9th Five Year Plan (Vol-2)

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Energy || Power Sector || Oil and Natural Gas


6.240 The Petroleum and Natural Gas sector has played a crucial role in the economic development of the country since Independence. The share of petroleum products and natural gas in the total final energy consumption has been increasing over the years and was 54% in 1996-97. The country is heavily dependent on imports of crude oil and petroleum products and this dependence will increase in the years to come. This underscores the need for increasing indigenous production. The National Oil Companies (NOCs) have made continuous efforts for discovery of oil and gas in order to meet the ever- rising demand in the country. Natural gas will become the most favoured source of energy due to its nature as a clean and environment- friendly fuel. The available options for maximising the share of gas in energy through domestic as well as imported sources to meet the energy demand are being examined. The Petroleum and Natural Gas sector was opened up for private participation at the beginning of the Eighth Plan. As of now, exploration, production, refining and marketing are open for private participation. The Restructuring Group for the Oil sector (R-Group) has estimated an investment of about US $ 100 billion in the Petroleum and Natural Gas sector up to 2010 for ensuring the security of of oil and gas supplies to various sectors of economy. It was against this background that major incentives were announced by the Petroleum and Natural Gas sector to attract a larger degree of private participation. A new exploration licensing policy has been announced recently by the Government to boost investment in exploration for increasing the level of hydrocarbon reserve accretion to enhance the domestic oil and gas production.

Review of the Eighth Plan

6.241 The major objectives for Petroleum and Natural Gas sector during the Eighth Plan included maximisation of indigenous production of crude oil and natural gas, a reasonable level of accretion of new hydrocarbon reserves through intensification of exploration activities, augmentation of domestic refining capacity with emphasis on cost-effective debottlenecking or expansion of existing refining capacity, encouragement to private sector participation etc.

Demand for Petroleum Products

6.242 The actual consumption of petroleum products was 79.16 million tonnes as against the Eighth Plan projected demand of 81.19 million tonnes in 1996-97. The compound average annual growth rate during the Eighth Plan period was 6.8 % as against the projection of 6.9% envisaged at the time of the formulation of the Eighth Plan. The cumulative consumption of petroleum products during the Eighth Plan was however lower at 341.69 million tonnes than the projected demand of 346.78 million tonnes due to lower than anticipated increase during the first two years of the Plan. These consumption figures include product sales through parallel marketing system (PMS). The share of imports of petroleum products by private sector was less than 3%. The consumption of petroleum products during the Eighth Plan is given in Table 6.24.

                       Table 6.24
             Consumption of Petroleum Products
                                        (Million Tonnes)
  Product             1991-92        1996-97
----------         --------------------------
                        Actual      Target   Achievements
Light Distillates        10.12      18.52      14.54
Middle Distillates       34.40      48.83      49.06
Heavy Ends               12.45      13.84      15.56
Total:                   56.97       81.19     79.16

6.243 While the indigenous production of crude oil has declined, the growth rate of demand for petroleum products is rising at a fast pace. This has led to higher volumes of imports of petroleum products during the Eighth Plan. The import dependence in respect of crude oil to meet the demand of petroleum products has gone up from about 50% in 1992-93 to 60% in the terminal year of the Eighth Plan.

Exploration and Development

6.244 Seismic Surveys: Against the revised 2D departmental survey target of 130370 Seismic Line Kilometre (SLK); the actual achievements was 145604 SLK during the Eighth Plan, i.e. an achievement of 127.9%. For contractual survey, the target was 22973 Ground Line Kilometre (GLK) and the achievement was 21286 GLK i.e. about 98% of the target. For 3D seismic surveys against the survey target of 4281 Seismic Square Kilometre (SSK), the achievement was 4788 SSK i.e. an achievement of 124.6% for onshore areas. For offshore areas against the 2D survey target of 126023 SLK, the actual achievement was 109682 SLK i.e. an achievement of 93% and for 3D surveys against the target of 77093 LK the achievement was 79846 SSK, giving an achievement of 104%.

6.245 Exploratory Drilling: As against the target of 3042 thousand metres for both the onshore and offshore regions during the Eighth Plan period, the achievement was 2883 thousand metres i.e. an achievement of 95percent. This was mainly due to the lower drilling achievements in Upper Assam Basin due to land acquisition and other environmental problems.

6.246 Development Drilling: The achievement of development drilling during the Eighth Plan was 2718 thousand metres against the target of 3809 thousand metres i.e. an achievement of 71 percent. The lower achievement in development drilling target was due to the fact that some of the fields which were proposed to be developed by ONGC at the time of formulation of the Eighth Plan were offered for development to joint venture companies (JVCs).

Domestic Crude Oil Production

6.247 The Eighth Plan had emphasised the need for maximisation of domestic crude oil production . However, against a total planned production of 197.3 million tonnes during 1992-97, the crude oil production was only 154.28 million tonnes. The terminal year production was only 32.90 million tonnes as against the target of 47.08 million tonnes. The medium-sized oil fields to be developed under Joint Ventures were expected to produce about 11 million tonnes of crude oil during the Plan period. The full production from these fields is now expected to materialise only in the Ninth Plan period on account of delays in award of contracts. The details of crude oil production during the Eighth Plan are given in Table 6.25.

Table 6.25  
Crude Oil Production
Organisation 1991-92 1996-97            Eighth Plan
             -------   ----------------   --------------------  
     Actual Target Achievement Cum. Target Achievement
i) Onshore     8.86 14.13   8.50         61.77          43.75
ii) Offshore  18.96 29.25  20.18        118.96          94.57
Total ONGC    27.82 43.38  28.68        180.73         138.32
2) OIL         2.53   3.70   2.87 16.59         13.97
3) JVC/Pvt.     -     -     1.35         0.0            1.99
Total:        30.35 47.08   32.90       197.32         154.28
Gas Production and Utilisation

6.248 Consequent to the lower domestic production of crude oil, the gas production was also lower than the Plan targets. In addition, there was a shortfall in the production of free gas also on account of delays in the development of gas fields. Against the Eighth Plan target of 125.42 billion cubic metres (BCM), the actual gas production was 101.71 billion cubic metres. Accordingly, despatches to downstream users of gas fell short of the target. The overall management of the domestic gas sector has improved during the Eighth Plan with better utilisation of the produced gas and minimisation of flaring. The level of gas flaring was reduced from about 10.3 % of the total production at the beginning of the Eighth Plan to about 4.9 % in the terminal year of the Eighth Plan. The production of natural gas during the Eighth Plan is given in Table 6.26.

