs are not subject to unwarranted delay. There are already signs that in the coal mining and electricity supply industries investment projects which had been agreed in principle are now subject to uncertainty and delay because the means of fi- nancing them are no longer clear. As many countries have found, it is difficult in an already inflationary situation to raise substantially the.prices of basic products such as fuel, and to maintain the new price relationships when they are established. However, some hard decisions have already been taken in India in relation to petroleum products, particularly gasoline (motor spirit). Moreover, the effects of price increases on consumers would not necessarily be as un- favorable as in the case of gasoline. There is evidence that free market prices for fuel products have often been well above the official controlled prices in recent periods. Thus for example the following estimates for the percentage excess of the former over the latter were given in early 1974: for kerosene, 30 percent; for furnace oil, 170 percent; for hard coke, 25 percent; and for steam coal, over 40 percent.5 Increases in official prices might therefore not always be fully reflected in the prices paid by final consumers. In any case, as noted already, there are many cases where industrial con- sumers particularly would be better off even with higher prices if they could have assurance that supplies would be available. As to particular products, it was remarked in Chapter 4 that the increase in coal prices that was brought into effect from April 1, 1974 was probably not large enough to enable the industry to meet the increase in its wage bill that has occurred over the past two years. Moreover, despite the price in- crease and the rise in production that has taken place in the first half of 1974/75, shortages of coal still seem to be widespread. It was also seen in Chapter 5 that the current shortage of power is likely to continue, in many areas at least, for some time to come. Meanwhile the costs of the electricity supply industry have risen and are still rising in line with the general in- crease in wages and prices. It is therefore arguable that both coal prices and electricity tariffs need to be raised further, to a greater extent even than would be warranted by the increases in costs that are outside the control of these industries, and thereafter to be adjusted so as to keep pace with these increases in costs. In the case of petroleum products, attempts to curb demand by means of price increases have so far bben limited to gasoline, kerosene, and naphtha sThese figures are taken from the issue of Commerce Research Bureau, Monthly Review of the Indian Economy, for February 1974. The data relate to the Bombay area, except in the case of hard coke where the reference is to Delhi. SOME QUESTIONS OF POLICY AND PRACTICE 153 for use as a feedstock in the petrochemicals industry. For other petroleum products, prices have been allowed to rise only as a consequence of the change in ex-refinery prices which has resulted from higher costs, and in particular from the increases in the price of imported crude. This is true for instance of light diesel oil and heavy fuel oil for which, as can be seen from Table 30, the present rates of excise duty are actually lower than they were in mid-1970. In the case of high speed diesel oil, the duty was reduced in November 1973, in order to bring it into line with the duty on ke rosene which at the same time was substantially increased. In this case, the current rate of duty is lower than it was in 1965. With respect to such products as light diesel oil, heavy fuel oil, and bitu- men, a further increase in official selling prices can be justified in present conditions. This would at the same time help to curb demand, and therefore imports of petroleum, and to promote greater efficiency in the use of these products. Even for kerosene it appears (as was mentioned above) that short- ages are still frequent despite the earlier price increases, so that open market prices often exceed official selling prices by a substantial margin.6 In these circumstances a further increase in the official price might not cause great hardship to the final consumers who are subject to shortages, as distinct from the intermediaries who profit by the difference between the official and the free market price. Whatever increase may be made in the selling price of kerosene should also apply to high speed diesel oil. Increases in the selling prices of petroleum products could be effected by raising rates of excise duty, by increasing ex-refinery prices, or by some combination of these. It was seen in Chapter 4 that at present the selling price to Indian refineries of domestic crude is no more than $4.58 per barrel, as compared with a current average c.i.f. price for imported crude of at least $11.30 per barrel. It appears that the reason for not raising further the price of domestic crude is to keep down ex-refinery prices, which therefore do not yet reflect the full increase in the international price of crude. In view of the need to restrain demand, this seems to be a questionable policy. It would be preferable to bring domestic crude prices into line with the landed cost of imported crude, and to adjust ex-refinery prices accordingly. This course is recommended in the final report of the Fuel Policy Committee, which suggests that the price of domestic crude to the producer should be at least equal to the long-term cost of production; that this crude should be sold to refineries at a price equal to that of imported crude of comparable quality; and that any difference between the price to the producer and the price to the refinery should accrue to the Government. 6As a recent instance, a premium of 40 percent was reported for the city of Kanpur in Sep- tember 1974. 154 CURRENT PROBLEMS AND FUTURE POSSIBILITIES In addition to allowing ex-refinery prices to reflect the full increase in the cost of crude petroleum to the Indian economy, consideration should be given to raising rates of excise duty on those petroleum products-such as light diesel oil, heavy fuel oil, and bitumen-for which they have fallen in real terms over the past few years. If higher energy prices are to make their full contribution to a better allocation of scarce inputs, they must be reflected in the prices as well as the costs of energy-intensive industries. As was seen in Chapter 3 the most energy-intensive sector by far is transport, and the prices of transport ser- vices should accordingly be allowed or induced to rise in relation to those of other goods and services. At the same time the practice of freight absorp- tion, by which products are sold at uniform delivered prices irrespective of the length of hauls and transport charges, has become even more question- able in this new situation. Similarly, the full cost of higher electricity tariffs should be reflected in the prices of the outputs of power-intensive indus- tries such as aluminum. In addition to their function as a means of allocating limited supplies of energy products, financial incentives including higher prices could be more widely used, in the energy sector as elsewhere, as an encouragement to bet- ter performance. One possible example is the quality of coal delivered to thermal power stations, which as was seen in Chapter 5 has given rise to problems because of its variability. The situation might be improved if by agreement between the mines and power stations that are linked together there was a system of premium payments for maintaining consistent quality. As another instance, the suggestion has been made in H.L. Rhodes's report for the World Bank on the coal mining industry that coal transport by rail might be improved by the introduction of a system of "reverse demurrage," under which the railways would be charged for failure to collect or deliver on time.7 Within each of the fuel and power industries, more attention needs to be given to the structu're of prices or tariffs, as well as to securing a high enough general level. In the case of coal, the difference between different grades and qualities under-the former pricing arrangements was-rather small. As a result, there was a natural tendency for consumers to favor higher grades of coal than were technically necessary, and for shortages of these to develop in relation to lower quality coals. It was seen in Chapter 4 that under the new pricing structure the higher quality coals have in general become relatively more 7Both these suggestions were in fact made some time ago in relation to the steel industry in the study by Johnson (William A. Johnson, The Steel Industry of India, Harvard University Press, 1967: p. 185). The author suggests that "a workable price mechanism could become an important source of coordination for the industry." This seems to be true also of the fuel and power industries, both individually and taken together. SOMEQUESTIONSOF POLICY AND PRACTICE 155 expensive. It has yet to be seen, however, whether these changes go far enough to ensure that these better grades are not consistently in excess de- niand. There is little point in fixing relative prices which give consutners an incentive to use better rather than worse coal, and then introducing admin- istrative regulations to prevent them from doing so. It has been seen that under the new structure, the relative pithead prices per ton for different grades of coal are in direct proportion to useful heat value. This is an important element affecting the value of coal to the con- sumer, while value to the consumer is in turn one element which should affect the relative prices of different grades. Over the longer term, however, account needs to be taken also of the costs of producing coal in different geographical areas and conditions of mining, and to expected changes in these costs of production as the output of the industry increases. To deter- mine prices on the basis of useful heat value alone may be too simple a rule. The Fuel Policy Committee has recommended in its final report that in future coal prices should be separately determined in relation to each pro- ducing area. Within an area, the general level of prices should be such as to enable the mines taken together to cover their costs and earn a 10 percent return on their investment, while it is suggested that the structure of prices "should adequately reflect the value of the specific qualities to the con- sumer as well as the relative scarcity of coal of different qualities."8 In the petroleum industry, relative ex-refinery prices of different prod- ucts are still notionally related to import parity, though in practice this for- mula has not been strictly adhered to. The Fuel Policy Committee's report has questioned the principle of import parity on the grounds that these products are now largely or entirely produced from Indian refineries. However, so long as imports of petroleum products are needed or exports are possible, it seems to be a reasonable basis for deciding internal prices; and with the extension of public ownership of the refinery industry, which means there may be less concern about the possibility that excessive profits would be earned by private interests, it could now perhaps be operated more easily and consistently. The whole question of petroleum pricing has now been referred to an official committee. It is hoped that the review of pricing arrangements in connection with the report of the committee will extend not only to ex- refinery prices but also to selling prices and rates of excise duty. In the electricity supply industry, it would appear that the rationale of ex- isting tariff structures needs to be critically reviewed. At present there is lit- tle reason to believe that the charges made to different classes of consumer bear any consisient relation to the costs of supply. By establishing such a relation, it would be possible to reduce the cost of supplying a given amount 8Financial Express, September 16, 1974. 