Petroleum prices are crossing dizzy heights: on April 16 crude oil crossed $114 per barrel, five times the average price prevailing six years ago. Energy costs are now the principal driver of inflation worldwide. A democratic India with an open economy and the world's second largest population-1.3 billion-cannot wish away the unacceptably high levels of prices of all commodities in a most sensitive political year preparing for regional elections within months to several State Assemblies and to the Lok Sabha in a year from now.
While energy price increases are not being passed on to the consumer as the government keeps them in the administered mode and does not give the market forces free play, food and other commodities are having a free run. The Reserve Bank tries to keep the rupee price against the dropping American dollar in check and refuses to cut interest rates to avoid flooding the market with easy cash, the government is importing edible oils-one million tons straightaway--and 1.5 tons of pulses and cracking down on hoarders to protect the consumer. Yet the retailer is having a field day: he makes a neat new profit over his own purchasing price.
Why are the energy prices in spite of a slowdown in advanced countries? Are India, China and 50 or more other nations with economies performing well keeping crude oil on the boil? It is true that countries like India are depending more and more on imported energy. From 70 per cent of imported oil meeting India's needs today, the dependence on imported energy will rise to 87 per cent in 10 or 15 years. But blending petrol and diesel with ethanol is a trend, which the Prime Minister has called a halt to. He does not want food production or acreage to be diverted to fuel related crops. It is important to ensure that people do not starve or miss too many meals because motor vehicles should have cheaper options.
But in the US, one-third of corn produce is already being diverted to produce oil for use as energy. A lot of corn is already fed to chickens all over the world: it is an old practice to produce eggs and poultry for food. A lot of American wheat is also fed to cows and buffaloes as apart from milk, beef is an important part of meals. In Brazil, a lot sugarcane is used to produce ethanol and the vast country with a low population meets 70 per cent of its energy needs from alcohol coming from molasses. In India, 5 per cent of petrol is blended with alcohol. The plan to increase the blending to 20 per cent in 10 years by using sugarcane based alcohol is sought to be stopped as sugar prices are rising all the time and the government can ill afford it, especially when it is preparing for elections.
What are the alternatives? There are several in the research laboratories, but none that can come for small scale and large scale production any time soon. India has the option of extracting oil from jatropha which can be grown over 63 million hectares of wasteland, but nobody in the government or environment lobbies is talking about it any more. This option may, therefore, be ruled out until a crisis hits the nation and catches the policy makers by surprise. The Prime Minister has also called a halt to contract farming by corporate houses and displacement of the small farmers, who must be allowed to till their land and make a living, even if it is not too substantial. But he should not lose his identity. This makes political sense even though it is commonsense.
The key option of nuclear energy is unfortunately mired in controversy because the left Communists will not even allow the Government of the day to even reach an agreement with the International Atomic Energy Agency (IAEA) on safeguards, which a number of countries, including China, have already done, nor to get an exemption from the Nuclear Suppliers Group (NSG) for the purchase of fissile material like uranium. Why are the leftists hell bent on stopping the government even though waivers from IAEA and NSG and exemption from signing the nuclear non proliferation treaty do not bind India in any way to sign on the dotted line with the US. India signed only a preliminary agreement with the US almost three years ago, but the final agreement has yet to be signed. India need not do so if the Indian political establishment, especially the CPI (M), says that the American Hyde Act constrains India's freedom of action in the area of nuclear options for its defence needs.
India appears to have finalized a parallel agreement on peaceful uses of nuclear energy with France during the visit of President Sarkozy in January this year when he came as the chief guest at the Republic Day parade. No agreement has been signed yet, but it is on the table and awaits clearances from the IAEA and the NSG. The Prime Minister could have, and might well have, reached a similar agreement with President Putin when he visited Russia. Russia has indeed been engaged in preliminary work on nuclear power plants in Tamil Nadu for several years and these projects could receive the go ahead if the safeguards and uranium supplies issues are settled. But it is worthwhile to recall that when Dr. Manmohan Singh reached agreement with President Bush three years ago, he had telephoned President Putin and asked him to send a consignment of heavy water for the Tarapur atomic power plant. This was duly resumed and Tarapur was assured of functioning for five years.
France has an excellent record of tapping nuclear energy and produces 78 per cent of all the electricity it needs from nuclear sources. Forty years ago, it had to import the technology, but now it is fully equipped to build large scale power plants to produce power at reasonably low cost. France's safety record is impeccable.
India may well have placed its nuclear eggs in more than one basket and need not depend on America alone. Even China is keen to sell nuclear power plants to India as the business to be generated by India is calculated at $100 billion in the next ten years. India should exercise the options it has and should not miss the opportunities knocking at its door.
Lalit Sethi, NPA
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