Table 6.26
Natural Gas Production
(Billion cubic metres)
Organization                   Eighth Plan
                         Cumulative Target      Actual Achievement
I. On land                   28.64                   19.32
ii.Offshore                  87.34                   74.08
Sub Total:                 115.98                    93.40
On land                        9.44                   7.47
JVC                                 -                  0.84
Total:                         125.42                101.71

Hydrocarbons Reserves Accretion

6.249 The accretion to recoverable hydrocarbon reserves has not been very encouraging during the Eighth Plan period. The Reserves Replacement Ratio, which is a measure of reserves discovered to reserves depleted has declined to less than unity value, thereby implying that oil reserves are being depleted faster than being replenished. Against a total accretion target of about 1325 million tonnes of hydrocarbons during the Eighth Plan period, the accretion to recoverable reserves of oil and gas was 700 million tonnes. Exploration results during the past four years have been characterised by discovery of predominantly smaller size fields, creating uncertainties about their commercial exploitation. In order to intensify exploration, two major programmes have been launched in addition to the exploration programmes being implemented by National Oil Companies (NOCs). Starting from September, 1991 blocks in on-land and offshore areas are being offered for exploration on a continuous basis. So far, about 5 rounds of bidding starting from 4th round to 8th round have been announced for the offer of about 126 blocks but the response has not been very encouraging. In view of the low reserve accretion during the first two years of the Eighth Plan, an Accelerated Exploration Program was taken up in 1994.

POL Import

6.250 The import of crude oil has increased from 24.0 million tonnes in 1991-92 to 33.90 million tonnes in 1996-97 and that of petroleum products from 6.51 million tonnes to 16.86 million tonnes in the corresponding period. The import bill for crude oil and petroleum products is given in Table 6.27.

Table 6.27
Net Imports Value of Crude Oil and Petroleum Products
( Rs.Crore)
Item                   1991-92        1996-97               Cum. Eighth Plan
                --------------    -----------------------      --------------
                   Actual          Target         Actual         Value
Net Imports
a) Crude Oil        7869            4408           18332          60573
b) POL Products     5261           12892           13338          40399
Grand Total:       13130           17300           31670          100972

6.251 At the time of the commencement of the Eighth Plan, the total POL import bill was estimated to be Rs. 74,660 crore. However, the actual total POL import bill during the Eighth Plan period was Rs. 100,972 crore.

Refining Sector

6.252 The refining capacity at the beginning of the Eighth Plan was 51.85 million tonnes. The Eighth Plan envisaged augmentation of the domestic refining capacity to 65 million tonnes by 1996-97. The actual refining capacity at the end of the Eighth Plan was 61.55 million tonnes. The shortfall in the refining capacity was mainly due to delay in the commissioning of Gujarat Refinery Expansion by 3 million tonnes per annum. The highest priority has been accorded to low cost expansion of the refining capacities. The new grassroot refining capacities already commissioned during the Plan period are at Mangalore (3 million tonnes) and Panangudi (0.5 million tonnes). Although a number of private sector promoters were issued Letters Of Intent(LOIs) for setting up refining capacities, only 15 miilion tonnes per annum Reliance and 9 million tonnes per annum Essar refineries, are likely to come up by the year 2001. There is no firm indication of refineries being set up by other private sector promoters.


6.253 The Government of India has thrown open the major segments in exploration and production, refining and marketing sectors for private investment. These are as follows :

Exploration and Production

  1. Announcement of exploration bidding rounds, on a continuous basis, for onland and offshore areas.
  2. Announcement of speculative seismic survey rounds.
  3. Offer discovered oil and gas fields for development by private sector either solely or as joint venture with upstream sector PSUs.

Refining and Marketing

  1. The setting up of new grass-root refineries by private sector either on their own or as joint ventures with downstream sector PSUs.
  2. Setting up of lube refineries by private sector.
  3. Parallel marketing of petroleum products by private sector.
  4. The oil sector PSUs are also being permitted to form JVs among themselves and with Indian and foreign companies.

6.254 Parallel marketing of a number of petroleum products by private sector has been permitted and imports have been decanalised. Due to constraints at ports and inland transport facilities, parallel marketing has succeeded only to a limited extent so far.


6.255 As against the approved outlay of Rs. 24,000 crore during the Eighth Plan period, the cumulative expenditure was Rs. 40452.94 crore. The gross budgetary support was only Rs. 513.84 crore and the balance of the outlay was met by internal and extra-budgetary resources.


6.256 Taking into account the likely demand and the estimated indigenous crude oil production, the import dependence of oil in 2001-02 may go up to 70% as against about 60% now. The following areas would be given specific attention:

  1. Acceleration of exploration efforts especially in deep offshore areas as also in the frontier areas.
  2. Pursuing the possibility of acquisition of acreage in other countries for equity oil and provision of incentives to domestic oil companies for this purpose.
  3. Special attention on improving reservoir management and increasing recovery rates for all major fields by at least 5%.
  4. Formulation of an overseas oil and gas supply policy with a view to assessing the appropriate mix of supply source to optimise the cost.
  5. Deregulation/ rationalisation of the administered price mechanism in order to curb wasteful consumption, generate internal resources and attract private capital.
  6. Examining the possibility of importing natural gas at competitive rates, particularly in the form of liquefied natural gas (LNG) at coastal locations.
  7. Creation of adequate refining capacity (80-90% of demand of petroleum products) and balance 10-20% requirement to be met from imports for optimum supply mix and to take advantages of international oil prices.
  8. Augmentation and upgradation for marketing and distribution facilities to meet the demand of petroleum products.
  9. Improvement of product quality.
  10. Removal of existing administrative bottlenecks by further streamlining the existing procedure for Government approval for various projects and their implementation.
  11. Setting up of relgulatory mechanism, both in upstream and downstream sectors.
  12. Setting up of strategic tankages for ensuring supply of crude oil and petroleum products.

Thrust Areas in Oil and Natural Gas Sector

Exploration and Production

  • Expeditious implementation of the New Exploration Licensing Policy (NELP).
  • Acceleration of exploration efforts, especially in deep offshore areas and also in frontier areas.
  • Improvement in reservoir management and enhancing oil recovery.
  • Exploration and exploitation of Coal Bed Methane.

Refining and Marketing

  • International refining margins are currently very low. Therefore, grassroot refineries in future should only be set up if they are economically viable, keeping in view likely movements in the international refining margin over time. As the sector is expected to be fully decontrolled by 2002, the structure of effective protection for refining needs to be kept at appropriate levels to ensure economic efficiency.
  • Grassroot refineries should be set up in partnership with international oil companies having financial and technical strength.
  • Emphasis on infrastructure development for distribution and marketing of petroleum products.
  • Improvement of product quality.

Project Implementation

  • Removal of existing administrative bottlenecks by further streamlining the existing procedure for Government approval for various projects and their implementation.

Private Sector Participation

  • Exploration, production, refining and marketing areas have been opened up for private participation. It is necessary to identify and sort out operational bottlenecks which stand in the way of private participation. Looking ahead to the abolition of price control by 2002, the policy for the Petroleum sector needs to evolve in a manner which ensures a competitive environment at the marketing level.