156 CURRENT PROBLEMS AND FUTURE POSSIBILITIES of power, or (to put the same point in another way) to increase the benefits derived from a given expenditure incurred in the supply of electricity: these gains would result mainly from improved load factors and a flattening of the load curve. In relation to power, the Fuel Policy Committee has recom- mended that tariffs should be designed so as to discriminate adequately be- tween peak and off-peak usage; that there is no case for subsidizing the cost of power supply to any industry; and that "agricultural loads should be charged with due regard to the cost of supplying power to the agricultural sector."9 Within all these industries, and also in looking at the relative prices of different fuels, an attempt needs to be made to relate prices to costs in a more deliberate and systematic way. For this to be possible, a good deal of further analysis is required of current and prospective costs. In addition to periodic reviews by ad hoc committees, questions of energy pricing need to be given thorough and continuous attention, both within the fuel and power industries and in the government agencies concerned. Some new adminis- trative mechanism may have to be created for this purpose. THE COAL INDUSTRY Transport The transport of coal in India is a critical issue both immediately and in the longer term. The present state of affairs with respect to rail transport in the coal fields of West Bengal and Bihar, and the crippling effect it has had on the energy situation and hence on the economy as a whole, have been summ'arized in Chapter 5. It is difficult to think of any sector or aspect of the economy of India in which an improvement in performance is more urgently needed. The problems of the Eastern and South-Eastern Railways in these areas are complex and deep-seated, so that their resolution may well be a long and difficult process. It is possible, however, that some immediate progress towards better relationships and a smoother flow of coal traffic could be made by putting into practice some of the operating procedures that are jointly employed by the South Central Railway and the Singareni Collieries Company in Andhra Pradesh, where working relationships are good and movement of coal is not normally a problem. Over the longer term, a good deal of research and planning need to be un- dertaken on alternative systems for treating and transporting coal. The possibilities will have to be explored of coastal shipping, barge transport in 9Financial Express, September 16,1974. SOME QUESTIONS OF POLICY AND PRACTICE 157 the Ganga and Yamuna river systems, pipelines for conveying coal in slur- ry form, and-the construction of specialized railway lines confined to coal traffic. At the same time, there are alternatives to transporting coal which will also need to be assessed. One such possibility, which is already being developed, is the construction of major power stations in coalfields rather than at load centers, so that energy is transported by high voltage transmis- sion lines rather than in the form of coal by surface transport. Another way to reduce coal movement would be by more refining of coal-for example, through washing or gasification-at or near the point of production, though whether the benefits of this would exceed the costs involved is debatable. The balance of advantage as between different methods and processes for handling coal will change over time, with changes in technical knowledge and input prices. Thorough and continuing inquiries will be necessary to determine the set of techniques, installations and investments which is likely to minimize costs. Some questions of industry policy On a number of matters affecting the coal industry, there may be a need for concerted action to formulate an industry-wide policy, and to extend the interests and responsibilities of the industry further than they have nor- mally been taken in India up to the present. One such matter has already been briefly referred to above, namely stocks, or policy with respect to inventories of coal. Problems of transport and distribution might be considerably eased if strategic stocking of coal at collieries and by major users were to become a planned feature of the dis- tribution pattern. The need has now been accepted to establish dumps of coal, to be supplied by rail in block rakes, for subsequent distribution to consumers by road. These are to be set up by State governments as and when the supply position permits. However, the question of the-size and distribution of stocks at every stage is one in which it may be necessary for the coal industry to take the main initiative, and to provide or to join in pro- viding physical facilities and management skills.'0 Stocks of coal in India are at present surprisingly low. In November 1973 the estimated amount of stocks held by the collieries themselves was rather more than five million tons. This is equivalent to a little' over three weeks' output. Given the prevailing conditions of shortage, this may well be a sea- sonable figure. However, the position with respect to consumers was less reassuring: estimated stocks held by the railways, the steel industry, ther- mal power stations and the other main consuming industries came to just 10The Fuel Policy Committee in its final report has recommended that the industry itself should assume responsibility for establishing dumps. 158 CURRENT PROBLEMSAND FUTURE POSSIBILITIES over two million tons, which is probably less than two weeks' consumption. In a country where coal hasNto.be transported long distances and shipments are subject to delay, this seems a dangerously low figure. " When supplies permit, the industry should enable and encourage the main consuming units to build up their normal inventories to a more pru- dent level, and to go beyond this for temporary periods if output rurxs high- er than demand. A second and related subject which may need more consideration is mar- keting. A strong marketing organization is lacking in the industry, largely perhaps because of what was until recently the large number of firms, and an established tradition that the interests of the individual colliery did not normally extend beyond the point at which coal was loaded for despatch. A marketing organization in direct contact with each mine and consumer might be able to play a more effective role in the distributive network than the various committees which now regulate or supervise the movement and allocation of coal. A third subject in which the industry may need to take a more active in- terest is research and development. It appears that an amount probably less than 0.5 percent of the industry's turnover is now being spent on research and development related to coal, which in view of the prospective expan- sion of production and the problems that need investigation appears a low proportion. Among several topics on which the present scale of effort might be increased over time, one which deserves particular emphasis is the development and testing of mining equipment specifically for use in Indian conditions.. A conscious policy of standardizing equipment has been followed since nationalization, for good reasons; but without the benefit of detailed research and testing there is no guarantee that the most suitable equipment that is available will be adopted as the standard design. On this and other subjects, the industry may need to take a more active role, though in close collaboration with the two existing research establishments on fuel and mining matters, which are and should probably remain independent of it- It is yet to be seen whether the formulation and execution of policies on an industry-wide basis can be successfully reconciled with the existence in the coal mining industry of three independent public sector companies. THE OIL INDUSTRY Exploration and development The dramatic increase in international prices of crude petroleum, and the worse: ing of India's balance of payments situation to which the rise in oil lln the Unlied States it is general practice for major consumers. such as power stations and coke oven units, to hold a stock equal to 60 to 90 days' consumption. SOME QUESTIONS OF POLICY AND PRACTICE 159 prices has been a major contributing factor, have made it necessary to reap- praise earlier programs and policies in relation to exploration and develop- ment. As suggested in the previous chapter, a case has been established for expanding the scale of operations. At the same time a change of emphasis may be needed, in view of the greater urgency of achieving additions to domestic crude production and reserves as soon as possible. This implies a shift in efforts and expenditure towards the development of fields already discovered, which as noted already is the main single constraining factor in the production of crude in India, and also an acceleration of programs for offshore exploration and deeper drilling onshore. In the Draft Fifth Plan reference is made to the need for "maximum effort" in oil exploration and development. It is stated that a number of measures are to be taken to strengthen the organization, management and technical capability of the Oil and Natural Gas Commission, and also to develop indigenous capacity for the design, development and operation of offshore facilities. The Draft Plan then continues: Based on the foregoing considerations, it would be necessary to clearly define the maximum contributions that ONGC can make to the country's offshore efforts. A decision would then be taken on the question of foreign collaboration that may be necessary to supplement ONGC's efforts in the exploration and production of offshore oil.12 The ability of ONGC to carry out the present Fifth Plan program, and preferably even to expand it, is a critical issue in present circumstances. In recent years the Commission has been subjected to a good deal of unfavora- ble criticism, partly perhaps in respect of matters which were not fully under its control. A committee to review the Commission was appointed in July_1971 under the chairmanship of Mr. K.D. Malaviya, the former Minis- ter of'Petroleum who recently rejQined the Cabinet as Minister for Steel and Mines, and who has now resumed his former portfolio as a result of the Cabinet changes which took place in October 1974. In its report made in mid-1972, the Malaviya Committee was highly critical of the past perfor- mance of ONGC, and suggested that there was a need "for both widening the objective of ONGC and raising its status."'3 Although no specific ac- tion has been taken on this report, and in particular the organizational changes which it suggested have not been approved,'4 it is probable that a '2Draft Fiftlh Five Year Plan, Vol. II, p. 167. '3Although the report of the committee was not published, a summary was made available. '4The committee wanted the name Oil and Natural Gas Commission to be attached to a new body, a top-level policy-making group presided over by a chairman with cabinet rank, ser- viced by a new Department of Exploration coming under the Prime Minister. The existing ONGC would then be renamed and reorganized, and would act as the operating agency responsible for implementing the policies decided o't by the new high-level Commission. 160 CURRENT PROBLEMSAND FUTURE POSSIBILITIES number of its criticisms and suggestions have been taken into account in defining the role and program of the Commission in the coming decade. The ONGC's main geographical spheres of activity are three, namely, (a) onshore exploration and development in all parts of India, ex- cept for the very limited areas in Assam at present reserved for Oil In- dia Limited; (b) the offshore program in the very promising Bombay High area of the Cambay basin; and (c) participation in overseas ventures on a collaborative basis, as in the arrangements in Iran and Iraq referred to in Chapter 4. Onshore, these responsibilities leave room only for the restricted activities of Oil India Limited, while in the offshore program possible foreign col- laboration is at present limited to areas apart from the Cambay and Saurashtra basins. Outside India, the ONGC is studying the possibilities of participation in further ventures abroad. The present intended distribution of plan outlays between these spheres of activity was shown in Table 57 in the previous chapter. In the Fourth Plan period, the ONGC completed the greater part of its planned activites, though the end results in terms of additions to oil reserves were: less than had been hoped. Given that foreign exchange is readily available for the purchase of equipment, a substantial increase in ac- tivity should be possible during the Fifth Plan period. While however there appears no reason to question the reliance that is being placed on the Com- mission, there may be a case for allowing or encouraging other agencies to play a somewhat greater part than is at present envisaged for them. As was seen above, this issue has been explicitly raised in the Draft Fifth Plan with respect to the offshore program, but it may be relevant to onshore activities as well. Taking the onshore program first, two possibilities may need to be looked at. One is to permit a larger r6le to be played by Oil India Limited, a course of action which should become. more acceptable if as planned the Govern- ment of India's share in this company is increased beyond the present 50 percent figure. Greater reliance on Oil India should enable a somewhat larger onshore program to be carried out. It would also have the advantage of giving more scope to a second source of ideas and initiative, in a field of activity where it is important to ensure diversity of views and readiness'to try something different. For the same reasons, it might be wise not to ex- clude the possibility of collaborative ventures with overseas interests in par- ticular areas even in the onshore basins of India, on the model of the ar- rangements in which ONGC is already a partner in the Middle East. As to the offshore program, it has already been mentioned that the Government of India has decided to try to establish collaborative agree- ments with foreign companies for the exploration and development of SOME QUESTIONSOF POLICY AND PRACTICE 161 offshore areas other than the Cambay and Saurashtra basins. Hence foreign companies, insofar as such agreements are arrived at, will be permitted to explore in a number ofNsreas on the Continental Shelf including Bengal, Orissa, Cauvery, the Coromandel and Kerala Coasts, and the Andaman Is- lands. This represents a departure from previous policy, in which explora- tion rights were reserved to the State. It reflects a recognition that the change in the international situation has created the need for a new ap- proach to questions of oil exploration. Under this policy, the foreign operators are to enter into production-shar- ing contracts with ONGC. These would be basically similar