If you go to the NASA website, you can see beautiful satellite pictures of the earth at night. If you look carefully where the lights are, it says a lot about where the world economy is today. Europe is probably the most uniformly luminous; but not as bright as the eastern part of the US and its western coastline. Africa is almost completely in the dark. Latin America is lit, but mostly along the coasts. One can also see Asia’s economic story in the picture: vast swaths, including most of Russia, Tibet, and the Middle East are unlit. Japan looks like a shining moon in the middle of the pacific. The southern part of the Korean peninsula is bright, the north completely dark. China’s lights shine on the coast and slowly fade inland. India is full of a million dull lights, with a few bright spots.
To me, the picture highlights the obvious point that wealth, economic growth, and energy use are fundamentally intertwined: where there is wealth or growth, energy is needed the most. If we could somehow see that picture evolve over the past 50 years, I am almost certain that we would see Europe, Japan, and the US brighten as their economies grew, with the rest of Asia emerging towards the tail end. The point of this silly astronomy lesson is simply to say that if India wants to grow at the pace necessary to lift our millions out of poverty within two or three decades, we’re going to have to power that growth – with lots of electricity and fuel; and hopefully some alternative methods too.
Currently, the average Indian consumes 0.9 barrels of oil, 31.5 cubic meters of natural gas, and 610 kilowatt hours of electricity every year – and these numbers are going up by 4.5% – 5% annually. Add to that 1% annual population growth, and our total energy needs
will increase by about 5.5% – 6% a year. This year, we will produce about 90% of our natural gas and 30% of our petroleum domestically, and import the rest. Capacity addition over the last few years has been quite rapid, but not nearly fast enough to keep up with the growth of demand. Judging by current rates of capacity addition, and borrowing some projections from the EIA, by 2020 we will have to import 20% of our natural gas, and 80% of our oil; by 2030 those numbers will be around 30% and 90%, respectively.
A parallel problem is our pending electricity shortage. As far as I know, electricity cannot (and probably should not) be imported – it has to come from coal, nuclear, hydroelectric, and wind power plants at home. Even if we add power plants at the fast rate that we have over the last few years, demand will still outstrip our production capacity within another five years (It also doesn’t help that, at last check, our transmission and distribution losses were an astounding 27% of output) – by 2020 the shortage will be about 13% of demand, 25% by 2030. Right now, we have enough installed capacity to produce about 80,000 mw of electricity a year, and it is growing at about 5% a year. Consumption is currently at 75,000 mw, but is growing at about 6.5% a year. This implies that we face a cululative shortfall of about 20,000 mw by 2020, and 70,000 mw by 2030.
This is by far the biggest reason why signing the nuclear deal into law is extremely important for India. Right now, only 3% of our electricity production is from thermonuclear generation. Following the approval of the deal in the Senate, the Nuclear Power Corporation of India (NPCIL) announced that it planned to add 20,000 mw of capacity by 2020 and 50,000 mw by 2030. These sums are not trivial – they represent 10% and 15% of our projected electricity demand, respectively. While these alone still don’t cover the projected shortfall, the smaller margins (3% in 2020, 10% in 2030) can probably be made up for by an increased pace of capacity expansion (or, less favorably, by a mild recession).
The nuclear deal achieves two basic things: it hitches our foreign policy wagon for the time-being to the US, and it allows us a clear path towards energy security. In an important sense, it is foreign policy and economic policy rolled into one. Despite seemingly overwhelming support in the US Congress and in India, there are still loud critics on both sides. Publications like the New York Times and the Economist are urging that the deal be made contingent on a cap in India’s strategic arsenal (obviously a non-starter), and if that doesn’t work, that the other members of the Nuclear Suppliers Group (NSG) not follow the US’ lead. In India, critics from the BJP and CPIM are urging the government to back out of the deal because it infringes on India’s ability to pursue an independent foreign policy (which is essentially a way of saying, ‘Don’t align our interests with America’s’). While the argument that this deal may damage the Non-proliferation Treaty is reasonable; I would argue that the NPT was flawed from the beginning – both in being inherently unfair to India, and being completely ineffective (as demonstrated by Iran and North Korea’s unbridled march towards nuclear weapons).
The contention by those in India that we should back out of the deal because it impinges our sovereignty, however, is a shallow argument. The agreement represent somewhat of a turning point in Indian foreign policy. Through most of the past 60 years, our foreign policy has been predicated on two basic instincts. Firstly, there was a perpetual insecurity about transgressions on our sovereignty. This is understandable given our colonial experience, and our wars with China and Pakistan. Secondly, there was a tendency towards moralizing – using foreign policy to reward the “good guys” and punish or ignore the “bad.”
The deal marks a turning point because it is made purely out of economic self-interest. It understands the compromises required: align with an unpopular America, and join the global nuclear security architecture (via IAEA inspections, etc.) which we have thus far studiously avoided. This is precisely the approach to foreign policy which is required if we are to meet our energy needs. It has the added benefit that it will increase our influence in global affairs (which should help in trade negotiations, etc.), but it will also impose on us certain basic responsibilities and transparency requirements.
The remaining Indian critics of the deal must understand two fundamental realities about India and the world today. Firstly, if the emerging geopolitical realignment between energy exporters like Iran, Venezuela, and Russia; and energy importers like Europe, the US, Japan, etc. continues, India will invariably end up on the latter side. Secondly, we need rapid economic growth in order to fight poverty, create jobs, and develop our resources, and we face relatively severe electricity constraints in trying to achieve that level of growth. We will need big, out-of-the-box ideas to deal with this, and the agreement is a big step in that direction.
It is, in not so many words, the best way forward. If you’re still in doubt, take a look at that picture again, and think about what you would like India to look like from space in another 20 years.