Demand Projections for Petroleum Products

6.257 The demand of petroleum products is estimated to grow at a compound annual growth rate of 5.77% and is expected to be 104.80 million tonnes in the terminal year of the Ninth Plan. This does not include liquid fuel requirement for power generation. The projected growth in demand for petroleum products is given in Table 6.28.

Table 6.28
Demand Projections of Petroleum Products (Million Tonnes)
                      Products                      97-98                 98-99                99-00          00-01            01-02
                       i) Light Distillate        16.87                18.25                19.62           21.03           22.15
                      ii) Middle Distillate     50.45                53.43               56.62           60.24           64.38
                     iii) Heavy Ends            16.41                16.88               17.43           17.80           18.27
                           Total                        83.73                88.56               93.67           99.07         104.80

Exploration and Development

6.258 The policy of upgradation of basin categories by progressive exploration did not yield desirable results. With evolving geological concepts and experience in other parts of the world, it is seen that the less- explored basins in India e.g. Gondwana basins could possibly be more prospective and need to be accorded priority for exploration. Exploration efforts should therefore be spread over all the basins, including unexplored/less explored ones having favourable geological formations. This warrants a change in exploration strategy. 3D technology has been identified as a major seismic input for the development of the field,as well as for monitoring EOR processes. The focus of 2D surveys in Assam and Arunachal Pradesh areas would be on the North Bank of Brahmaputra river, the belt of Schuppan and further detailing of Eocene prospects in this region. The 2D surveys would also be carried out in Ganga Valley, Rajasthan and Saurastra offshore areas. In view of the rapidly increasing demand for oil in the coming years, there is an urgent need to step up the level of indigenous oil production which has remained more or less stagnant during the last 5-6 years. This will call for enlarging exploration coverage of the different sedimentary basins in the country. A new thrust needs to be given for exploration in deep waters, in the North bank of Brahmaputra as also in other frontier areas. A certain minimum level of exploration by the National Oil Companies may still be necessary for upgrading the hydrocarbon resources and attracting private investments in this area. The strategy to be adopted to achieve this would be addressed during the Ninth Plan.

Hydrocarbon Reserve Accretion

6.259 The ONGC and the OIL have together planned to add 865 million tonnes of oil equivalent in-place hydrocarbon reserves during Ninth Plan. These efforts will be supplemented by addition of some reserves in the exploration blocks awarded to the private parties. An accretion of up to 200 million tonnes of oil and oil equivalent of gas (O+OEG) is envisaged in deep water areas where a breakthrough is expected in the Ninth Plan. The estimated recoverable reserves will be in the range of 245.84 to 342.72 million tonnes of oil equivalent. The cumulative oil and gas production during the Ninth Plan is projected at 335.16 million tonnes of oil equivalent. It may be mentioned that considering the reserve accretion and the production of oil and gas during the Ninth Plan, the Reserve Replacement Ratio(RRR) will be in the range of 0.73 to 1.0. All efforts would be made to bring the RRR above the unity level. Although a New Exploration Licensing Policy (NELP) has already been formulated, certain fiscal and financial incentives would be required under this Policy to attract investment for exploration. Exploratory activity should be given infrastructure status to attract necessary investments from both public and private sector companies.

6.260 The average recovery factor in India is only about 28% of initial oil in-place reserve. This is low by international standard. Improvement in recovery factor would yield additional oil and gas without any corresponding additionality in the reserve accretion. Special steps are necessary in this regard.

Crude Oil and Natural Gas Production

6.261 The cumulative production during the Ninth Plan period would be 180.82 million tonnes of crude oil and 144.53 billion cubic metres of gas. The projection for oil and gas production during the Ninth Plan is given in Table-6.29.

Table 6.29
Organisations                     97-98        98-99               99-00            00-01                 01-02             TOTAL
1. OIL PRODUCTION (Million Tonnes)
i) ONGC                     27.73      28.09         29.18         29.87            30.02          144.89
ii) OIL                          3.10        3.20           3.29          3.38              3.50            16.47
iii) JVC PRODN.         3.59         4.40           4.08          3.93              3.46            19.46
TOTAL                      34.42       35.69         36.55        37.18            36.98          180.82
i) ONGC                   62.75       63.81           65.49       65.29             69.04         119.04
ii) OIL                        5.60         6.33             7.19         7.81              8.28           12.86
iii) JVC PROD.            6.73        7.26             6.98         6.82              6.79           12.63
TOTAL                     75.08       77.40           79.66       79.92             84.11         144.53
MMSCMD: Million Metric Standard Cubic Metre per Day
BCM: Billion Cubic Metre

Gas Availability and Utilisation

6.262 There are shortfalls in the availability of natural gas vis-a-vis the commitments already made in the different regions of the country, especially on the HBJ pipeline and in Gandhar. In addition, the demand for natural gas in core sectors like power generation and fertiliser production has been on the increase. Many States are planning to set up short-gestation power plants, based on naphtha, through private promoters. Against this background, a clear view on the issues of large-scale import of naphtha/ natural gas (LNG) for power generation has to be addressed urgently. The need for involving the PSUs in the petroleum sector to have a participating interest in overseas oil and gas development for sourcing the new infrastructure would also be emphasised. The import of natural gas from Mynamar and Bangladesh is being considered.

6.263 The gas utilisation, particularly the offshore gas, would improve with the commissioning of gas compression, evacuation, shore-based treatment facilities as well as the augmentation of the capacity of HBJ pipeline in the first year of the Ninth Plan. The gas flaring would be reduced to minimum level after the implementation of this project.

The long-term gas demand would critically depend on;

  1. Supplies of other primary energy resources from domestic sources ;
  2. Availability of transportation infrastructure to reach fuels to the end-users ;
  3. Mix of make versus buy options as in the case of fertiliser sector ;
  4. Long-term power plan, including mode-mix of power generation capacity creation.
  5. Stipulation arising from environmental considerations and long-term competitiveness of gas /LNG under expected currencies exchange rate parties.

Refining Capacity

6.264 The refining capacity in the country at the end of the Eighth Plan was 61.55 million tonnes. As per the present estimates, this capacity may go up to 113.95 million tonnes by the terminal year of the Ninth Plan, which includes 24 million tonnes capacity addition from the private sector and 28.40 million tonnes of capacity addition from PSUs and the joint venture projects respectively. The refinery-wise capacity addition during the Ninth Plan is given in Table 6.30.