to the forms of agreement that have been arrived at in Indonesia between a number of foreign companies and the national oil company concerned. In agreements following this model, the foreign operator meets all the expenses and assumes the risk of failure to discover oil in remunerative quantities. Reim- bursement of expenses is made in crude oil, with an agreed maximum per- mitted share of crude reserved to the operator up to the point'at which costs have been recovered. That part of the oil that is not initially earmarked for meeting the operator's expenses, and the whole of the oil after expenses have been met, is shared according to an agreed formula between the opera- tor and the national oil company or government. The sharing arrangement can provide for a sliding scale to allow for changes in' the international.price of crude. It can also provide for the contractor to sell back his share of the oil to the host country at a price reflecting the international market. As noted above, two collaborative agreements on these lines have so far been arrived at with U.S. companies in the spring of 1974. In one case the area allotted is in the Kutch basin, in the northwest, while the other is in the Bay of BengaLhThe price of any crude that is produced will be determined on the basis of ihe current f.o.b. price in the Gulf for overseas crude of com- parable quality. It is possible that further agreements on a similar basis will in time be conc!uded. As has already been seen, much the most promising offshore area is comprised by the Bombay High and neighboring structures in the Cambay basin. Here consideration is now being given to expanding the scale of the ONGC program, and in particular to allowing the Commission to buy and operate a second drilling vessel. The decision to reserve this area to ONGC reflects a clear conception of the permissible limits to foreign participation, and it means that the profits that would accrue from successful develop- ment would not be shared. At the same time, it also means that the risk of failure- though admittedly less than in the other offshore basins where less survey work and no drilling has been done, and the chances of finding useful deposits of oil are therefore much more uncertain-is entirely borne by the Commission. Moreover, the pace of exploration will be limited to what the ONGC can achieve from its own resources, backed though these 162 CURRENT PROBLEMS AND FUTURE POSSIBILITIES are by overseas consulting services. It might therefore be prudent not to rule out at this stage all possibility of overseas collaboration, particularly if it becomes clear that this would enable the exploration program to be com- pleted in a much shorter period. In considering this issue, a good deal de- pends on how large an offshore program ONGC is likely to be able to carry out, and on the degree of urgency which is now placed on proving likely new sources of domestic crude. Assuming that oil is found in the Bombay High structure in substantial quantities, it is probable that some form of overseas financing will be neces- sary at the development stage if undue delay is to be avoided. One of the characteristics of offshore fields is the very high initial capital cost, and much of this may have to be incurred in foreign exchange. It is not too early to consider different possible ways of financing the development of the Bombay High area, and the corresponding implications for the role of over- seas agencies. The oil refining program As was seen in Chapter 6, the plans that have been made for the petroleum refining industry in the Fifth Plan period may need to be recon- sidered in certain respects. This suggestion was raised in the light of the present level of effective refining capacity, the possibility of some reduction in the previously expected rate of growth in demand for petroleum prod- ucts, and the further possibility that major refinery expansion schemes, and particularly the big new refinery at Mathura, may not be completed on schedule. These are all questions relating to total refining capacity, measured in throughput of crude. Increasing the total capacity, however, is only one aspect of refinery planning. Other aspects which have to be considered in- clude the pattern of product demand overall and in different regions, the location of new capacity, and the possibilities of affecting the product yield of refinery output by various forms of secondary processing. These matters are interdependent, so that an optimal refinery plan should determine a set of values simultaneously for each of the variables involved. In doing so, it should also take into account the actual and prospective price relationships of petroleum products entering into international trade. In the past, refinery planning in India has broadly aimed to achieve a high level of self-sufficiency with respect to refined products, while as noted in Chapter 4 secondary processing has been rather limited in extent. Given.this characteristic of the Indian refineries, and in view of the fact that a high proportion of the demand consists of middle distillates, the ten- dency has sometimes been to think of other products as potentially surplus. Thus for example a conscious attempt was made during the 1960s to SOME QUESTIONSOF POLICY AND PRACTICE 163 develop indigenous fertilizer and petrochemical plants based on naphtha as a feedstock, because a surplus of light distillates was otherwise anticipated. More recently, it was thought that a prospective surplus of heavy fuel oil would warrant the establishment of a new generation of fertilizer plants which would be based on fuel oil rather than naphtha. Thus to a certain ex- tent the demand for finished products was tailored to the prospective pat- tern of output from' fairly simple refineries. In the present situation, a rather different approach may be justified, in which the design of refineries is more closely matched to the pattern of product demand. In particular, the prospective demand for fuel oil now seems likely to be affected considerably both by price increases and by ad- ministrative restrictions, since this is the product for which a substitute is or should be readily available, in the form of coal. Rather than expanding total refining capacity in line with the prospective increase in the demand for middle distillates, it might be better to use heavy ends, which should become available because of the switch from fuel oil to coal, as an input into secondary processes, as for example hydrocracking, catalytic cracking, or coking, which would yield further quantities of light and middle distillates. This possibility was raised by the Fuel Policy Committee in its first report of May 1972, and more recently has been explored in some detail by an In- dian academic economist.'5 It would have the advantage of reducing the in- vestment in crude distillation capacity, and also the extent of dependence on imports of crude. On the other hand, additional investment within the petroleum industry would have to be made in the secondary processing facilities that were installed. In considering this choice, much depends on the extent to which substitution of coal for fuel oil can be affected. This will depend on the availability of coal, and also on technical factors still to be es- tablished, such as the degree of success achieved with coal-based fertilizer plants in India. THE ELECTRICITY SUPPLY INDUSTRY A basic and controversial issue with respect to the supply of power is the future organization of the industry. The Draft Fifth Plan states bluntly that "the organizational structure as well as the financial structure of the State Electricity Boards ... has been found to be inadequate for meeting the challenging needs of the 1970s."16 Reference is also made to the need to create an effective Central Electricity Authority together with Regional 15"The Oil Crisis: An Economic Analysis and Policy Imperatives," by Ramesh Bhatia, Eco- nomic and Political Weekly, July 27, 1974; and "Investment Planning for Petroleum and Petrochemical Industries: An Inter-regional Programming Model for India" (Institute of Eco- nomic Growth, Delhi, May 1973), by the same author. 16Draft Fifth Five Year Plan, Vol. II, p. 126. 164 CURRENT PROBLEMS AND FUTURE POSSIBILITIES Electricity Authorities in each of the five existing regions, in addition to carrying out a "restructuring" of the State Electricity Boards. In its conclud- ing sentence, the chapter on power in the Draft Plan says that "it is pro- posed to restructure the organization as also the financial structure of the Electricity Supply Industry in the immediate future."'" At the time of writ- ing it is still not clear what action will be taken on these lines. The need for greater emphasis on the regional and national aspects of power planning was referred to in Chapter 4. There seems to be little doubt that planning has been undertaken in too limited a framework, largely because of the natural concentration of the State Electricity Boards on mat- ters within their own boundaries and spheres of responsibility. Hence in the identification and choice of projects there is a bias against major schemes which extend beyond State boundaries, and there is no comprehensive evaluation to determine the least costly ways of meeting demand on a regional basis. This largely accounts for the fact that only slow progress has been made with respect to a number of much needed and interrelated developments which were referred to in Chapter 4: the extension of inter- State connections; the establishment of effectively functioning regional load dispatch centers; the preparation of long-term plans for the develop- ment of hydro power in the north for sale across State boundaries; and an agreed system of tariffs and working conventions for the exchange of power between Statesystems. As was seen above, it seems clear that this set of issues can only be tackled more effectively if a greater degree of initiative and authority is exercised from the Centre. This in turn presupposes the creation of an effective Central Electricity Authority, as suggested in the Draft Fifth Plan. How far central initiative should be taken in present circumstances is debatable. A radical proposal, which would simplify existing administrative relationships and enable the power system to be planned on a national scale, would be to assign the responsibility for generation and bulk supply exclusively to the Centre, leaving distribution only as the responsibility of the States. In terms of organizational change alone, however, such a reform would mean a considerable upheaval. Further, it would raise basic political and constitutional issues going well beyond the question of how to make the power industry more efficient. A less far reaching suggestion was put forward some years ago by the Energy Survey Committee of India.'8 This would permit the State Electricity Boards to retain ownership of their existing generating stations but these would be operated according to the instructions of a central board, which would also have the exclusive right to construct and operate future stations. "7bid., Vol. II,p. 126. IsReport of the Energy Survey Commituee ofIndia, p. 141. SOME QUESrIONSOF POLICY AND PRACTICE 165 A still more modest and possibly more acceptable proposal would be to extend the scope of central financing and execution of power projects, so that an increasing number of schemes involving more than one State would become the responsibility of the Centre. However, a gradual rather than an ambitious move in this direction might be advisable. In the Fourth Plan period, centrally sponsored generation schemes (excluding the nuclear power program) were planned to contribute 550 MW of new capacity, of which only 100 MW had actually been installed by the end of the period. The ability of the central authorities to manage a large investment program with their current staffing resources has yet to be established. Perhaps the most fruitful approach would be to develop at the same time a number of different ways of planning and executing power schemes on a regional basis, with the choice depending on the circumstances of each in- vestment project. The possibilities include full central responsibility; joint collaboration among the particular States involved; action by the Regional Electricity Boards; and a variety of possible joint venture agreements in which participating States might join with the Centre or with one or more Regional Boards with shared responsibilities. The administrative arrange- ments could be decided in relation to the methods of financing to be adopted, which themselves need not be uniform although an increasing measure of central participation in financing seems likely to be needed. In planning the development of the electricity supply industry, improve- ments need to be made in the present methods of load forecasting, both at the Centre and in the States. It is also probable, especially in the light of re- cent and prospective changes in the price of fossil fuels, that more effort should be put into the identification and preparation of hydroelectric schemes, particularly those which from the beginning must be conceived and planned on a regional basis. In this connection, as was noted in Chapter 4, the stage has probably now been reached at which a full system develop- ment study of the power industry in India should be undertaken. It has also been seen that attention needs to be given to the