World Energy Outlook 2007

■
urban, industrial and commercial applications and, in remote rural areas, its
application, particularly in cooking, lighting and motive power. It is also in
charge of policy making in the field of biofuels.
The Department of Atomic Energy is responsible for administration of
India's nuclear programme.
Other ministries that have influence over energy policy include the Ministry of
Agriculture, which handles research and development for the production of
biofuels feedstocks, the Ministry of Rural Development, which has
responsibility for promoting jatropha plantations for the production of
biodiesel, the Ministry of Science and Technology, which supports research
into biofuel crops, especially in the area of biotechnology, and the Ministry of
Environment and Forestry, which approves and administers clean development
mechanism projects in India.
State governments in India have considerable responsibilities in the energy
sector, especially in the area of power. The Indian parliament cannot legislate
over certain aspects of this sector in the states. In general, as in most federal
systems, the states are responsible for implementing national laws, but can also
issue state laws and regulations of application in their own territory. As a result,
the evolution of power-sector reforms and the level of penetration of renewable
energy sources, particularly biofuels, differ widely among states.
Energy-sector reforms started in the early 1990s. The first phase of oil-sector
reform involved allowing private and foreign firms to participate in onshore
exploration and production through production-sharing contracts. 9 In 1996,
a second phase of reforms began, allowing gradual private participation first in
refining (1996-1998), then in upstream production (1998-2000) and finally in
marketing (2000-2002). In 1997, the government announced a New
Exploration Licensing Policy (NELP) to provide a more attractive framework
for private domestic and foreign investment in oil exploration (Box 15.2). The
government officially abolished the administered pricing mechanism (APM) in
2002 for all petroleum products except kerosene and liquefied petroleum gas
(LPG). The abolition was respected for a while but, as international oil prices
subsequently rose, the government re-imposed price controls on gasoline and
diesel. These controls, plus those on kerosene and LPG, have imposed heavy
deficits on downstream oil companies. Some gestures have been made to
alleviate these, but the burden essentially remains (see Price and Subsidy
Reform below).
Joint-ventures in building oil-product pipelines have been allowed since 2002.
Private investors have been free to develop their own gas-pipeline infrastructure
since 2006. Foreign direct investment in the gas sector is allowed in exploration
9. These are contracts with the government that lock in fiscal terms for the life of the project and
ring-fence it from future changes in the general upstream tax regime.
452 World Energy Outlook 2007 - INDIA’S ENERGY PROSPECTS