Table 6.30
Refining Capacity Addition During 9th Plan
(Million Tonnes)
Refineries              97-98    98-99    99-00      00-01         01-02
1. Capacity as on      61.55     61.55    61.55      61.55         61.55
2. Panipat, IOC        0.00      6.00     6.00        6.00          6.00
3. Visakh, HPC          --        --      3.00        3.00          3.00
4. Numaligarh, NRL      --        --      3.00        3.00          3.00
5. Barauni Expn, IOC    --        --      0.90        0.90          0.90
6. Mathura Expn, IOC    --        --      0.50        0.50          0.50
7. Bina, BPC            --        --       --         0.00          6.00
8. MRPL Expn            --        --      6.00        6.00           6.00
9. Gujarat Expn, IOC    --        --       --         3.00          3.00
10. ESSAR, Pvt         --         --      9.00        9.00          9.00
11. Reliance, Pvt.      --        --     15.00       15.00         15.00
Sub-total:Cap.Addition 0.00      6.00    43.40       46.40         52.40
Total                  61.55     67.55    104.95     107.95      113.95

6.265 The above projected refining capacity will be sufficient to take care of the total demand of petroleum products of 104.80 million tonnes (Table 6.28). It is possible that there may be slippages in the planned capacity coming on stream but nevertheless it implies a very low degree of import dependence in products in net terms, though of course, import dependence on crude oil will increase. The growth of refining capacity in future must be seen in the context of the fact that the international refining margins are currently very low. Therefore, grassroot refineries in future should only be set up if they are economically viable, keeping in view likely movements in the international refining margins overtime. As the sector is expected to be fully decontrolled by 2002, the structure of effective protection for refining needs to be kept at appropriate levels to ensure economic efficiency. Grassroot refineries should be set up in partnership with international oil companies having financial and technical strength.


6.266 The increase in the refining capacity as also the need to cater to the large demand for petroleum products will warrant corresponding additional infrastructure in the form of port handling facilities for crude oil and petroleum imports, crude oil and product pipelines, crude and product tankage etc. The facilities that are necessary in this regard have been identified. Any delay in setting up these facilities on time may create serious supply problems, particularly in the North-Western region. The lower port capacity, coupled with poor operational facilities, results in a lot of idle time for the tankers and also affects product availability. This problem is bound to increase on account of the anticipated increase in demand and consequential increased imports during the Ninth Plan period. Similarly, the existing railways infrastructure will also need strengthening to handle the projected distribution of products.

6.267 In view of the above, pipelines, port facilities and product tankages would need to be accorded infrastructure status for attracting investments from companies, both in the public and private sector.

6.268 A number of product pipelines are proposed to be laid/upgraded during the Ninth Plan for facilitating the movement of petroleum products to the demand locations. These include, Bina-Jhansi-Kanpur pipeline, Cochin-Karur pipeline, Mangalore-Bangalore pipeline, Madras-Madurai-Trichy pipeline and LPG pipeline of GAIL and upgradation of Kandla-Bhatinda pipeline to 11.5 million tonnes. Efforts will be made to complete these pipelines during the Ninth Plan . Besides, it is also proposed to install many small feeder pipelines. A joint venture company, PETRONET has been formed by IOC, HPCL , BPCL and IBP for the implementation of petroleum product pipeline projects.

6.269 There is a need to increase strategic tankages for crude oil and petroleum products to avoid disruption of supply in case of war or natural calamities. Appropriate ways and means may be evolved to raise funds for this purpose. These funds may be administered by Government or by a regulatory authority.

Import of Crude oil for Refineries

6.270 Considering the domestic production level during the Ninth Plan, about 78 million tonnes of crude oil would need to be imported in the terminal year of Ninth Plan. Adequate arrangements in terms of port facilities and other pipeline infrastructure would need to be synchronised for the receipt and the despatch of crude oil from the port to the refinery gate. Some of the facilities that need augmentation are:

  1. Vadinar port in Gujarat is presently handling about 11 million tonnes of imported crude oil a year. The requirement will go up to 47 million tonnes by 2001-02 for the refineries in the Western and Northern regions.
  2. New Crude pipeline from Vadinar to Bina refinery in Madhya Pradesh and capacity expansion of Salaya-Viramgam, Viramgam-Koyali and Viramgam-Panipat Pipeline.
  3. Similarly, augmentation of crude import facilities at Mangalore, Cochin and Chennai for the refineries in the Southern region
  4. Augmentation of import facilities at Haldia, or in alternate location, to supply adequate crude to Barauni and Bongaigaon refineries.

Private Sector Participation

6.271 A number of steps have been taken by the Government for encouraging private participation in the petroleum sector. The economic reforms, initiated in 1991, seek to delicense the industry and encourage private sector initiatives for supplementing and speeding up economic growth. This liberalisation process has also opened up the petroleum industry, both upstream and downstream sector. Continuous yearly exploration bidding rounds are being conducted and offers of small and marginal fields are being made for private participation in upstream sector. In the current context, the participation of private Indian and multinational companies will not only provide the risk capital required for the upstream industry but also help in new technology input. In the downstream sector, in view of the low risk environment, the participative response of private/multinational companies in the last few years is quite encouraging. It is necessary to identify and sort out operational bottlenecks which stand in the way of private participation. Looking ahead to the abolition of price control by 2002, the policy for the Petroleum sector needs to evolve in a manner which encourages the development of a competitive environment at the marketing level. This will also create a competitive environment for the NOCs to re-engineer themselves for improved performance and productivity. In the long run, the private sector participation will help the Indian oil industry to play a global role.


6.272 The continuance of the present administered pricing regime is coming in the way of large-scale private participation. This aspect will also be suitably addressed to make Indian petroleum sector globally competitive. Reforms in pricing of petroleum products would also help in containing the oil pool deficit. The import of kerosene, LPG has been deregulated during the Eighth Plan period. The price of diesel linked to import parity has been announced by the Government in September, 1997. The selling price of all grades of diesel would now be based on import parity to be fixed on a monthly basis.

Environmental Management

6.273 To reduce the environmental pollution caused by the increasing number of diesel vehicles, Government has issued orders to supply HSD with sulphur content of 0.5 wt % and below in the four metropolitan cities of Delhi, Mumbai, Calcutta and Chennai w.e.f. April 1, 1996. As the effects of the environmental pollution are not confined to the metropolitan cities, the Government has decided to extend the supply of low-sulphur content HSD throughout the country, by April 1999. In pursuance of the above decision of the Government, nine refineries plan to put up hydro-desulphurisation facilities. The other five refineries are processing low sulphur crude and the stipulated quality can be produced without any additional facilities. In addition, supply of low lead Motor Spirit (0.15 gms/ltr) has been introduced from January, 1997. Supply of unleaded Motor Spirit for cars fitted with catalytic converters has been introduced in four metropolitan cities and will be extended to the entire country from April 2000.