level and design of power tariffs, which has been raised as a serious issue in the Draft Fifth Plan. In all these matters it will be necessary for the central agencies to take the lead, even though the responsibility for planning and executing the studies that are needed is likely to continue to be shared. THE USE OF ENERCY IN RURAL AREAS It has already been seen that the consumption of electricity in the agricul- ture sector has been increasing extremely fast: the annual average com- pound rate of growth in the decade from 1960/61 to 1970/71 was over 14 percent. This rapid increase in consumption has been associated with an ac- tive policy, supported and partly financed from the Centre, of bringing 166 CURRENT PROBLEMS AND FUTURE POSSIBILITIES electricity to the villages. As was seen in Chapter 6, the Fifth Plan program appears to provide for an increase of about 70 percent in the number of villages electtified, while the total prospective Plan outlays for rural electrification exceed the corresponding amounts proposed for either the coal mining industry or the petroleum industry. Despite the rapid progress that has been made and is in prospect in rural electrification, the effects are necessarily limited, and the program leaves untouched some of the basic problems that arise with respect to the use of energy in rural areas. The main limitations of the rural electrification program, which are to a large extent inherent in the circumstances, are twofold. First, the extent to which the program can be carried to the smaller villages which are not close to main distribution networks is necessarily limited by the high costs in- volved. Unit costs of supply fall both with size of installation and consumer density, while they rise steeply with the length of transmission line in- volved. Second, the power is used in villages very largely for pumping and irrigation purposes, while only about 20 percent on average goes for domestic and commercial uses taken together. Although rural consumption by households is growing rapidly, the absolute amount of electricity used by households in the countryside is extremely small in relation to other fuels. In Table 9, Chapter 3, the consumption of electricity by the agricultural sector in 1970/71, the latest year for which data on aggregate energy con- sumption are available, is put at 3.7 million tons in coal replacement terms. Total household consumption of electricity, virtually the whole of which was in urban areas, came to only 2.3 million tons coal replacement. Thus total rural consumption of electricity on this estimate could not have ex- ceeded 4 million tons coal replacement in 1970/71. By contrast, the esti- mated rural consumption of noncommercial fuels for the same year, as shown in Table 67, was on the order of 150 million tons coal replacement, a figure whictiis expected to rise by the end of the Fifth Plan period to almost 180 million tons. With respect to these dominant forms of fuel consumption in rural areas, there has so far been relatively little study, planning, or concerted develop- ment. In relation to villages as well as urban areas, attention has been almost entirely concentrated on commercial sources of energy.'9 In order both to improve the level of living in the countryside and to encourage a more efficient pattern of energy consumption in India, greater attention needs to be paid to ways of simultaneously increasing the amount of energy that is used in villages and reducing its cost in terms of resources used. 19As will be seen, the work of the Fuel Policy Committee is a recent and welcome exception to this generalization. SOME QUESTIONSOF POLICY AND PRACTICE 167 An important part of a program for noncommercial energy must relate to the use of firewood. As seen in Chapter 2, the present estimated annual consumption in India of wood as fuel is some 130 million tons, which ex- ceeds by some 50 percent the present level of output of the coal industry. From the estimates presented in Appendix 11, it appears that firewood still accounts for perhaps 30 percent of total energy consumption, measured in coal replacement terms, and for two-thirds of the consumption of noncom- mercial energy. Recent shortages of kerosene, together with increases in its selling price, have probably increased the incentive to use firewood as a substitute fuel, in urban as well as rural communities. In view of this heavy dependence on firewood and the harmful effects of this in many areas through depletion and destruction of forest cover, a long-term program is needed in relation to the use of wood as fuel. The main elements in such a program would seem to be the following: (a) to identify and estimate more accurately the locations and ex- tent of the damage that is now being done by felling; (b) to try to restrict the extent of felling where the environmental costs appear to be high; (c) to increase the supply of wood for fuel from existing forests where this could be done at acceptable cost; (d) to establish new forest plantations largely consisting of fast- growing species of trees designed for firewood consumption; and (e) to increase the supply of fuels which can be used as substitutes for firewood, especially in areas which are distant from forests or where the extent of felling needs to be reduced. These elements are interrelated, and need to be looked at simultaneously. Many possible combinations of them exist, and an informed choice can only be made on the basis of a careful eyaluation of the costs and benefits associated with each. This in turn presupposes a broad program of research and development and of inquiry into the facts. With reference to item (d) above, specific reference is made in the Draft Fifth Plan to the shortage of firewood, which is said to be likely to grow worse. Provision is made. for the establishment of mixed plantations, in- cluding trees for firewood, to be raised on waste land, community lands and sometimes in government forests also. The target for these plantations is put at 100,000 hectares over the Fifth Plan period. Although if achieved this would be a useful start, in relation to the current and prospective levels of firewood consumption it represents only a very small contribution. It is possible that a much larger planting program, if only it could be organized, would be justified by the benefits provided. In the present state of technical knowledge, the growth of trees for firewood is probably the most effective use that can be made in India of solar energy as a source of fuel. 168 CURRENT PROBLEMSAND FUTURE POSSIBILITIES As to alternative fuels to firewood, both commercial and noncommercial possibilities exist. The three main commercial substitutes are kerosene, soft coke, and electricity. Of these, kerosene has recently become much more costly, and in relative terms is likely to become more so. Hence as noted above it is likely that firewood will displace kerosene at the margin, rather than the reverse. As to soft coke, it was seen in Table 51 that under the pres- ent Fifth Plan program it is hoped to increase the consumption (and hence the supply) from about 4 million tons in 1973/74 to 9 million tons in 1978/79. Given the coal supply prospects this is an ambitious target, and even if it were attained the total effect on firewood consumption would be modest. Further development of this source of energy for households is, however, one of the possibilities which has to be assessed. In so far as electricity is used for household purposes in rural areas, it is mainly a substitute for kerosene rather than firewood, and has therefore become relatively cheaper in recent months as a result of the rise in kerosene prices. The existing program of rural electrification could be modified, so that more emphasis was placed on total village needs and hence on household consumption as well as agricultural uses, but this might entail costs which were excessive in relation to the benefits produced. A noncommercial source of fuel with considerable potential, in rural areas particularly, is the gas which can be derived from cow dung and other natural wastes by anaerobic fermentation. The gas contains by volume about 55 percent methane and 45 percent carbon dioxide, and can be used for cooking, lighting, and as a fuel for energizing pumpsets. The residue that is left after gasification makes a good organic fertilizer, so that the process is a dual-product one. As a result of recent increases in the prices not only of fossil fuels but also of inorganic fertilizers, the prospective net benefits from the installation of "gobar" gas plants for the production of fuel and fertilizer from cow dung must have increased substantially over the past 18 months.20 An advantage of gobar gas plants is that they can operate successfully on a small scale, with a gas output as low as two cubic meters per day. This minimum scale of production would require no more than four or five head of stalled cattle, while the total capital cost at current prices and with the ex- isting technology might be on the order of Rs. 3,000. In the absence of facilities for distribution and storage, the largest practicable size of plant would have a gas capacity of about 100 cubic meters per day. At present the process is used mainly by establishments such as dairies, and by family or farm units, for their own consumption only. 20A very useful and informative survey of this subject has been given in a recent paper: "Bio-Gas Plants-Projects, Problems and Tasks," by C.R. Prasad, K. Krishna Prasad and A.K.V. Reddy (Economic and Polifieal Weekly, Vol. IX, Nos. 32-34, August 1974). SOMEQUESTIONSOF POLICY AND PRACTICE. 169 On the basis of present evidence relating to costs and benefits, there seems to be a strong case for extensive adoption of this process, particularly in areas of the country which are deficient in forest resources and not close to main transmission lines. Although there exists a publicly supported program operated by the Khadi and Village Industries Commission, which provides technical and financial assistance for the construction and opera- tion of gobar gas plants, it seems likely that a considerably larger promo- tional effort would be justified in present circumstances. This effort should be directed not merely to establishing plants in villages, but also to research and development work designed to reduce the unit costs of the process and to increase its prospective availability. At present a serious limitation of gobar gas plants is that only a small minority of rural families own the minimum number of cattle required to supply them. Thus the direct benefits of installing them more widely on a family unit basis would accrue to the richest members of a village. Larger plants could be established on a village basis, and the costs of producing gas and fertilizer would fall as the scale of production increased. In this case however further substantial costs would then be incurred for distribution and metering if the gas were distributed by pipeline, or alternatively for storage facilities.2' Hence although a program to encourage the installation of the present smaller designs for families or enterprises can be justified, because of the high prospective return involved, provision should be made for recovery of costs where financing is provided from public funds. At the same time, the possibility of establishing small plants to be operated by village authorities or on a cooperative basis should be explored, for sales to the poorer families, while research and development should be directed not only to improving the small-scale process but to developing more effective methods of distribution or storage which would enable village-scale plants to become competitive. It is possible that the process has the potential to become established as a major source of energy and fertilizer in the countryside. It seems clear that the twin subjects of noncommercial fuels and the energy consumption of the rural areas both need more attention and more resources. In this connection, some pertinent points were made in the in- terim report of the Fuel Policy Committee, which was completed in May 1972. The Committee recommended that there should be (a) regular surveys and analysis by the National Sample Survey Organization of the consumption of noncommercial fuels; 21Unfortunately, pipeline distribution over any but short distances requires compression or pumping of the gas because of the'low pressure at which it is generated, while the gas cannot be easily and cheaply stored under compression for sale in containers. 