Reimagining India: Unlocking the Potential of Asia’s Next Superpower (28 page)

The expansion of opportunity for the use of private services may be equally valuable to many Indians. Having a bank account linked to one’s Aadhaar number enables the transfer of money in an electronic, auditable, and convenient way. With the Indian workforce being increasingly migrant, people need a payment infrastructure that provides access to financial services and resources anytime, anywhere in the country. An estimated one million Aadhaar-enabled micro-ATMs—handheld devices with fingerprint recognition pads and mobile connectivity—are in the process of being added to the existing set of one hundred thousand bank branches and ATMs; of course, those with Aadhaar IDs will also be able to make use of self-service through the Internet and mobile devices. They will also be able to top up their mobiles—that is, increase their calling and messaging capacity—at any location in the country.

More applications will no doubt materialize as the number of enrollees grows. Intriguing possibilities arise in online education, for instance. Students who have “attended” online classes and studied digital course material will want to obtain certification that they have passed examinations—and they may be able to do that online, too, by using their unique ID number and biometric data to prove their identity at exam time.

The Aadhaar project is not a panacea. But it can provide a powerful impetus for making governance more transparent, efficient, and accountable in a country that has suffered from the other kind of governance for far too long. And the choice and convenience average middle-class Indians enjoy will be available to poor migrants from the villages. Why should the quality of service be less efficient or convenient for the marginalized? Why shouldn’t they benefit from new systems to ensure they get the government support that is lawfully theirs? Technology can be a great leveler of Indian society. And it will be, if Indians continue to welcome Aadhaar in the spirit with which it is intended.

Vikram Singh Mehta

Vikram Singh Mehta is chairman of Brookings India and former chairman of the Shell Group of Companies in India.

For the last thirty years I have maintained a home in the middle of the Binsar forest sanctuary in the Himalayan foothills. The house sits at the edge of a promontory twenty-five hundred meters high and boasts a panoramic view of the valley below. In some ways the area hasn’t changed at all in three decades. Once night falls, darkness blankets the valley. The few pinpricks of light one sees come from kerosene lamps—the fuel more likely than not acquired on the black market—and wood fires. There is no evidence of electric power. LPG (liquefied petroleum gas, i.e., propane) cylinders are scarcely available, and solar is an expensive and unfamiliar alternative. An abandoned windmill, built years ago but no longer operating, blots the skyline.

Much else about the place has changed greatly, though. Mud tracks have been tarred, thatched roofs have been replaced by solid beams, guesthouses and restaurants have proliferated, cars and motorcycles have crowded out bicyclists, and everyone now carries a cell phone. Though locals still lack access to secure, reliable, and clean energy, their demand for the appurtenances of modern life continues to grow. The results are obvious to the naked eye: The forest cover has been denuded, streams have been reduced to a trickle, and the scent of pines can be difficult to discern amid the exhaust fumes. In this Himalayan retreat one can witness all the aspects of the crisis that plagues India’s energy sector: Demand is surging, supply is struggling to keep pace, and the environment is getting squeezed between the two.

When I first bought the forest bungalow, India imported 30 percent of its oil requirements and a small quantity of high-quality coal. Domestic production was rising after the discovery of the giant Mumbai High offshore oil and gas reservoir. Analysts expressed cautious optimism that Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL)—the two state-owned exploration and production companies—would soon replicate this success elsewhere and that the gap between demand and supply would narrow even further.

Today the import ratios have flipped, and the optimism has evaporated. India now imports more than 80 percent of its fossil fuel requirements, and hopes of energy independence are fading fast. There are many reasons for this reversal, but the most important have to do with prosperity, policy, and geology.

Demand for energy has risen in lockstep with economic development. Two decades of relatively high growth have pushed India onto an energy-intensive trajectory. Industry and services now account for around 80 percent of GDP, whereas agriculture, which requires far less energy, contributes less than 20 percent. Prosperity has also reshaped consumption patterns. A growing middle class has sought to trade up from bicycles to motorcycles, cars, and trucks. Electric appliances like washing machines, cookers, and TVs are now essentials, and conspicuous materialism has become a badge of individual success. The government’s populist policy of artificially holding down the cost of transportation and cooking fuels including diesel, kerosene, and LPG has further encouraged consumption.

Domestic supply has struggled to keep pace with the surge in demand. India is not endowed with huge hydrocarbon resources. And what reserves do exist tend to be trapped in complex geology, inhospitable terrain, and often both. It’s not easy to find these resources or, once found, to develop them on a sustainably commercial basis. India does have large coal deposits, but the quality is generally poor.

The government has worsened these natural constraints with policies that discourage and delay investment in the energy sector. Exploration licenses are mired in bureaucracy. Land is never easy to acquire.
Delhi is often at loggerheads with state governments and in recent years has taken to unilaterally changing commercial and fiscal terms of deals—hardly the kind of behavior to inspire investors.

To make matters worse, the distribution and transport infrastructure is inadequate. There are, for instance, only two interstate gas pipelines in the entire country, and none that link gas production to south India. Poor road and rail connections mean that coal often doesn’t get to utilities in time, resulting in frequent power outages.

The environmental consequences of this imbalance between demand and supply have been severe. More than half of the population has no access to commercial fuels and must resort to burning wood or cow dung to meet their cooking, lighting, and heating needs. This has led to widespread deforestation, the depletion of water tables, and air pollution. Indian cities now rank among the most polluted in the world.

The hard truth is that India’s energy sector is standing at the edge of a cliff. It can pull back, but only if the state rethinks its energy policies and the institutions set up to implement it.

