Why India can't afford to lose the energy story

Since Narendra Modi took over '"Dilli ki gaddi" in May this year, the focus has been on what India can achieve under him. Already, right wing intellectuals have been describing 2004 to 2014 as the wasted decade. Never mind the fact that a huge chunk of people incidentally were pushed up the poverty line. Now, as he moves across different parts of the globe - Brazil, America, China, Japan, Australia - his main slogan has been "Make in India ". But the first step towards realising that goal is to ensure that we have 100 per cent self-sufficiency in very basic infrastructure. It's here where our current dilemma as a nation comes into play.

While PM Modi was away in Australia, the focus was on whether the present regime has helped the Adani group benefit from a loan of one billion dollars from SBI to purchase the Carmichael coal mine in Queensland in Australia. The loan was being described as amongst the biggest ever from a PSU bank. Several questions have been raised about the approval of this loan. (SBI chairman has now gone on record to say it's only an MoU which has been signed). Questions range from financial ability of the Adani group to repay the loan to ecological impact of coal being mined from this region on the Great Barrier Reef. Various national and international reports have cited top banks refusal to provide this loan. So what then has really happened? The truth as always lies somewhere in between.  

Contrary to what's being talked about, the capex required for this entire project is to the tune of $7.2 billion AUD. According to those involved in the deal making, top banks being cited as having withdrawn from the project, incidentally are on the list of company's advisory panel for expansion of Abbot point port. The main objection now being raised is the alleged proximity of Gautam Adani, chairman of Adani group to PM Modi. This to my mind is at the heart of the entire controversy.

Firstly, Mr Adani isn't the first corporate tycoon to have emerged as a friend of a PM. From Jawaharlal Nehru to Rajiv Gandhi to Atal Bihari Vajpayee, story of corporates being close to top politicians are all too well known. House of Tatas, Birlas and many others have been known to be close to former prime ministers. The key is whether Mr Adani's purchase of Carmichael mine, in any way, impacts the long term energy story of India. Can this one move ensure that the remotest village in Palamu district of Jharkhand be illuminated with coal fired electricity?

If we have to become a global superpower, we need to be energy-sufficient. Oil, gas and coal are at the heart of this desire. Make no mistake about this, but half of what Mr Modi is promising can be realised only and only if the government gets its energy policy right. Oil imports on their own account for 30 per cent of all imports with subsidies impacting deficits. The centre can't keep vacillating on this front. Luckily, the global crude oil prices are down right now. But imagine what were to happen if the crisis, which is never ending in the Middle East, was to escalate? The best way to insulate ourselves from any such scenario is to invest in our own capabilities of production and exploration of natural resources.

This is an investment-heavy sector and unless there is enough incentive for private players, there is no reason for them to not look at other countries for hydrocarbon. After all, India is not a country endowed with tremendous quantity of hydrocarbons. So, to attract private capital, the government has to lay out proper policies which will ensure a balance of risk and reward. Of course, if a proper transparent partnership thrives between the government and the private players, one could perhaps be looking at a success story. Till yesterday, the reality was that government was only interested in extracting maximum revenue from private players. However, given the risk undertaken by oil companies and the investment brought in with the knowledge that finding oil is not a surety but a probability, government must decide whether it wishes to support the private companies - more so at the initial stage - to secure energy.

If there is no transparency; then I am afraid whether you are in my home town of Banaras (Incidentally, Modi's constituency) or anywhere else, the India story would still be a long long way from being truly realised. And every big move made by a corporate in the energy sector, be viewed with suspicion.