Energy Conservation

6.274 The Government of India attaches a very high priority to conservation of petroleum products to contain the demand and to reduce the ever-increasing gap between demand and indigenous supply of crude oil and petroleum products. The Government has initiated several measures to promote conserveration of petroleum products in the transport,industrial, agricultural and domestic sectors. These include adoption of measures and practices which increase fuel efficiency, organisation of training programmes in the transport sector, modernisation of boilers, furnaces and other oil-operated equipments, standardisation of fuel-efficient irrigation pumpsets, rectification of existing pumpsets in agriculture sector to make them more energy efficient and development, as well as promotion, of the use of fuel-efficient equipment and appliances like kerosene and LPG stoves in the household sector. These activities are promoted and coordinated by the Petroleum Conservation Research Association (PCRA) as well as the Oil Companies.

6.275 The following strategies are suggested for the intensification of conservation efforts.

  1. Energy conservation should be viewed as a source of energy and should be used to bridge the gap between demand and supply.
  2. Energy conservation should be made attractive by providing incentives, wherever feasible.
  3. Energy efficiency standards should be prescribed in line with the international standards for equipment, appliances and processes and energy labelling of equipment,appliances, technologies and processes should be made mandatory.
  4. Fuel consumption norms should be established for different industries.
  5. Small and medium-scale industries should be encouraged to take up technology upgradation and phase out inefficient equipment.
  6. Price structure for petroleum products should be rationalised to reflect properly the scarcity values.
  7. Energy-audit should be made mandatory in energy intensive units.

6.276 There has been a progressive reduction in the fuel and loss in Indian refineries over the last several years. But it is still quite high as compared to the fuel and loss in the refineries overseas with similar configuration. In order to reduce energy consumption in the refineries, heat recovery needs to be optimised, steam leaks need to be minimised, advanced control techniques need to be encouraged and low efficiency equipment need to be upgraded. For further improvement in energy consumption levels, bench-marking can be used as a reference platform to compare and identify the gaps, so that action plans to bridge the gaps can be prepared and implemented to the extent economically feasible.

Research and Development

6.277 Research and Development (R and D) has played a key role in the development of the petroleum industry. This is more so in the upstream sector where the discovery rate and production technology have shown a marked improvement with each innovation. In the downstream, such efforts, though not spectacular , have helped in improving the quality and product mix and in reducing the cost. In the petroleum sector, the R and D efforts are highly capital-intensive. The NOCs have to play a major role in such R and D endeavours because of high investment required in R and D in the petroleum sector.

6.278 It is necessary to ensure that the R and D agenda is decided with a market driven approach and demand articulation. The main thrust of R and D in upstream sector would be directed towards improving the quality of prospect, enhancement of recovery from the existing fields, technological aspects of marginal field development, deep-water technology and cost control in petroleum operations. In view of the growing demand for gas as a clean fuel, R and D attention is required for finding and developing unconventional resources like coal bed methane (CBM), gas hydrates etc. In the refining sector, the R and D efforts towards technology upgradation for optimising product output and quality, including cost control, will be vital in satisfying the product demand, environmental imperatives and competitiveness.

Financial Outlays

6.279 The assessed Ninth Plan outlay for the Petroleum sector is given at Annexure 6.6. The outlays would be met through internal and extra-budgetary resources of PSUs. In addition, substantial investment is expected from the private sector during the Ninth Plan.


6.280 The major portion of the country’s energy requirement is met from conventional energy sources like coal and petroleum. However, the vast majority of our rural population still depend upon the locally available non-commercial sources of energy like animal dung, crop waste and fuelwood. In order to ensure the efficient use of these energy resources in an environmental friendly manner, it is important to promote the programmes of non-conventional energy sources. The new and renewable sources of energy were accordingly given adequate importance during the earlier Plans and it is proposed to continue this momentum in the Ninth Plan. The programmes are promoted under the Central Ministry of Non-Conventional Energy Sources (MNES) in coordination with the Governments of States/UTS. The major programmes include power generation through wind, small hydro, biomass and solar energy, the socially oriented programmes to meet the rural energy requirements such as National Project on Biogas Development (NPBD), National Programme on Improved Chulhas (NPIC), Integrated Rural Energy Programme (IREP), solar energy for lighting, solar water heaters, solar cookers and other rural applications and other programmes with demonstration components. The promotion of these programmes in decentralised specific locations is justified when one compares the difficulties and costs involved in the transportation and supply of conventional energy like coal, petroleum products, electricity, gas etc., to such remote and inaccessible areas. In addition, the new and renewable sources of energy programmes are environment-friendly and sustainable in the long run in view of the abundant potential of such sources. However, exploitation of these energy sources in a cost effective manner poses a challenge to the scientists and the planners at present.

6.281 The programmes to develop non-conventional energy sources have so far relied heavily on Central subsidies provided to individuals either directly through Indian Renewable Energy Development Agency (IREDA) or to States through Central and Centrally Sponsored Schemes. The emphasis in this sector during the Ninth Plan may have to shift from capital subsidies to interest subsidy and gradually move towards private entrepreneurship and community participation, without undue reliance on subsidies.In addition, it is necessary for the State Govts. to have an increased role in these programmes so as to have a visible impact of these programmes , especially in changing the lifestyle of the rural people.

Assessment of NRSE Programmes

6.282 While the Ministry of Non-Conventional Energy Sources (MNES) in the Centre had taken initiatives in promoting the non-conventional energy programmes during the Eighth Plan, it is, however, noticed that the matching efforts from the State Governments. were lacking mainly because of the constraints of financial resources as well as institutional arrangements. The programmes which were socially oriented like biogas, improved chulhas and Integrated Rural Energy Programme (IREP) could not make the expected impact in changing the lifestyle of the people mainly because of the weak institutional set-up, lack of suitable mechanism to maintain and put the non-functional systems back into operation, lack of locally available trained and skilled manpower where such systems were installed etc. In the case of the centralised power generation programmes like wind power, small hydro, biomass, energy from urban and industrial waste, solar power etc., it was seen that there were problems in buy-back of the power generated from these sources by the state utilities at an acceptable and economic price. In addition, lack of suitable infrastructure facilities like sub-stations, transformers etc. to evacuate the power generated from the decentralised energy sources was also acting as a major bottleneck. The absence of a regulatory body to settle the differences between the entrepreneurs generating energy from non-conventional energy sources and the Utilities buying this power is also a major constraint in the promotion of such programmes. In the case of small hydro programmes, the State Governments. were finding it difficult to provide matching resources along with the Central funds provided for this purpose. In the case of solar power, the prevailing high capital, as well as operational cost of such power projects, act as a hindrance in promoting it. In order to overcome these difficulties, efforts will be initiated during 9th Plan to access long-term funds in the national and international markets. Necessary action would have to be taken to remove administrative bottlenecks, if any, and reverse the slow down in critical areas in promoting Non-Conventional Energy Sources. The programmes to generate energy from urban/municipal wastes were facing the problems of the involvement of too many agencies like Central Ministry, State Governments., local bodies like Municipal Corporations, Municipalities etc.