In fact, the first thing India needs is a true, unified energy policy—one that provides an integrated and holistic picture. Instead we have a host of disconnected policies promoted by a variety of decision makers. There are today, for instance, six different cabinet ministers engaged with energy. These include ministers for petroleum and natural gas, coal, power, atomic energy, renewables, and the Planning Commission. Each has a defined constituency and looks at energy through a narrow lens. They get together formally around the cabinet table, but cabinet meetings are hardly the venue for rigorous discussion.

This fragmented structure misallocates resources and inflates costs. Prices of a fuel are often set without reference to the price of a substitute because the latter falls within the domain of a different ministry. Infrastructure
investments get duplicated, and governance and accountability are diffused and compromised. The first thing the government needs to do is create an overarching authority with executive responsibility and accountability to develop and implement an integrated energy policy.

A key tenet of the economic reforms of the early 1990s was to simplify the nature and system of bureaucratic controls—to end the so-called license raj. Unfortunately, these reforms did not percolate through to the energy sector. Procedural and regulatory red tape continues to hobble efficiency and competitiveness. The state-owned energy giants lag behind their international competitors in the adoption of cutting-edge technology. With bureaucrats constantly breathing over their shoulders, managers have more incentive to stay on a path they know is headed in the wrong direction than face a possible inquisition for shifting strategies.

The opportunity cost of these governmental shackles has been and continues to be enormous. The recovery rate of oil from producing fields in India is currently only 28 percent, compared to around 40 percent for fields of similar geology internationally. This is because ONGC and OIL do not have the autonomy to freely adopt new oil recovery technologies. The cost of petroleum subsidies has also eaten into their cash flow, forcing them to slash their R&D budgets.

This has not only slowed innovation but also led to an exodus of skilled talent. My experiences as chairman of Shell in India convinced me that India could quite easily stand on the forefront of energy technology and innovation. In 2006 we set up a technology center in Bangalore. Its goal was to provide high-end technology support across the oil and gas value chain to Shell subsidiaries across the world, as well as to do primary research. The center employs approximately one thousand engineers and scientists—more than 90 percent of whom are Indians and many of whom had started their careers with OIL or ONGC. The quality of the support provided
by this center has been so outstanding that Shell has announced it will close all but three of its several technology centers around the world.

Clearly the state companies could achieve the same level of excellence if they were unshackled from intrusive bureaucracy and overweening regulation, and if they were allowed to promote an environment that encouraged creativity and innovation. The added value for the country in terms of increased recovery rates of oil and gas, operational excellence, and the development of talent would be enormous.

Lifting such institutional and regulatory constraints might pull the energy sector back from the edge of the cliff. But the only way to reverse its current direction is to contain demand. This half of the energy equation must now be assigned higher priority on the policy agenda.

The government has made some positive moves. It has tightened building standards and provided fiscal incentives to encourage energy efficiency. A number of major cities are investing substantially to improve public transport. But much more needs to be done. More resources need to be allocated to promote energy efficiency, and public messaging has to focus much more strongly on the need for conservation.

Ultimately the only way to ensure sustainability is to move away from fossil fuels. This will take decades. In the short to medium term, therefore, the focus should be on “greening” the existing energy basket. Above all that means investing more in the infrastructure to import and distribute natural gas—a much cleaner fuel than oil or coal.

Looking ahead, we also need to start laying the foundations for a future based on renewable energy. It’s worth remembering that although Edison illuminated lower Manhattan in 1882, American factories had not been designed to use this revolutionary new technology. They did not finish converting from steam to electric power until 1935. Our focus now should be on encouraging cost-competitive alternatives to fossil fuels and on developing the “smart” and “clean” infrastructure we’ll eventually need to scale up the supply, distribution, and usage of these resources.

There is no panacea for India’s energy problems. A number of initiatives—some focused on the immediate task of improving supply,
others on managing demand, still others on preserving the environment—will have to be taken simultaneously. The challenge is to make these initiatives work in harmony, keeping the ultimate goal in mind: to weaken the link between economic growth, energy demand, and environmental degradation. I am optimistic that in another thirty years, the glow of lightbulbs, not kerosene fires, will illuminate the valley of Binsar, and the air will smell once again of sweet pines.

K. Srinath Reddy

K. Srinath Reddy is president of the Public Health Foundation of India.

From all over the world, people needing hip replacements, cardiac bypasses, or even bone marrow transplants are increasingly flocking to India for treatment. Top-flight hospitals in Chennai, Mumbai, Delhi, and elsewhere are performing sophisticated procedures on hundreds of thousands of “medical tourists” each year thanks to the renowned skill of Indian doctors and the comparatively low cost of a hospital stay.

Considering how successful our health-care system has become at delivering effective and affordable treatment for foreigners, the prospect of decent care for all Indians might seem to be within our grasp. Unfortunately, that dream remains as distant as ever.

Take infant mortality: At forty-four per one thousand live births, the rate in India is three times higher than in China, four times higher than in Sri Lanka and Thailand, and even higher than in Bangladesh and Nepal. Equally discouraging are the inequities that exist within our country. An infant born in Madhya Pradesh is six times more likely than her peer born in Kerala to die before her first birthday.

Indeed, by a host of indicators we lag behind other major emerging nations, our South Asian neighbors, and even some countries in sub-Saharan Africa. Forty-two percent of Indian children under five years suffer from undernutrition—“a national shame,” according to our
prime minister (the corresponding rates are 7 percent in China, 7 percent in Thailand, and 14 percent in Ghana). Coverage with DPT immunization is 72 percent in India, while it is 99 percent in Sri Lanka, 96 percent in Botswana and Bangladesh, and 82 percent in Nepal. India accounts for a third of the world’s measles deaths and a third of TB cases. And within India, vast inequities are apparent on all these indicators across states, and within states, across urban-rural, education, income, gender, and caste divides.