Posted in Finance Articles, Total Reads: 2555
, Published on 09 September 2012
The article takes a look at two important natural resources: power and water and assesses the present state of the nation in regards to these natural resources.
Fiscal and current account deficit have already shackled government in the prison of stagnation. While calls for infrastructural reforms echo from all corners of world, the news on current industrial monopoly(example: cement cartel in India) is unpalatable. For industrial system to register healthy growth a robust infrastructural set-up is must. From electricity to food: there are certain pains which we citizens face both at office and back home.
One of the flagship events during summer season is the daily electricity outage. One would helplessly watch his/her locality face the share of load-shedding for particular time frame. The hours are treacherous, usually ranging from 1 hour to 4 hours.
Now imagine that in addition to facing the hassle due to power outage, one is refrained from having food once a day. How does it feel? No, this isn’t about the story of bottom of pyramid, but what we all are posed to face in due course of time. Power and food sector seem to be in acute pain today, as they battle out hurdles ranging from uneven supply of raw materials to power of supplier. And this pain would soon reach out to every office and household. India currently is heading towards power and water crisis.
A classic live example of bargaining power of supplier is the present state of power sector in India. Coal India Limited(CIL) has been playing hide and seek, both with its buyers and government. Fickle promises, partial commitment and underutilized capacity are some of the symptoms emerging out of the chaos. Member of Prime ministerial economic advisory board M Govinda Rao recently expressed his desire to break the monopoly of CIL. The government however had little luck in its attempts of cajoling/pressurizing CIL to cater to the need of power players.
Figure 1: Sector-wise Assessed Coal Demand in India(In Million Tonne ).*As per the Working Group on Coal & Lignite. Source : Lok Sabha Starred Question No. 282, dated on 16.03.2011.
Not only the private corporations impacted by the lower supply of CIL, but also government agencies are impacted by the issue. Maharastra recently made a fresh appeal to the Centre for availability of adequate power supply in order to cater to the surging demand. Public private partnerships look to be abandoned child as private players are kept waiting for coal to arrive in for productions. Essar Group Chairman Shashi Ruia expressed his concerns on the sluggish rate of coal output, which is resulting in mining equipments of worth 450 crore INR to sit idle. NTPC Ltd.(6,000 Mw Plant), Reliance Power Ltd Rosa plant(1,200 Mw) and Gurgaon-based Lanco’s Anpara C plant(1,200 Mw) are other renowned casualties waiting outside the clinic of CIL.
Adding to plight of power generation, the dwindling petroleum production by Reliance Industries Limited(RIL) in the KGD6 basin has left government miffed. The request of RIL, to write off the large chunk of expenditure incurred over last 3 years, has not gone down well with Government of India. While government finds itself in a fix, a smart pricing policy is the need of the hour to escape from the problem.
The positive news in this domain has been Cairn India’s identification of exploration points in Rajasthan. However, with the Directorate General of Hydrocarbons (DGH) believe that the area is delineated for hydrocarbons production, Cairn India has its work cut out.
Figure 2: Actual Vs Forecast rainfall in India. Source:Centre for Monitoring Indian Economy
The alarm of pessimism over monsoon has been rung by government, with GOI stating that kharif crops in parts of Rajasthan, Gujarat, Punjab and Haryana might be hit if the monsoon does not improves soon. State governments have been asked to come up with contingency plans in wake of low rainfall.
A recent media report states an interesting fact: in last 130 years, Indian Meteorological Department (IMD) has never forecast a drought, neither in 1987, 2002, 2004 or 2009. The report continued to further state that each time IMD predicted normal or near-normal rainfall, not once has IMD got the forecast right in last 12 years. The closest prediction came in the year 2005 when the prediction was 98 per cent and the actual rainfall was 98.8 per cent. The worst was in 2002, when the forecast was 101 per cent rainfall, while the country actually received 79.4 per cent.
Decentralized meteorological monitoring system(short and medium range forecast allocated to Delhi and long rage forecast to Pune IMD) and political intervention look to be the likely suspects. However the problem looks to be soon addressed, with Indian Institute of Tropical Meteorology (IITM) Pune working on Rs 400-crore National Monsoon Mission to forecast drought and flood events, active and dry spells of monsoon and rainfall distribution across the nation.
With the nation running out of power, water and time the future prospects does not look fancy. Increasing international and domestic pressure on government combined with the impending election might help to up the momentum and address the problems. However, as of now any concrete solution looks to be a distant reality.