6.283 The absence of a suitable legislation and policy for promotion of new and renewable sources of energy had also acted as a deterrent in accelerating these programmes. Concerted efforts have to be made in the new and renewable energy sources programme, particularly in the area of increased role of State Governments., effective institutional mechanism, both at the State and the Central level so as to ensure that maintenance and trouble-free operation of the systems installed. Framing of a policy including a legislation with necessary regulatory mechanism in order to buy back the power generated from new and renewable sources and deliver the energy to the users is also necessary. It is also necessary to bring down the cost of energy, especially from solar and other such renewable sources through suitable R and D and enhanced manufacturing facilities. The indigenous production of equipment should substitute imports and pave the way for viable technologies.


6.284 The thrust areas for development of new and renewable sources of energy (NRSE) during the Eighth Plan period were as under:

  • Operational programmes of biogas, improved chulhas, low grade solar thermal devices would be enlarged and intensified so as to meet a significant proportion of cooking and heating needs in the country especially in the rural areas. At least 750 to 1000 MW of power capacity would be installed on the basis of NRSE technologies of wind energy, micro hydel, urban/agricultural wastes, solar photovoltaics and also cogeneration programmes wherever feasible.

6.285 An amount of Rs. 857 crore was approved as outlay under the Central Sector programme to install 7.5 lakh biogas plants, 100 lakh improved chulhas, setting up power generation projects of 100 MW through wind farms, 300 MW through utilisation of urban /agricultural waste, 200 MW through micro hydel,1720 KW through SPV systems and other programmes including SPV wind pumps, solar cookers, and other non-conventional energy programmes.

6.286 A brief review of the major programmes of the Ministry of Non-conventional Energy Sources (MNES) is given below.

The physical achievements during the Eighth Plan in the socially oriented programmes are given below.

                               Target for             Achievement
                            1992-97                 1992-97
Biogas Plants                7.5 lakh                9.60 lakh
Improved Chulhas           100.0 lakh              127.00 lakh
Solar cookers                3.0 lakh                1.98 lakh

Wind Power

6.287 In the wind power programme against the target of 100 MW including private sector, the achievement during the Eighth Plan was 860 MW. The implementation of demonstration projects by States has provided operating experience, development of sites, etc and have resulted in commercial development of wind power. These projects have also encouraged the State Governments to declare their policies for private sector participation. All the States with wind power potential have declared their promotional policies. The private sector projects have gained momentum in Andhra Pradesh, Gujarat and Tamil Nadu. Wind power activities have also started in other potential States such as Karnataka, Maharashtra and Madhya Pradesh.

Biomass Power and Co-generation

6.288 In the biomass-based co-generation /combustion programme, against the Eighth Plan target of 300 MW the achievement was only 115 MW. During 1993-94 MNES has launched a national programme for co-generation in sugar industries. The response from the sugar mills is not yet very encouraging. The major constraints are non-availability of capital with the industries for putting up co-generation plant in the existing sugar mills, lack of proper policies in the States facilitating wheeling of surplus power, banking and buy back of power generated by the co-generating industries and non-remunerative payment for power exported by the co-generators.

Small Hydro

6.289 The progress of small hydro programme has been very slow. Against the Eighth Plan target of 200 MW including the private sector, the achievement during the first two years was only 17.37 MW. The achievement at the end of the Eighth Plan was limited to 93 MW only. The implementation of subsidy-based projects by the States was not encouraging. The allotment/clearance of private sector projects was also slow. The problems and constraints were mainly institutional and operational in nature. Inadequate State Plan allocation, lack of coordination among the agencies, low priority by SEBs, lack of clear policy for private sector participation are some of the constraints.

Indian Renewable Energy Development Agency (IREDA)

6.290 The Indian Renewable Energy Development Agency (IREDA) came into existence on 11th March, 1987 with the main objective of operating a Revolving Fund for development, promotion and commercialisation of technologies relating to new and renewable sources of energy (NRSE) by providing soft term finances. IREDA has now assumed global dimensions with assistance received from the Government. of Netherlands, Line of credit from World Bank and with assistance in the pipeline from DANIDA, ADB etc.

6.291 The review of the non-conventional energy programmes on completion of the Eighth Plan reveals that the progress in respect of the socially oriented programmes like biogas, improved chulhas, solar cookers, solar PV programmes for lighting in villages etc., has been satisfactory and the Eighth Plan targets have been achieved. However, the progress in the case of the programmes for power production has not been very good during the Eighth Plan except in the case of wind power programme. In the case of small hydro power, the achievement during the Eighth Plan was limited to only 100 MW against the target of 200 MW. In the case of power from biomass also there was shortfall in achievements. Against the Eighth Plan target of 300 MW the achievement was only 135 MW.

6.292 The economics of decentralised power generation needs to be evaluated with reference to the delivered cost of grid electricity vis-a-vis local generation cost. Cost of grid electricity would include not only the generation cost but also the actual transmission and distribution cost including the T and D losses. Decentralised power generation cost, on the other hand, will include a higher capital cost but low or nil fuel cost and also low distribution cost. A proper comparison of the relative costs of electricity at the consumer end is necessary to evaluate different options for non-conventional energy programmes for power generation.The Ministry of Non-Conventional Energy Sources (MNES), after realising the constraint of funds to be provided through Government budgetary support and taking into account the vast potential of non-conventional energy sources available for large- scale power generation, had formulated a strategy and action plan with revised goals to achieve 2000 MW of power generating capacity in the Eighth Plan. This action plan was based on the new strategy for market development and commercialisation. However, during the Eighth Plan the commercialisation of these programmes through private sector participation was successful only in the case of wind power programme.

Integrated Rural Energy Programme

6.293 The Integrated Rural Energy Programme (IREP) which was started as a planning exercise during the Sixth Plan in the Planning Commission was taken up as a regular programme during the Seventh Plan. In the middle of the Eighth plan, this programme was transferred to the Ministry of Non-Conventional Energy Sources from 1.4.94 onwards. This programme aims at meeting the energy requirement in the selected blocks of all the States/UTs by providing a cost-effective and optimal mix of all the energy sources.

6.294 The Central Sector outlays provided for IREP are utilised in creating capabilities for setting up planning cells in the States in their selected blocks. These funds were utilised in meeting the expenditure on staff component of IREP as well as their training. The States are providing funds for actual implementation of the programme by providing the energy devices like biogas plants, improved chulhas, solar cookers etc.

6.295 For proper upkeep and maintenance of the energy devices, technical back- up units are set up both at the State level and district level. So far 19, state level and 171 district level technical back- up units have been set up. A National Training Centre has been set up in Delhi and a Regional Training-cum-R and D Centre has been set up in Lucknow (U.P.). The Regional Training -cum-R and D Centers are in the process of being set up in Bangalore (Karnataka), Kheda (Gujarat) and Shillong (Meghalaya).

