Central Idea

• Lessons learned from the liberalization of upstream petroleum sector can guide India’s transition to a self-reliant clean energy system.

Background

• In 1980, then-Prime Minister Indira Gandhi took a significant step in liberalizing the upstream petroleum sector in India. This move aimed to reduce the country’s reliance on external sources for petroleum and protect it from supply shocks. However, the liberalization did not bridge the gap between domestic demand and indigenous supply.
• In 2020, Prime Minister Narendra Modi introduced the production-linked incentive (PLI) scheme to promote investment in minerals, components, and equipment required for the generation and consumption of clean energy. This decision was driven by the strategic imperative to transition to a self-reliant clean energy system and reduce dependence on external sources of energy.

Bridging the gap between demand and supply in the clean energy sector

• Demand and supply gap: The liberalization of upstream petroleum did not bridge the gap between the domestic demand for petroleum and indigenous supply.
• Capital is not enough: The clean energy sector must not presume that the availability of technical talent and capital will be enough to create a world-class hub for the manufacture of batteries, solar cells, wafers, and modules.

Efficient Implementation of Technology in Clean Energy Sector

• India’s oil and gas producing average: The recovery rate of oil and gas from India’s producing fields has averaged between 25-30%, while fields of comparable geology across the world have a recovery rate between 40-60%.
• China’s dominance in clean energy value chain: China’s dominance of the clean energy value chain is because its process engineers have perfected the implementation of the several technological steps required to convert raw material into end product.

Reduce entry barriers and improve business condition

• India cannot compete on the size of the incentive package, and the endeavor should instead be to lower entry barriers, ease business conditions and remove the perception that India offers a high-cost operating environment.

India’s Dependency on External Market and Two-Track Policy with China

• India remains dependent on the external market for supplies of petroleum, but the country should desist from building a high-cost, domestic, clean energy hub that is forever dependent on subsidies.
• India should continue with its two-track policy and strengthen its trading relationship with China.

Conclusion

• India can learn from the lessons of the last 40 years to transition to a self-reliant clean energy system. The country needs to focus on creating an enabling ecosystem, efficiently utilizing technology, and easing business conditions to attract international investment. India should focus on trading relationships and not build a high-cost, domestic clean energy hub dependent on subsidies.

Mains Question

Q. India’s clean energy sector has enormous potential for growth, however there is a gap between domestic demand and indigenous supply. What specific measures can India take to bridge this gap and emerge as global leader in renewable energy?

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