170 CURRENT PROBLEMS AND FUTURE POSSIBILITIES (b) an inventory of forest resources and potentialities, with a view to determining the extent to which supplies of firewood could be drawn from existing forests and from newly established forests plant- ed with quick-growing species for firewood purposes; (c) greater financial and organizational support to the scheme for establishing gobar gas plants; (d) an increase in the availability of soft coke for household use, and of coal for use in brickmaking in place of firewood; and (e) research and development work on ways of improving the cook- ing and heating appliances commonly used in small towns and rural areas. It is not clear how far these recommendations have yet been translated into action. However, it appears that in its final report the Fuel Policy Commit- tee has again concerned itself with the problems and opportunities arising from the use of noncommercial fuels, and with the need for new develop- ments to be undertaken in relation to the use of energy in rural areas. WORLD PETROLEUM PRICES AND THE ENERGY PROBLEM IN INDIA India is one of the countries that has been worst affected by the recent in- creases in world petroleum prices. Because of this, the conclusion is some- times drawn that a radically new set of energy policies has become neces- sary, and that the main objective of energy policy in the new situation is to curb consumption of petroleum products, preferably by using indigenous fuels in their place, so as to reduce dependence on imports. In this conclud- ing section a brief analysis is given of the effects and implications for India of the increase in oil prices, looking particularly at energy problems, the ex- ternal payments situation, and the ways in which the two are related. In certain respects, the rise in oil prices has made little difference to the energy situation. This is because many of the current problems of the energy sector are internal to India, and arise in connection with the supply and distribution of indigenous fuels. Thus the shortages of electric power and coal, which were described in Chapter 5, existed before the world petroleum market changed and cannot be attributed to the change. These shortages have not become more difficult to correct as a result of higher oil prices, nor are the corrective measures that are called for different in any significant way from what they were before. Again, the world petroleum situation has little bearing on the various issues of policy that were raised above in connection with the coal mining and electricity supply industries. An obvious respect in which the rise in oil prices has changed the situa- tion is that the real cost to the Indian economy of using petroleum is now much higher in relation to possible substitutes derived from coal, electricity and other sources. This change in relative costs can and should be reflected SOME QUESTIONSOF POLICY AND PRACTICE 171 in the relative prices of different fuels,22 so as to induce consumers to carry out forms of substitution which would reduce the cost of energy supply to the economy. The pattern of demand for energy products needs to change accordingly, and the supply of these products has to adjust itself to the change. The case for reducing dependence on oil on grounds of cost saving is therefore clearly established. This case however is valid quite apart from any need to improve the balance of payments. It would therefore not be correct to say that the only reason for curbing petroleum consumption is to reduce the degree of dependence on imports. This can be seen by imagining what the position would be if India's con- sumption of petroleum products could be entirely met from domestic sources. In this situation the increase in world petroleum prices would not have given rise to any problem with respect to the balance of payments or external financing. But it,would still be the case that the real cost of using petroleum within India would have risen in line with the world price, so that the argument for reducing dependence on it would still apply. In order to ensure that the output produced from domestic crude oil used within In- dia was not less valuable than the imports which could have been obtained by exporting the oil, the domestic price should be raised to the level of the export price. Thus it would pay India (or any other country) to shift away from oil even if it was a net petroleum exporter. On grounds of cost saving, the main argument for increasing the consumption of fuels such as coal and electricity at the expense of petroleum products is not that these fuels are indigenous, but simply that their cost to the economy has become relatively lower. This however is not the end of the story. It is true that in some respects India's energy problems have not been created by the increase in oil prices nor greatly changed by it, and also that this increase would justify some switching to other fuels even if it had not affected the external payments situation. However it is also true that the increase has had extremely serious effects on India's external position, and that this in turn has certain implica- tions for what may need to be done in relation to energy questions. In order to see how this is so, it is necessary to consider the ways in which the rise in oil prices has affected the countries which are dependent on petroleum imports, and to give some indication of the orders of mag- nitude of these effects in the case of India. For this purpose it is convenient to distinguish two separate though related consequences which the increase has brought about. First, it has made the importing countries poorer than they otherwise would have been, by raising the cost in real terms of petroleum products 22As has been seen in Chapter 4, this has not yet happened in India, since the price of domestic crude petroleum to Indian refineries has been increased only moderately. 172 CUR RENT PROBLEMS AND FUTURE POSSIBILITIES that enter into industrial use and final consumption. This change can also be described as the terms of trade effect- that is, the effect on real national income of the worsening of the terms of trade that is attributable to the rise in petroleum import prices. Second, the rise in oil prices has created an actual or potential transfer problem, or external financing problem, resulting mainly from the need to increase the flow of receipts of foreign exchange in order to meet higher total import bills.23 If for a particular importing country this problem becomes sufficiently intractable, difficulties may arise in financing the flow of imports needed to maintain the level of production (including production for export). In such a situation, production and therefore real income could easily be still further reduced, over and above the direct effect on real in- come (but not on production) of the worsening of the terms of trade. With respect to the first of these two mechanisms, the terms of trade effect, the consequences for India of the rise in world crude petroleum prices have been limited by two factors. First, India is not a heavy con- sumer of petroleum products even in relation to total national income. Sec- ond, about 30 percent of petroleum consumption is met at present from domestic sources. In round terms, India's gross national product at factor cost in 1972/73 may be put at rather more than Rs. 400 billion. Taking for il- lustrative purposes a volume of petroleum imports of 17 million tons24 and an average price of Rs. 700 per ton corresponding to the present situation, a total petroleum import bill is derived of close to Rs. 12 billion. Since oil prices have roughly quadrupled, some three-quarters of this amount, or Rs. 9 billion, may be taken as the increase in the cost of petroleum imports into India which is due to the increase in world oil prices.25 In relation to the total gross national product, this is a little more than 2 percent. If GNP were to grow at the official target rate for the Fifth Plan period given in the Draft Fifth Plan, which is 5.5 percent per annum, the loss arising from dearer petroleum imports would be made good in less than six months. It is true that actual rates of growth in the past few years have been well below this figure, while any reduction in income is a matter for concern in a country as poor as India. However, the terms of trade effect is considerably smaller for 23For all petroleum importers as a group, a transfer problem arises because the earnings from petroleum exports of some of the oil-producing countries have greatly outrun the amounts that they can usefully spend on imports of goods and services. Hence the emergence of "recycling" as an issue in international monetary affairs. 24Total imports of petroleum including both crude and products, as shown in Table 47, came to 17.4 million tons in 1973. The current level may be somewhat less than 17 million tons, but only because of the direct limitation which has been imposed on the level of petroleum imports in order to reduce foreign exchange outlays. 25This figure takes no account of the increase in the cost of fertilizer imports into India, which is partly accounted for by higher petroleum prices. However the broad conclusion stated here would not be affected by making allowance for this. SOME QUESTIONS OF POLICY AND PRACTICE 173 India than for a good many other developing countries, including particu- larly Korea, the Philippines and Thailand. The situation looks very different however when the transfer or external financing problem is considered. In this connection, two other factors become relevant. One is the size of the increase in the cost of petroleum im- ports in relation not to a country's national product but to the main items in its external accounts with the rest of the world. The second is the outlook for the balance of payments with respect to items other than petroleum im- ports. In relation to both these factors, India is one of the countries that are most unfavorably placed. The importance of dearer petroleum imports in relation to the balance of payments can be illustrated by a few more statistics. Taking the increase in the petroleum import bill again as Rs. 9 billion, this amount comes to well over 40 percent of total commodity exports in 1973, and to about 30 percent even of the considerably higher figure now projected for the value of ex- ports in the current financial year, 1974/75. It is also roughly equal to the present level of India's official holdings of international monetary reserves. Even in favorable circumstances, a sudden increase in the cost of imports of this order of magnitude would raise difficulties for the balance of pay- ments and external financing: to have to increase total exports by 40 per- cent in order to finance a constant volume of petroleum imports implies a very large adjustment and transfer problem. In India's case moreover the circumstances were and remain unfavorable. Even before the rise in oil prices, the volume of imports was already subject to very severe quantita- tive restrictions. The rise. in import prices has affected items other than petroleum, even though not so dramatically, while some of India's principal exports have not shared in the recent boom in commodity prices. Just re- cently the disappointing 1974 monsoon has increased India's prospective dependence on imports of food grains. Thus the outlook for the balance of payments is in many ways depressing, and the position in relation to exter- nal finance could easily become critical. It is in this respect that the conse- quences for India of the increase in world oil prices must be regarded as ex-, tremely serious. In these circumstances it has become necessary to try to reduce depen- dence on imports of petroleum, by steps which go beyond what would result from merely allowing the internal prices of these products to rise in line with the cost of imported crude. This explains the measures which have been described above-the direct limitation on the current level of petroleum imports, and the steep increases in rates of excise duty on certain petroleum products. Thus a conscious attempt to shift energy demand towards indigenous fuels is one aspect of energy policy which has indeed become a good deal more significant as a result of the increase in oil prices, because of India's very difficult external position. 