6.296 An amount of Rs. 85 crore was approved under the Central Sector as the outlay for the Eighth Plan taking into account the resource constraint. A target to cover at least 100 blocks during each year of the Eighth Plan with At least one block in each district, was fixed. The approved State Sector outlay for IREP for the Eighth Plan was Rs. 82.03 crore.

6.297 The Eighth Plan review, however, indicates that an expenditure of Rs.41.58 crore. had been incurred in the Central Sector and in terms of physical achievements only on an average 60 to 70 blocks had been covered per year against the target of 100 blocks per year. Thus, there was shortfall in achievements both in physical and financial terms in this programme during the Eighth Plan.

Endless Source ? Yes!

The current utilisation of renewable energy sources is much below their potential. This is mainly due to the dispersed nature of these sources, development stage of some of these sources and high initial cost for renewable energy sources. The situation may not change drastically even at the end of the Ninth Plan. Therefore, the major areas of focus for the future must be to:

  • Change the structure of the existing programmes from subsidy-driven to gradual commercialisation of non-conventional energy sources.
  • Gradual phasing out of subsidies in the socially oriented programmes like Bio-gas, Improved Chulhas, Biomass and Solar Photo Voltaics programmes.
  • Strengthening of research, development and commercialisation of non-conventional energy sources.

Renewable Energy Potential and Achievement

Source/System                     Approximate        Achievements             Ninth Plan
                                          Potential             (Up to 31.3.98)              targets
Biogas plants(No.)                 12 million                2.67 million             1.26 million
Improved Chulhas(No.)         120 million               26.29 million             19.6 million
Biomass/Gasifier                17,000 MW                105 MW                 22 MW
Solar Photovoltaic               20 MW/sq.m.              28 MW                 2.5 MW
Solar Thermal Systems       35 MW/Sq.m.
Solar Water Heating           4.36lakh Sq.m.        2.50 lakhs Sq.m
Wind Power                        20,000 MW                 970 MW                1200 MW
Small Hydro Power              10,000 MW                 151 MW                175 MW
Power from Municipal            1,700 MW                   3.75 MW             300 MW


6.298 The major thrust of the programme for new and renewable sources of energy in the Ninth Plan would be in the following two areas.

  1. The structure of the existing programmes for non -conventional energy is to be changed towards gradual commercialisation of non conventional energy. Special efforts have to be made for exploiting the large cogeneration potential available in the country. Necessary legislation and other measures have to be undertaken out to enable producers of non-conventional energy to sell electricity to the State Electricity Boards at a remunerative price. Necessary policy initiatives along with legislation for selling the Non-conventional energy power produced by the private entrepreneurs at a competitive price to the to the utilities will be taken up during the 9th Plan.
  2. The socially oriented programmes have to be restructured such that the direct capital subsidy provided by Government to these programmes are brought to the minimum level and a definite time frame is fixed during which the subsidies have to be phased out. The continuation of these programmes during the Ninth Plan should take into account the various financial and fiscal incentives, interest subsidy in place of capital subsidy and the implementation of some of the socially oriented programmes as a part of the other rural development programmes. Some of the socially oriented programmes which were continued under the Central Sector for a longer period, i.e. more than 2-3 Five Year Plans should be gradually transferred to the States. In such cases, the readiness of the States to implement these programmes is to be ascertained.

6.299 There is a persistent demand from the States to transfer all the CSSs to the States. While this demand has considerable relevance for the development of decentralised non-conventional energy sources, all the States may not have the necessary institutional and technical capability to undertake this task. It will be necessary during the Ninth Plan to define the roles of the Centre vis-a-vis the States for the development of non-conventional energy sources.

6.300 At the field level, the IREP and the other programmes for development of non-conventional energy sources need to be integrated into the other developmental programmes of the Centre and the State Governments.

6.301 The power generation programmes through different sources like wind, small hydro, biogas and solar power would be given adequate attention during the Ninth Plan. It is necessary to optimise the benefits under these programmes by conducting necessary evaluation of the work done in the past in order to consolidate the gains through these programmes. The programmes need an effective commercialisation approach with private sector participation wherever possible.

6.302 There is no satisfactory arrangement at present for absorbing in the grid, the surplus electrical energy available from decentralised energy supply systems. The Ninth Plan should take cognisance of this and deal with the necessary policy initiatives.

6.303 The provision of soft loans through financial agencies including Indian Renewable Energy Development Agency (IREDA) and other concessions for provision of land, infrastructure for evacuating the power generated by the private entrepreneurs have to be ensured for implementing an effective power generation programme through non-conventional energy sources during the Ninth Plan.

6.304 A major programme would be initiated for the production of power through cogeneration in industries, especially in sugar mills using bagasse as the fuel. This programme would be promoted through the MNES as per the existing pattern of financing which includes demonstration programmes in cooperative/private sugar industries, interest subsidy programme to enable the financial institutions to give soft loans at reasonably low rate of interest to the private sugar mill owners, necessary financial and technical support for the preparation of detailed project reports for setting up cogeneration power plants in the existing sugar mills etc. Co-generation programmes in industries will be given necessary thrust during the 9th Plan as these programmes can be implemented in a shorter duration and would also help the industries to meet their power demand and enable them to sell the surplus power to the utilities.

6.305 There is a need to consider enacting a legislation during the Ninth plan to enforce energy conservation standards, installation of co-generation systems etc

6.306 In order to promote the Solar PV programme, it is necessary to strengthen the R and D set up presently available and also bring down the cost of production of solar cells through fiscal and financial measures.

Fuel Wood Consumption in India

6.307 A large section of the society particularly the poor people are not in a position to meet their energy needs from sources like kerosene, LPG, etc., at an affordable price. As a result the dependence on fuelwood consumption is on the increase. The major source of energy for domestic sector both in urban and rural areas continues to be fuelwood and total requirement of fuelwood per year is estimated at 200 million tons of which 102 milllion tons are expected to be obtained from forest areas and the balance 98 million tons are obtained from the farm forestry.

6.308 The availability of wood from forests in terms of fuelwood is increasing on an average by 21 million tons per year. However, on a sustainable basis an additional 18 million tons per year are available .As a result in 84 million tons to be met by excess removal from forest areas. This in turn brings pressure on the conservation of our forest resources.

6.309 The proposed solution to the problem is to development of the degraded forest lands. Studies show that development of around 60 million hectares of the degraded forest land in a phased manner would help result in meeting the fuelwood needs in full.

6.310 For developing such degraded lands, an estimated Rs.25,000 per ha has to be invested. In order to take up a programme of development of 5 million ha of such degraded land during a Plan period an amount of Rs.2500 crore will have to be invested This would result in additional fuelwood availability of 2 tons per year.

6.311 In addition to the development of degraded forest land the other programmes like Integrated Rural Energy Programme may also help in meeting the fuelwood requirements especially in rural areas. These programmes aim at conservation/ promotion of energy efficient chulhas, biogas, biomass and other solar energy devices.

