Energy Shortage Constrains India's Economic Growth

Energy shortages in coal, natural gas, and diesel fuel are constraining India's growth. At the heart of the shortages are government subsidies that keep prices low, state-run monopolies that are unable to increase production, and costly imports.
July 3, 2012, 10am PDT | Irvin Dawid
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Indian correspondents Amol Sharma and Megh Bahree describe how the shortages of all three fossil fuels hamper economic growth in the sub-continent.

"A shortage of coal, which accounts for more than half of the nation's energy supply, is crippling the power sector, forcing companies to delay the opening of multibillion-dollar projects. India in April announced an 80% jump in coal imports ...but many plants still run below capacity for lack of coal."

Electricity shortages have resulted in clinics being forced to dump vaccines due to lack of continual refrigeration. As many as 400 million rural residents may lack access to electricity.

Coal shortages are largely a result of the inability of Coal India, India's state-run monopoly, to produce enough due to many factors, including old equipment and security threats.

The video shows an operator at a new plant explaining that he has only five days worth of coal stock - when a month's worth should be available.

"(Prime Minister Manmohan Singh) is beginning to realize that there's a very bleak outlook in terms of energy security, and that this is going to create the single largest constraint on the economy", said one energy consultant.

Deregulation of energy will be challenging.

"State-run energy companies are racking up billions of dollars in losses by selling auto fuel, cooking gas and electricity at artificially low prices to protect consumers from global cost increases." Consequently, residents expect low prices on these fuels.

"India has a very distorted system of subsidies," Jaipal Reddy, minister for petroleum and natural gas, said. "But how, in a vibrant democracy like in India, do you change the system suddenly?"

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Published on Monday, July 2, 2012 in The Wall Street Journal
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