174 CURRENT PROBLEMSAND FUTURE POSSIBILITIES At the same time, two qualifying considerations need to be kept in mind when considering the extent to which a planned change in the pattern of energy demand would help to improve the prospects for India's balance of payments. First, the problem is one of external payments as a whole, and not just of petroleum imports alone, even though it is the increase in the cost of these which has largely contributed to' making the problem so much more acute. Thus action to reduce dependence on imported petroleum is only one of a very wide range of measures which might be taken, with a view to influencing one or more of the following: (a) the capacity and incentive to export, so as to increase foreign ex- change receipts; (b) the capacity and incentive to produce goods which could replace imports without undue increases in costs, so as to enable foreign ex- change expenditures to be reduced; (c) the volume of imports, so as to reduce directly foreign exchange expenditures; and (d) foreign exchange receipts from overseas borrowing on- terms which are acceptable to India. If the problem is stated in this way, it becomes.apparent that action to restrict the consumption of petroleum can help matters in only two of the four ways listed above: replacing oil from increased supplies of other fuels comes under the second heading, while a direct cut in petroleum imports comes under the third. Even in relation to the two spheres of action in which it operates, a reduction in petroleum consumption is only one of many possibilities-though in view of the current size of the petroleum im- port bill, a considerable one. Too much should not be expected from cuts in the use of oil.26 A second consideration is that even for the purpose of reducing depen- dence on imports, which is undoubtedly needed in the present situation, ac- tion to restrict the consumption of petroleum products could easily be car- ried too.far. This is particularly likely to happen when the action takes the form of administrative regulations. Beyond a certain point, which is not easily determined, direct limitation of oil imports could affect production and the capacity to export. Again, enforced substitution of other fuels for petroleum can bejustified only if it does not lead to undue increases in cost; and in making cost comparisons all costs are relevant, not just the direct costs of fuel alone or petroleum alone. Thus for example rail transport is 26The question of how the present external payments problems can best be handled falls outside the scope of this discussion: it could well be made the subject of a much longer book than this one. However, it is perhaps fair to make here the general point that so far as possible improvements should be sought through expansion-both of exports and of domestic produc- tion which could easily replace imports-rather than through further direct cuts in imports, which could make expansion more difficult to achieve. SOME QUESTIONS OF POLICY AND PRACTICE 175 both less energy-intensive and less dependent on petroleum than road transport. It would be wrong however to infer from this that drastic admin- istrative action should now be taken to compel traffic to go by rail rather than road. The choice of transport mode should have regard to all the other costs involved, which still greatly exceed the immediate costs of fuel. Measures which try to reduce oil consumption without regard to the total costs involved would in fact be harmful to the balance of payments, though in ways that might not be directly obvious or measurable, because they would reduce the efficiency with which productive resources were used in India. Whether existing and planned curbs on oil consumption have gone far enough is debatable. There appears to be some danger that current measures will be subject at the same time to two opposite errors. On the one hand, failure in the case of some petroleum products to increase either ex- refinery prices or rates of excise duty, so as to keep them in line with the in- crease in world petroleum prices, may permit some consumption of these products to continue when it is no longer justifted on grounds of cost. At the same time administrative actions, such as making industrial licenses conditional on the use of certain fuels, may in some cases reduce or preclude the use of petroleum products when even in the new situation it would be less costly than the alternative. In considering the present interconnections between the energy sector and the external payments situation, it is possible to place too much empha- sis on the negative aspect of restricting petroleum consumption, necessary though this has become. More positive forms of action are also desirable. In particular, an-increase in supplies of coal and power over the next year or two, which would enable the present disruptive and often crippling short- ages to be brought to an end, would not only make it easier to reduce certain forms of petroleum consumption: it would also make possible an'increase in the output of exports and of goods which are now being imported because the domestic capacity to produce them cannot be properly utilized, and would thus contribute to helping the balance of payments. It is through these two energy industries above all that real progress could be made in the short run towards enabling India's productive potential to be fully used. The need for this was apparent before the increase in oil prices. It has become even more acute however with the worsening of the external pay- ments situation. This argument applies even more strongly to an increase in the domestic production of crude petroleum and natural gas. Partly just because oil prices have gone up so much, but also because of the effects of this on the balance of payments and on external financing problems, it has become consider- ably more urgent to expand and accelerate Xso far as practicable the programs for exploration and development which had been drawn up 176 CURRENT PROBLEMS AND FUTURE POSSIBILITIES before the world petroleum situation was transformed. Hence as was seen in an earlier section of this chapter, there may be a case for reviewing some of the basic premises on which exploration policy is at present founded. With respect to the domestic petroleum sector, it is clear that the new situa- tion has created the need for new measures. In broad terms, the main immediate objective of energy policy is clear: to increase the output and available supplies of domestically produced coal, power, and petroleum, both by timely completion of existing investments and by making better use of capacity already installed. Meanwhile, measures including pricing policy should be further developed in order to ensure that existing supplies are used as productively as possible, and that the.demand for petroleum products is curbed. For the longer term, the main objective becomes that of minimizing the expected cost of meeting prospective energy demands. This is a complex task, which includes the choice of fuels, processes and techniques; the ap- propriate selection and timing of investments; and in relation to each of these, consideration and appraisal not only of the production of energy products, but also of their transport, distribution and usage patterns. It will require thorough, continuing and realistic analysis, based on full and up-to- date information, together with institutional arrangements which provide for each of these. In relation to the longer term objective also, there is con- siderable scope for using pricing policies as a means of coordination, both within each of the energy industries and in their relations one to another. POSTSCRIPT SINCE THIS BOOK was completed in October 1974, some more recent data have become available and new developments have taken place. As to the data, these have so far as possible been incorporated above into each of the tables concerned. Where comment was necessary on these new figures, it has been made at the appropriate point in the main text, mainly in Chapters 4 and 5. Accordingly this brief postcript contains no tables, and deals only with those recent developments which need to be recorded and which are not covered in the changes that have been incorporated into the main text. Two of these in particular should be mentioned, both of them favorable. First, the situation with respect to coal production and transport has con- tinued to improve. It now seems likely that total production for the finan- cial year 1974/75 will be close to the revised target of 88 million tons, which is about one-eighth above the level of the previous year. This increase has been made possible partly by improvements in working methods within the mines, but also by more reliable power supplies (particularly in Bihar), and by a continued increase in the number of wagon loadings. As a result of higher output and despatches of coal, it appears that for the time being at least there are no longer any serious shortages, while stocks in the hands of important consumers such as power stations and cement works have been built up to a more satisfactory level. The present official target for coal pro- duction in 1975/76 is 98 million tons. To achieve it would require a con- tinuation of the recent favorable trends within the coal industry itself and in the industries which it depends on. While the prospects for this are un- certain, there can be no doubt that the coal situation looks a good deal better than it did at the beginning of the current financial year. The second encouraging development relates to domestic production of crude oil.On the Bombay High structure, which as noted above is at present much the most promising area for future discoveries of petroleum in India, the results from the third well which has now been drilled have been favor- able. In consequence, it has now become more likely that very substantial reserves of oil are there to be developed. The Chairman of the Oil and Natural Gas Commission in a recent statement held out the hope that over a period of some five years, from 1976 to 1980, production from this area could be developed to an annual rate of 10 million tons. The total cost of this development might be of the order of Rs. 4-5 billion, or $500-600 million. The fact that development on this scale and within this time period may prove technically possible lends emphasis to the point made above, in the section on the oil industry in Chapter 7, that it is not too early to draw up financing plans for possible forms of development of the Bombay High field. 177 178 POSTSCRIPT Apart from these two changes, the position has not greatly altered. The situation with respect to power supplies remains bad. It is impossible at pres- ent to forecast with confidence a date by which it will begin to improve, still less the time when shortages and restrictions on supply will become an ex- ceptional rather than a normal state of affairs. With respect to petroleum imports, the distinction between equity crude and other sources of supply, and hence between purchases from the private oil companies and from governmental agencies in the supplying countries, has now ceased to be relevant for India. Company oil is no longer cheaper, and there is in effect a single market price for crude purchases from whatever source. In the section on oil in Chapter 5 above it was suggested that a unified market for crude was likely to develop as the interests of the private oil companies were progressively taken over, and that broadly speaking crude prices in future could be expressed to reflect approximately, and possibly after a certain interval of stability, the average export prices of the developed countries. This still seems to be a reasonable guess. Mean- while the problem of financing imports of petroleum has become if any- thing more acute for India, since there is no sign that the special financing arrangements referred to in Chapter 5 above, which apparently covered in each case only one year's purchases, will be made available by any of the oil-producing countries for current or future purchases. Hence direct limita- tion of petroleum imports is likely to remain in force. Because of this and also because of the power situation, the supply of energy products will prob- ably continue to be a constraining factor on the economic development of India, even if the recent welcome improvement with respect to coal is maintained. (February 1975) APPENDIX I AGGREGATIVE MEASURES OF ENERGY When analyzing changes in total production or consumption of energy, and in the relative shares of different sources of energy within the totals, it is necessary to express these sources in terms of some common unit of measurement. One standard method of doing this is to measure different fuels in terms of their heat value. Thus the original units, expressed for in- stance as tons or kilowatt-hours or cubic meters, are all converted into kilocalories or therms. An alternative related measure is in terms of tons of coal equivalent. For fuels directly derived from coal, the measure is then in terms of the number of tons of coal required to produce a unit of each. In the case of electricity generated from fuels other than coal, the measurement is in terms of the coal that would have been needed to generate the same amount of power. Where these forms of equivalence do not hold, as with oil products which are neither produced from coal nor direct substitutes for it, the coal equivalence is established on the basis of heat values. In India the Energy Survey Committee in its report adopted the practice of expressing other fuels in terms of coal replacement ratio. This is in most respects similar to the method of coal equivalence. Once again, products manufactured from coal, such as coke, are measured by the amount of coal needed to produce a ton of each. Electricity from hydro or nuclear sources is also treated in the same way, in terms of the coal required to generate the same amount of power. In the case of oil products, however, the Committee in effect applied to these a test rather similar in principle to that usediin the case of electricity, namely that of determining how much coal would be re- quired to substitute for these products in their actual uses, taking account of the efficiency with which they are believed to be used in India. Thus for ex- ample the coal equivalent amount of a ton of high speed diesel oil, which would be based on thermal value comparisons, would come to approxi- mately 2 in India. But its coal replacement ratio as determined by the Energy Survey Committee is 9, on the grounds that 9 tons of coal would have been needed for locomotive use by the Indian Railways to replace a ton of diesel oil. For all petroleum products other than fuel oils and other heavy ends, the committee's coal replacement ratios greatly exceed the coal equivalent values. For all petroleum products directly used as energy, the average ratio of consumption in coal replacement to consumption in coal equivalent terms is 3.25. Hence use of this measure considerably raises the share of petroleum products in estimated energy consumption. Since the publication of the Energy Survey Committee's report, it has been common practice within India to measure energy on the basis of coal replacement value, and in particular this convention has been adopted by 179 180 APPENDIX I the Fuel Policy Committee. It has therefore been followed in Chapter 3, where changes in total energy consumption