Energy Sector and Atmanirbhar Bharat: Challenges and Prospects

Prime Minister Narendra Modi had announced the mission of Atmanirbhar Bharat earlier this year with a stimulus of Rs 20,000 crore. The agenda is in line with the Make in India initiative, to make India a self-reliant / Atmanirbhar country.

One of the key mediums of securing self-sufficiency is through domestic industry based energy production plants, reduced dependency on imported hardware, technical services, and rapid expansion of local manufacturing capacity.

India has 3rd largest reserves of coal in the world with producing more than 600 million tonnes for power plants. Despite it, we are importing 200 million tonnes annually.

Government has liberalised the coal mining rules and regulations. This will open the sector and allow wider-participation by the private sector to mine and sell coal, thus emancipate this critical source of fuel from the monopoly of Coal India Limited. This move is expected to reduce reliance on imports and at the same time lower the prices for end customers.

Also, in India have a plethora of ministries and departments looking into the energy development of the country. These include the Ministry of Coal, Ministry of Power, Ministry of New and Renewable energy, and a separate Department for Atomic Energy. We have many regulators, namely, Directorate General of Hydrocarbons, and the Petroleum and Natural Gas Regulatory Board, State and Central Electricity Regulators. The wide distribution of work is not conducive for streamlining policies and achieving intelligible outputs. One can take a leaf out from the recent example from the Ministry of Jal Shakti and implement it in the energy sector. The ministry was formed by merging Ministry of Water Resources, River Development & Ganga Rejuvenation and Ministry of Drinking Water and Sanitation. This has streamlined the work to be in done to counter the situation of 54% of water-stressed states in India. The same merger can be contemplated in the energy sector, which will bring more cohesion in this sector.

On the renewable energy front, India needs to step up its hardware manufacturing base, particularly the solar panel or what we call as modules. Modules are imported from China. A small percentage of modules are procured from local manufacturers and that too at higher costs.  This situation has a huge impact on the country because 60 per cent of its project cost is consumed in importing modules from China. By 2030 investment in this sector is estimated to be about 80 billion USD. Just the solar modules will be worth $50 billion.

Government has recently declared its intention to increase customs duty to 40 per cent to discourage import of modules, and thereby incentivising local production in India. While this is a positive step towards Atmanirbhar Bharat, it will take some time for showing tangible results for the India solar developers.

If India is to speed up energy self-reliance, a lot of investment in Research & Development is a must. Presently, we spend less than 2 per cent of our budgetary resource, as against Germany and USA which have increased their R&D expenditure to 7 per cent! These countries are leading Patents and IPR ownerships, conduct R&D in their Institutes, Universities plus they have developed state of art manufacturing industry support. Leading private industries in Europe and the USA have a mechanism in place to invest in R&D, to bring innovative technologies and retain a competitive edge in the global market.

To succeed in Make in India, we need a skilled and trained workforce. The lockdown has severely curtailed the workforce availability, their training, upskilling and deployment in industry. Pandemic has forced the country to adopt strict health and hygiene practices, that act as a barrier for sourcing workers from other states, relocate high-quality technical experts, bring in the labour force for construction and operations of the industry.

Due to the impact of COVID 19, the economy has been slowing down and it becomes all the more difficult to install and scale up the supply chain of hardware and services sector of the energy sector.

There is a flip side of Atmanirbhar Abhiyan as well. If more money is invested to manufacture, the initial brunt will have to be borne by the consumer until the industry becomes competitive and sustainable. The government will have to provide incentives and non-fiscal support in this first phase.

The government is taking many steps to promote the manufacture of energy-related hardware in the country. They have introduced a lower than previous tax regime for new manufacturing companies. Tax on Income of New Manufacturing Domestic Companies, 2019 passed on 20 September 2019 has inserted Section 115BAB offering a low tax rate of 15% (plus surcharge and cess) to newly built manufacturing companies. This is to align with international best practices and to prevent emigration of industries from India. Further, the government is contemplating to provide land bank for industrial clusters under Atmanirbhar Abhiyaan.

In the renewable energy space companies like Adani and TATA, have already expressed interest in setting up local manufacturing Li-Ion batteries in the country, under Atmanirbhar scheme of government of India. At present, we import all our batteries from China and Korea. These are required for Electric Vehicles and Energy storage systems for Indian electricity grids and large Industries that require a stable power supply.

The government of India has set-up the National Mission on Transformative Mobility and Battery Storage. The core objective of the Mission has been to obtain overarching cohesiveness in the policy framework for promoting e-mobility and battery storage in the country. This will bring changes in a niche sector of renewable energy.

Over and above the government initiatives, a lot can be done to overcome existing issues. For instance, India needs to come up with a strategic roadmap to harvest energy from green hydrogen. We can also take a leaf from the German model, which is the most energy-efficient country in the world. Germany is slowly moving towards renewable energy, with more than half of windmills of the European Union located in the country. India can produce 102GW of energy from wind alone! Also, one can look at the possibilities of a public-private partnership to diversify the energy sources.

With fluctuating oil prices and energy uncertainty. With the global economy recovering in the post-pandemic period, India must see this an opportunity to redefine the global supply chain and become a net energy exporter.