World Energy Outlook 2007

CHAPTER 15
OVERVIEW OF THE ENERGY SECTOR
HIGHLIGHTS
Primary energy demand in India was 537 Mtoe in 2005, roughly
equivalent to demand in Japan. While energy demand in India is growing
fast, at a crisp 3.2% per year in 2000-2005, energy demand per capita –
0.5 toe in 2005 – remains extremely low at about one-tenth of the OECD
average.
Energy-import dependence is growing. In 2005, India imported 70% of its
crude-oil requirements and consumed about 3% of world oil supply. LNG
imports commenced in 2004 and now make up 17% of total gas supply.
India also imports about 12% of its coal supply. Inefficiencies in logistics,
the low quality of domestic resources and slow reforms in the coal sector
have contributed to recent growth in coal imports.
India's energy sector is dominated by state-owned companies. Coal India
produces 84% of domestic coal. The Oil and Natural Gas Corporation
and Oil India are the dominant players in the upstream oil sector, while the
Indian Oil Corporation is the largest player downstream. Until 2006,
pipeline gas transport was the sole responsibility of the publicly-owned
GAIL (India). Most electricity generating capacity is state-owned. Private
generation is undertaken mainly by industrial autoproducers and a few
independent power producers. Recent reforms have brought more private
participation in India's energy sector, particularly oil and gas.
In 2006, after comprehensive public consultation, the Indian government
approved an Integrated Energy Policy, aimed at achieving co-ordinated
action among energy ministries, particularly at the federal level. The ability
of India's existing institutions to implement planned and proposed
policies, which has been lacking in the past, remains unproven.
Energy prices in India are heavily subsidised. LPG and kerosene subsidies
impose an enormous burden on domestic oil companies. Electricity
subsidies and theft cause the State Electricity Boards to incur big financial
losses. Subsidised natural gas prices are a disincentive to investors, which is
a concern given the investment needed for domestic gas exploration and
production.
Building much-needed infrastructure for power generation, oil and gas and
energy transport will require the mobilisation of public and private funds
within a transparent and predictable investment framework. With India's
growing appetite for personal transport, stronger government policies are
needed to enhance efficiency and to promote the supply and use of
alternative modes of transport and fuels.
Chapter 15 - Overview of the Energy Sector 443