are analyzed. The specific coal replacement values that have been used by the Fuel Policy Committee are set out in the following table. The Committee departed in one respect from the pra'ctice of the Energy Survey Committee, which had used a single average replacement ratio of 6.5 for all petroleum products. The Fuel Policy Committee, while using the same ratios for each of the four classes into which petroleum products were grouped for this purpose, used the four individual ratios separately rather than in the form of a single representative weighted average. It is the Fuel Policy Committee estimates of petroleum consumption that have been presented here. TABLE 63. Coal Replacement and Conversion Factors Coal Fuel Unit Replacement Hard coke I ton 1.3 tons Soft coke I ton 1.5 tons Firewood and wastes I ton 0.95 ton Charcoal Iton 1.0 ton Petroleum Products Motor spirit I ton 7.5 tons Kerosene and LPG I ton 8.3 tons Diesel oil I ton 9.0 tons Heavy ends I ton 2.0 tons Electricity 1,000 KWh 1.0 ton SOURCE: Data supplied by the Planning Commission. The choice of units of measurement makes a considerable difference to the apparent pattern of energy supply in India. This is brought out in Table 64, which compares the estimated percentage shares in aggregate energy consumption in the year 1970/71 of the main categories of fuels. It can be seen from the table that according to the common denominator that is adopted the share of electricity varies from just over 3 to just under 16 percent- that is, by a factor of nearly five. The share of total commercial energy comes to over one-half if the coal replacement basis of measure- ment is used, while in kilocalories it is not much more than one-third. Such wide variations are evidence of the limitations and uncertainties associated with any aggregative measure of energy consumption or supply; and these are superimposed in the case of India on the uncertainty which also exists with respect to the amounts of noncommercial fuels consumed, which is described in Appendix 11. A more satisfactory measure of total energy consumption, and of changes over time in this total and its composition, could in principle be APPENDIX I 181 TABLE 64. Energy Consumption in 1970/71: Shares of Various Fuels on Three Different Measures (percentages) Million Million Tons Tons 1012 Coal Coal Kilocalories Equivalent Replacement Commercial fuels Coal 20.2 16.5 13.6 Oil 12.1 9.8 25.9 Electricity 3.3 15.7 12.8 Total 35.6 42.0 52.2 Noncommercialfuels 64.4 58.0 47.8 Total, atl fuels 14O.0 100.0 100.0 SOURCE: Data supplied by the Planning Commission. based on expenditure series at constant prices. However, such a series has not been developed for India, and in any case it would also be subject in present conditions to considerable arbitrariness and uncertainty because of the difficulty of imputing prices to noncommercial fuels which may not be bought or sold at all, and for which if they are bought or sold no record ex- ists of the prices at which the transactions take place. In international practice, energy consumption is more commonly measured in coal equivalent units, and not in terms of coal replacement. Hence the data presented in Tables 6 and 8, which relate to consumption of total energy and of commercial energy in India over the period from 1950/51 to 1970/71, are also given, in Tables 65 and 66, in million tons of coal equivalent. TABLE 65. Estimated Energy Consumption, Commercial and Noncommercial: Coal Equivalent Basis, 1953154 to 1970/71 1953/54 1960/61 1965/66 1968/69 1970/71 Amounts consumed (inn. Ions, coal equivalent) Commercial energy 44 71 102 120 130 Noncommercial energy 127 147 l64 175 183 Total 171T 28 266 T95 313 Percentage shares Commercial energy 25 33 39 41 42 Noncommercial energy 75 6? 61 59 58 Total 10 T 1 o0 To00 100 NOTrE: The corresponding figures in coal replacement terms are set out in Chapter 3, Table 6. SOURCE: Data supplied by the Planning Commission. 182 APPENDIX I TABLE 66. Commercial Energy Consumption by Main Fuels: Coal E3quivalent Basis, 1953/54 to 1970/71 1953/54 1960161 1965/66 1968/69 1970/71 Anounts conswned(mn. tons, coal equivalent) Coal(directuse)l 28.7 40.4 51.8 53.0 51.4 Petroleum2(direct use)l 7.3 13.5 19.9 25.3 29.9 Electricity 7.6 16.9 30.6 41.5 48.6 Total 43.6 70.8 102.3 119.8 129.9 Percentage shares Coal 66 57 51 44 40 Petroleum 17 19 19 21 23 Electricity 17 24 30 35 37 Total 100 100 100 100 100 1. Direct use excludes coal and oil that is used for conversion to electricity. 2. Figures for petroleum exclude consumption of nonenergy products, such as naphtha for use as feedstock, lubes and greases, and bitumen. NOTE: The corresponding figures in coal replacement terms are set out in Chapter 3, Table 8. SOURCE: Data supplied by the Planning Commission. Measured in coal equivalent terms, commercial energy came to only one- quarter of the estimated total energy consumption in India for 1960/61, ris- ing to 42 percent by 1970/71. The corresponding percentage shares in coal replacement terms, as shown in Table 6, were 32 percent and 52 percent. The difference arises because of the considerably higher weight given to oil consumption when measured in coal replacement terms. In Table 66, the absolute amounts and relative shares are given in coal equivalent terms of coal, petroleum and electricity in total consumption of commercial energy. Total commercial energy consumption in India in 1970/71 in coal equivalent terms is estimated to have been 130 million tons, as opposed to 197 million tons coal replacement. The difference is ac- counted for by petroleum, the share of which in 1970/71 was only 23 per- cent if measured in coal equivalent terms, whereas by the coal replacement measure, as shown in Table 8, it comes to 49 percent. APPENDIX II ESTIMATES OF CONSUMPTION OF NONCOMMERCIAL FUELS There is no firm basis for estimating the consumption in India of non- commercial fuels, and the estimates derived below represent no more than an illustrative hypothesis. Informed estimates of domestic consumption of these fuels have been made only in a few studies, none of which is very recent. The Energy Survey Committee's Report relied on two inquiries that had been carried out by the National Council for Applied Economic Research. One of these related to domestic energy consumption in Delhi, Bombay and Calcutta in 1958, while the other was a survey of rural savings published in 1962. From these it was possible to estimate average annual fuel consumption per head, measured in terms of the coal replacement ratios adopted by the Commit- tee, in urban and rural areas. Total domestic consumption of each fuel, and therefore consumption of the three noncommercial fuels taken together, could then be estimated in a particular year-the Committee took 1962/63-by using these figures for per capita urban and rural consumption in conjunction with the estimated urban and rural population for that year. A further set of coefficients for domestic per capita fuel consumption, with somewhat different values, emerged from the results of the Eigh- teenth Round of the National Sample Survey, which relates to the period from February 1963 to January 1964. Since then no evidence has been col- lected for the rural population-which still forms 80 percent of the total-which would enable these two sets of past estimates to be checked or brought up to date. The only survey of domestic energy consumption since 1964, which was carried out by the National Council for Applied Economic Research and published in 1973, concerns the Bombay area. In default of any recent evidence apart from this latter study, the Fuel Policy Committee, in projecting consumption of noncommercial fuels, made two assumptions which have also been adopted here. First, the coeffi- cients given in the Energy Survey Committee's Report were used, rather than those implied by the National Sample Survey inquiry. Second, these values, which the Energy Survey Committee presented as applicable only to the year 1962/63, were assumed to remain constant in later years. Thus ur- ban consumption of noncommercial fuels is taken to rise in line with total urban population, and rural consumption with rural population. Projected total consumption per head may then change over time, but only because of shifts in the balance between urban and rural population. In the series derived below, it is assumed that these coefficients can be applied not only to the years after 1962/63, but also to the period before. For the urban population, the average consumption per head of noncommercial 183 TABLE 67. Estimated Urban and Rural Population, and Consumption of Noncommercial Fuels, Past and Projected 1953/54 1960t61 1965/66 1968/69 1970/71 1971/72 1972/73 1973/74 1978/79 Population (inillions) Urban 67 78 92 101 108 111 115 120 143 Rural 311 357 395 420 438 448 457 465 514 Total 378 435 487 521 546 559 572 585 657 Noncommercial fuel consumption (m .tc.r.)1 Urban 20 23 27 30 32 33 34 35 42 Rural 108 124 137 145 151 155 158 161 178 Total 127 147 164 175 183 188 192 196 220 1. Million tons of coal replacement. > SOURCES: Sources and methods are described in the text of this Appendix. z APPENDIX 11 185 fuels is put at 0.295 tons of coal replacement, and for the rural population at 0.346 tons. Each of these figures is derived by inference from data given in the Report of the Energy Survey Committee. In Table 67 estimates of aggregate consumption of noncommercial fuels are derived for selected past years, for a sequence of recent years, and for 1978/79, which\is the final year of the Fifth Plan period. Since per capita consumption is given and taken to be constant throughout, with the values just quoted for urban and rural areas, the only additional information needed is the urban and rural population for each year. The population series shown in the first two lines of Table 67 are based on recent estimates of total population made within the World Bank, which have been roughly adjusted to bring them onto a calendar year basis. The urban and rural shares of the total were arrived at by interpolation from the official published figures for census years. The estimates of total popula- tion, and hence of the urban and rural. population also, differ somewhat from the official published series. These differences however have a negligible effect on the estimates for consumption of noncommercial fuels, which in any case, as already noted, are subject to far greater uncertainty because (1) the 1962/63 estimates of per capita consumption are subject to error, and (2) the assumption of constant per capita consumption is unproven. Only the last line of Table 67 is of direct interest here, but the full set of series is shown so that the sequence of computation can be followed. INDEX ACC-Vickers-Babcock, 144 Civil works: construction delays in, 91, 146 Aluminum shortage, 144 Coal: allocation to consumers, 47; ash con- American Oil Company (Amoco), 57 tent of, 8, 10. 92: consumption of soft coke, Animal power: energy derived from, 25, 26 168. consumed for energy purposes,29,31, Arab petroleum exporting countries, 105, 38-40; conversion to, 116, 163; deposits of, 109-11 10-11 equivalent, 179; fields, 10; lignite Assam Oil Company, 55, 62; production of, reserves, 10; marketing, 158; prices, 42, 128 44-45, 47; public ownership of, 38, 48-50, Assam oil fields, 13-15, 55, 129 126; reserves, 7-8, 10-11; reserves of Atomic Energy Commission (India), 82 prime coking, 7, 9; seam size, 7, 10; use by Atomic Energy or Canada Limited, 83 sector, 30-31; workable reserves, 8. See AVB. See ACC-Vickers-Babcock also Coke, soft; Fifth Five Year Plan (coal) -coking: production of, 38-39 -mining equipment: shortage of, 121-23; Balance of payments: and need for foreign standardization of, 158, use of, 40 exchange receipts, 174-75; implications of -mining industry: average production of, petroleum imports for, 112, 158-59; and 40; employment in, 41, 43-44; extraction worsening of terms of trade, 172-73 methods, 40: industrial consumption, Bengal/Bihar coal fields, 124, 126, 156; aS 39-40, 120: labor productivity, 41-42; coking producer, 11: and hydro resources, mines, 40,46; nationalization of, 40,42-43, 16: production from, 38-39, 100-01, 104: 48-49, 100: planned consumption changes, rail transport in, 48, 102-04; wagon load- 120-21; planned target production of, II1 ings in, 102-04 48, 118-19, 121-22, 124-25, 126-27, 177: Bhabha, Homi, 82 private ownership of, 48; production, Bharat Coking Coal Limnited, 40, 124: estab- 38-39, 41, 100, 104, 177: productive lishment of, 49; planned output of, 125-26 capacity, 100-01, in the public sector, 38, Bharat Heavy Electricals Limited, 144 48, 126: stocks policy, 157-58; unit costs of, Bhatia, Ramesh, 163 42-43; wages in, 42-44 Bihar coal rields. See Bengal/Bihar coal rields 4-3 ae n 24 Bihar uranium mines, 20 -non-coking: reserves, 7-9; production, Bilateral agreements: with Iran and Iraq, 109, 38-39 113-14; with U.S. oil companies, 161 -prices, 42, 44-45, 47; of differing grades, Bio-gas plants. See Gobar gas plants 44-47, 154-55; free market, 152; as guide Bitumen, 50, 54, 153 to heat value, 45; low, 42:.1974 increase in, Bombay High structure. See Cambay basin 47: recommended, 155; wholesale, 44-45 Burmah Oil Company, 14,55 -production: total, 38-39, 41, 100, 104, 177: Burmah-Shell, 57, 63, 64, 109 by type, 9, 11-12, 38-39 -research and development: need for, 158 Caltex, 57, 63, 64, 109 -shortage, 36, 92: alleviation of, 177: and Cambay basin: oil discovery in, 177; oil capacity underutilization,. 01:effect on in- reserves of, 12-15, 161 dustries, 100, 103, 121: explosives and Canada, 83 stowing sand shortage, 124: and mining Cement: shortage of, 145 equipment, 122: and nationalization, Central Electricity Authority: coordination 101-02, 121: power shortage and, 100,101, by, 79, 82, 164-65 124: and spare parts shortage, 101: and Central Water and Power Commission steel supplies shortage, 101. See also Coal survey, 15, 18-19, 79 transport Charcoal, 25 -stocks policy, 157-58 187 188 INDEX -transport: alternatives for, 157; by coastal 69, 77; revenues, 87; system planning, shipping, 124, 156; planned increase in, 80-82, 164; transmission problems, 87, 91, 124, 177; price of, 154; problems of, 101-03, 142. See also Fifth Five Year Plan (electric 124, 156-57; production lost due to, 102;by power development); Hydroelectric power rail, 48, 101-02, 103-04,121, 124, 154, 156, Electric power shortage: causes of,36, 91-92, 177 146; and delays in capacity growth, 91; and Coal Controller: allocations by, 47; data governmental allocation, 96; effect on in- from, 149 dustrial production, %-97; regional varia- Coal Mines Authority, 49, 101; constituents tion in, 95-96; and transmission facilities, of, 126; plan for output rise, 121, 124, 91 126-27 Energy: aggregative measure of, 179; coal Coastal shipping: plan for, 124, 156 equivalent values for, 180-82 Coke, soft: household use of, 27, 168, 170 -commercial, 27-29; consumption by sec- Construction materials: supply of, 91, 145-46 tor, 29-32, 34; consumption of, 26-29, Copper shortage, 144 181-82; defined, 6; increase in use of, Crude oil. See Oil 26-27, 29, 32; ratio of increase to gross domestic product and industrial produc- tion, 31-32, 34; rural use, 31; share of final Dasgupta, B., 57n sources of, 28-29; share of primary sources Department of Atomic Energy, 20, 79 of, 27-28; urban use, 27 Distillates, light: demand for, 52, 163 -consumption: changes in, 33-35; in coal Distillates, middle: consumption of, 105; de- equivalent units, 26-27, 181-82; distribu- mand for, 53-54 tion by fuels, 148, 182; by sector, 29, 32, Draft Fifth Plan. See Fifth Five Year Plan 148 Dung, cow: burned as fuel, 24; dried as fer- - noncommercial: consumption of, 23, tilizer, 24; in gobar production, 168; output 26-27, 183-85; defined, 6; increase in use of, 24, 27 of, 26, 27; rural use, 27; use by type, 27; from vegetable wastes and cow dung, 23-24. See also Forest resources; Animal Electricity: agricultural use of, 74-75, 165-66; power demand growth rate, 29, 91, 94, 95; gener- -pricing: changes in, 150-51, 155-56; on free ation costs, 84; price rise in, 152, 155-56; market 152 rate to industrial users, 85; shortage of, mret, c52 36-37, 91, 94, 95 ~~-resources: capital expenditure data, 149; 36-37, 91, 94, 95 controls on, 151, financing for, 152; by -consumption: by state, 76-77; total, 73-77: types, 6-7. See also Coal; Oil; Natural gas; by user type, 73-74 Nuclear fuel Electricity Act: provisions of, 77, 79 -shortagel Elecric owe equpmen: dlivey of91, -shortage, 91, 151 Electric power equipment: delivery of, 91, Energy Survey Committee: 1965 report of, 143-45;domestic producersof,143-44;im- 25-26, 164-65, 179, 183 port of, 143-44 ENI, 56 Electric power generation: capacity by type, Equity crude oil, 109-11, 178 71-73; capacity increase, 71-73, 91, 97-98, Esso, 57, 63, 64, 109 140-41, 143, 145-49; growth in, 67-69, 80- Excise duties: effect on oil prices,65,67, 153, 91,93,94-95,97-98 173 Electric power industry: capacity increases in, 71-73, 91, 93-95,97-98; costs in, 87-88; depreciation in, 87-88; energy supply sources for, 78; delivery of equipment for, Fertilizer: coal consumption for, 120, 163; 143-45; fuel supply problems, 92, 101; and cow dung as, 24; import costs of, 172n, government agencies, 79-80; management naptha prices for,67, 163; and power short- problems,81-82, 146, 164-65;planned sup- age, 96-97; production of, 50 ply increases in, 11 9; public sector share of, Fertilizer Corporation of India, 97n INDEX 189 Fifth Five Year Plan for coal, 18, 20, 23, 88, Furnace oil: free market price of, 152 91, 101; consumption changes, 120, 168; non-coking coal target, 9; production targets, 11, 48, 118-19, 121-22, 124-25, Gasoline: household use of, 115; prices, 65, 126-27, 177; proposed outlays, 118, 125; 115, 152 transport changes, 124 Geothermal energy: use of, 6-7 -for electric power development: generating Gobar gas plants: as fuel source, 168-70 capacity target, 140-41, 143, 145-47; gener- Government agencies. See under Ministry ation estimate, 20, 140-42, 147; hydro vs. Government monopoly. See Coal; Oil ex- thermal increases, 18, 20, 140; and import ploration; Public sector enterprises of equipment, 143-44; inconsistencies in, Greases and lubes, 50 141, 147; outlay division, 139; rural Gross domestic product: growth of, 142; plan electrification in, 139-40; thermal program for, 142 shortfall, 145; transmission plan, 142. See Gross national product: factor cost, 172; pro- also Electricity; Electric power industry jected growth in, 172 -for noncommercial energy: and cow dung Gujarat oil fields, 13-14 fermentation, 167-68 -for the oil industry: consumption estimate, 133, 136; estimated imports, 137; explora- Heavy Electricals (India) Limited, 144n tion and development, 159-60; foreign par- Hindustan Petroleum Corporation, 63 ticipation, 159, joint sector enterprises, Hydrocarbons India Limited, 56 136-37; Oil and Natural Gas Commission Hydroelectric power: Central Water and role in, 159-60; outlay division, 127;output Power Commission Survey, 18-19; and increase, 127-28, 136; proposed pipeline, low rainfall, 92, 93, 98; need for transmis- 133; refining capacity, 132-33, 136, 162; sion lines, 19; output, 18, 20, 69, 92-93; need for revision Ofci27,2 159, 162,163 Power Economy Committee report, 18-20; Firewood: consumption of, 22-23, 27, 148, power potential, 15-17, 18-20, 71, 73; and 167; production of, 23, 167; shortage of, river systems, 16; water priority uses, 19 167; supply study need, 167, 170 Forest resources, 22-23; area of, 23; owner- Indian Iron and Steel Company: output, 126 ship of, 23; source of, 23; timber produc- Indian Oil Company, 63 tion, 23 Indian Oil Corporation, 57, 64 Fossil fuels. See Oil; Oil industry Indian Refineries Limited. See Indian Oil Fourth Five Year Plan: coal output projects, Corporation 100; coal shortage during, 36-37, 100; Indonesia: oil agreement type, 161 electricity generation, 67; electric power Industrial Policy Resolutions, 36-37, 48 shortage, 36-37, 91; interstate exchanges, Industrial production: growth of, 142; plan 81-82; petroleum products, 36-37; power for, 142, and power shortage, 97 projects, 80, 83; steel target, 126 International Monetary Fund: and oil facility Fuel: rural use of, 148, 183-85 drawing rights, 114 Iran: India oil agreement and, 109, 113-14;as for by user type, 53-54, 163: price of, 153; oil exporter 62 109 use in power plants, 69, 71oiexrt,6210 Fuel Poicy Committee. 11n, 153 17n;coal Iran Marine International Oil Company, 56 Fuel Pc m tIranian Light crude oil: prices of 64n, 109-11 price recommendation, 155; electricity tariff recommendation, 156; and firewood oil exporeer, 62, 109 supply, 23; petroleum price recommenda- tion, 155; and refinery changes, 163; and rural fuel use, 166n, 169-70 Johnson, William A., 154n Fuels, noncommercial. See Energy, noncom- mercial Fuelwood. See Firewood: Forest resources Kalinin, geologic survey by, 13 190 INDEX Kerosene: demand for, 53-54, 115 Iprices of, location of, 12-14; marketing of, 63-64, 65,67, 115, 152, 168; shortage of, 167 nonenergy uses, 50; quality of, 14-15, Koyali refinery, 134 reserves, 12-13; sedimentary area, 12-14; Kumaramangalam, S. Mohan, 38 use for energy purposes, 29, 31, 50; wax content of, 14; wells, 14 -consumption, 50-54, 105, 113, 115-17; Labor problems, 92 curbing of, 115-17, 170-71, 178; estimated Lube India.Limited, 63 growth in, 52, 133-34 Lubes and greases, 50 -crisis: and external financing problem, 172-73, 174n; and consumption curb, Malaviya, K.D., 159 170-71, '173, 175; and substitute fuels, Mathura refinery: cost of, 127, 133 170-71; trade elfect of, 172. See also Bal- Mexican oil: production cost of', ance of payments Mining and Allied Machinery Corporation: -exploration: discoveries. 13; foreign partic- ipation in,63, 131. 159-62:offshore, 13,63; output of, l22-23 onshore, 12-13, 62-63; planned, 129-31; Ministry of Agriculture, 79 and private sector. 55. 62; and public sec- Ministry of Finance, 80 tor, 55, 63, 161-62, 177 -imports. bilateral agreements on, 109, Ministry of Irrigation and Power, 93 1 13-14; demand for, 55,61-62, 137; depen- Ministry of Petroleum and Chemicals: data dence on, 61-62: ratio to exports. 173; ratio Ministry ofSteel and 4ines,49 to GNP, 172; ratio to total imports, 106-08; sources of, 62; value of, 106-08, 112: Montfort, Bernard. 146 volume of, 105-08, 112, 172n Motor spirit. See Gasoline -industry: ownersh:p of, 62-64 -prices, 152-54; of domestic crude, 64-65, Naptha. demand for, 50. 52; and feedstock, 171; of equity crude f'rom oil companies.. 163; prices of, 67, 152-53 109-I I- and excise duties, 65-67: of im- National Coal Development Corporation: ported oil, 64, 105-06, 108-12;ofparticipa- and costs,42; established,49; ownership of tion crude, 110-12 mines by, 49 -production, domestic: foreign participation National Council for Applied Economic Re- in, 56, 163: planned increase in, 126, search, 183 175-76; by producer, 56b productivity. 14: National Iranian Oil Company, 56-57; oil structure of, 55. 62-63: total, 13-14, 1i2n prices Of, 109n, 110 National Sample Survey. 183 -refining: additions to capacity, 132-33: Nationalization ofcoalmines, 3848-50,126 capacity utilization, 58-59: crude Nationalization output coal mines, 38,48-50126 throughput, 57-58, 60-61; joint sector, 57, Natural gas: output of, 15-16 1 36-37: location of. 57; and private sector, NuC. See National Iranian Oil Company 57, 63: product demand changes, 162-63; Nuclear fuels. production of, 83: resources, and public sector, 57, 63: types of, 58-59, 20-21 126 Nuclear power industry, 21-22,82-84; Cana- 162-63 dian design, 82-84: control of, 83: progress OIL. See Oil India Limited of, 83-84 Oil and Natural Gas Commission: activities Nuclear reactors: I:ast breeder. 21: types, ofl. 3. 15n, 55. 127, 160 exploration rights 82-83: use of uranium, 20-22 of, 63, 161: and Cambay basin production, Nuclear test explosion, 83 177: and Filth Five Year Plan, 159-60: and foreign exploration, 160-61: and Fourth Five Year Plan, 160: Iranian production Oil: coal as substitute for, 116:;coal equivalent and, 56: Iraqi production and, 56: planned ratio, 179-81: cost per barrel, 15 demand production increase by, 128-29; proposed by type, 50. 52-53; diesel, 53, 65, 105, 153; expenditures of. 130-31 INDEX 191 Oil India Limited, 14, 55, 62, 127, 160; in- Singareni Collieries Company, 42, 47, 49, creased role of, 160; production,_128 157; formation of, 49; planned output in- ONGC. See Oil and Natural Gas Commis- crease, 125-26; unit costs of, 42-43; wage sion levels of, 42-43 OPEC. See Organization of Petroleum Ex- Solar energy: use of, 6 porting Countries Soviet Union: as oil exporter, 62 Organization of Petroleum Exporting Coun- State Electricity Boards, 87, 140-41, 143-44, tries: petroleum prices of, 105, 109-11 151; borrowing by, 88-89, 146; capital ex- penditures of, 88-89; costs of, 88; energy supplied by, 77-79; rates charged by, Parra, Alirio A., 129 85-86; regional planning for, 164-65; Participation crude oil, 109-12 reorganization of, 81-82, 163-64; revenue Petrochemical industry, 50 of, 85-86 Petroleum products: prices of, 65, 152-55 Steel: and coal demand, 120; pricing of, 154n; Petry, Neithard, 145 shortage of, 101, 144-45 Phillips Petroleum Company, 56, 57 Steel Authority of India Limited, 50 Planning process: needs of, 150; for regional Subramaniam, V., 109n power industry, 164 Sweetwood, Charles W., 109n Planning Commission, 80 Plutonium, 21 Population series, 185 Tata Iron and Steel Company: as mine Power Economy Committee report, 18-20 owner, 49, 126 Prasad, C.R., 168n Thermal stations: available capacity of, Prasad, K. Krishna, 168n 92-93; coal consumption by,40; coal short- Public sector enterprises: defined, 36-37, 48 ages in, 92, 100; conversion from oil to coal by, 116-17, 120; and government supervi- sion, 98; outage of, 92; output of, 93; stan- Railways: coal consumption by, 120; coal dardization of turbine sets in, 144; use of transport by, 48, 100-02, 103-04, 121, 124, oil by, 116; utilization rate of, 98-100 154, 156-57; reverse demurrage pricing of, Thorium: reserves of, 21-22; use of', 20-22 154; wagon loadings by, 102-03 Tidal power, 7 Reddy, A.K.V., 168n Transmission lines. See Hydroelectric power; Regional Electricity Boards, 81. See also State Electric power industry Electricity Boards Turbinergenerator sets, 144 Research and development: for coal indus- try, 158 Rhodes, H.L., 101, 125, 154 United Nations Development Program, 7 Romania: as oil exporter, 62 Uranium: location ol, 20; ore grade, 20: Rural electrification: in agricultural sector, reserve, 20-21 166; support for, 74, 85, 139-40, 165-66 Vegetable wastes, 23-24, 27 Saudi Arabia: as oil exporter, 62, 109, 1 ]On Venkataraman, K., 85n Saunda Central Colliery: unit costs of, 42-43; wage levels of, 42-43 Schedule A industries: list oi, 37 West Bengal. See Bengal/Bihar Second Five Year Plan, 48 Wind power, 7 Shah, Narottam, 25n World Bank, 97n