6.312 Out of the total rural energy consumption 65% is met from fuelwood. As per the estimates of the Planning Commission, the fuelwood requirement is likely to go up to 180 million tons in 2001. This is in comparison to the actual consumption of 162 million tons in 1996. In this context, expansion of the biomass energy programmes comprising biomass production, biogas, improved chulhas, gasifiers, solar energy, etc. assumes importance in the Ninth Plan.

National Project on Biogas Development (NPBD)

6.313 While there is a notable achievement in the National Project on Biogas Development by the setting up of more than 9.6 lakh family size biogas plants during the Eighth Plan, the component relating to community/institutional biogas plants has not picked up to the expected levels. A dedicated involvement of the States concerned alone would help in promoting community- based plants as the promotion of such plants will be possible only by the strong involvement of the local bodies like panchayats, rural cooperatives and other micro- level administrative set- up in the villages. With this in view, it is recommended that this component of the biogas project should be transferred to the States with adequate budget provision under the State Plans.

6.314 In order to expand the family -size biogas plants under the existing programme, the Ninth Plan programme must include the low cost designs, improved working of the plants through new R and D initiatives, an effective mechanism to deal with the maintenance of the plants etc. It is also necessary to quantify the benefits through this programme for fuelwood saving. In order to justify the biogas programme as the best decentralised energy source especially in rural areas, the economic cost is to be taken as the basis. In the case of centralised source of energy like electricity etc. the actual cost is very high. Thus, detailed surveys need to be made for these programmes to quantify the economic benefits on the ground and also to make these programmes more effective. The Ninth Plan should aim at achieving a target of At least 12 lakh family- size biogas plants.

National Programme on Improved Chulhas

6.315 This is an ongoing programme since Sixth Plan with the provision of sizeable investments in the form of subsidy, both by the Central and State Governments. While the physical achievements exceeded the targets fixed during the previous Plans, it is a matter of concern that a large number of chulhas installed are either not functioning or not in use. An evaluation study conducted by the National Council of Applied Economic Research (NCAER) for the period 1992-95 indicated that about a fourth of the chulhas installed went out of order within a year. It was also observed that there was a marked indifference shown by a large number of beneficiaries in the maintenance of the chulhas. The study also indicated that the number of self-employed workers and their competence in these programmes are short of the requirements. Therefore, unless some structural changes in the training of the self-employed workers and the beneficiaries are made, expansion of the programme, howsoever desirable, is likely to lead to a low degree of success. This programme is being considered for transfer to the States during the Ninth Plan.

Integrated Rural Energy Programme

6.316 This programme which is a Centrally Sponsored Scheme, provides for Central Government grants to the States for developing capabilities in the States and UT for preparing and implementing Integrated Rural Energy Programme and projects. It further provides for the expenditure on staff salaries and their training. The State Sector component is utilised for actual implementation of the programme. While the progress achieved so far indicates that the programme covers around 660 blocks in the entire country, the actual efficacy of this programme is yet to be assessed fully. Although some evaluation studies have been conducted, they have taken a very limited sample of around 12 blocks. The role played by the State Governments in this programme during the past had been very marginal. There were both institutional and financial constraints on the part of the States. This programme being a Centrally Sponsored Scheme is under consideration for transfer to States. The size and the programme components during the Ninth Plan are thus to be decided keeping in view the above points.

Power Generation Programmes

Wind Power

6.317 The wind power programme has attained a commercial stage and thus this programme during the Ninth Plan needs support only in terms of fiscal incentives to encourage increased participation of the private entrepreneurs to set up wind farms. Also a suitable regulatory mechanism is required to decide on the buy- back of the power generated by wind farm operators at an attractive and economic price and also providing for wheeling, banking and third party sales facilities. New demonstration programmes could be limited, as the existing wind farms would provide the needed demonstration experience. However, as far as wind resource assessment and surveys are concerned, it is necessary to carry out a nationwide survey during the Ninth Plan in order to identify the potential sites for development of wind farms. This programme should aim at achieving a target of At least 2000 MW during the Ninth Plan and most of it under commercial projects with the participation of private sector. The demonstration programmes must be kept to the minimum.

6.318 For wind energy fiscal concessions like accelerated 100% depreciation etc. were not needed. Although this aspect has been overdone,one can now pull back. What is required is to select a suitable technology and methodology through which, these technologies can penetrate at the fastest possible manner.

Small Hydro Power

6.319 This programme could not pick up during the Eighth Plan due to various reasons such as the absence of identified sites well in advance for taking up the programmes, the reluctance on the part of the State Governments to actively involve, the long gestation combined with time and cost overruns of small hydro projects etc. During the Ninth Plan, the structure of the small hydro programme needs to be suitably modified and being a Centrally Sponsored Scheme, this is also being considered for transfer to States. Therefore, the size of the programme and the pattern of financing of these programmes have to take into account the points discussed above. During the Ninth Plan a target should be to set up at least 400 MW capacity of small hydro projects.

Biomass Power

6.320 The biomass power programme comprises the biomass combustion programme, biomass gasifiers and cogeneration programmes. A beginning had been made during the Eighth Plan for experimental biomass production, utilisation and development of gasifiers for different mechanical and electrical applications. More than 20 MW equivalent capacity projects have been installed against the Eighth Plan target of 2 MW. However, the cogeneration programme, especially in sugar mills using bagasse as the fuel, is yet to pick up in a major way. The main constraint for this is the lack of suitable promotional incentives and the absence of demonstration programmes. The promotional incentives modified recently are likely to result during Ninth Plan in private owners of sugar mills coming forward to replace their existing low pressure steam boilers by high pressure ones and also carrying out other modifications so as to make them suitable for power generation. In addition, a regulatory mechanism is needed in respect of buy- back of the cogenerated power by State Utilities (SEBs) at an economic price and provide for facilities like wheeling, banking and third party sales etc. The programmes for power generation through biomass should aim at achieving a minimum target of 500 MW during the Ninth Plan and this programme will include the contribution from the private sector especially in the areas of cogeneration of power in sugar mills and power generation through biomass combustion.

Solar Power

6.321 The generation of electricity from solar energy, although technically feasible, is yet to reach the stage of commercial viability. At the prevailing cost of solar cells, the cost of installations as well as the cost of production of electricity from solar energy is very high compared to the cost of electricity produced from other conventional sources. Thus, an increased thrust is to be provided for R and D so as to upgrade the existing technology and to reduce the cost of production of solar cells. As such, there are no large solar power plants operating in the country. As of now, solar energy is useful for decentralised applications like lighting, water pumping, passive heating of buildings, water heating, cooking and other such applications. In order to promote solar power plants during the Ninth Plan, a preliminary survey has to be undertaken and a viable technology has to be found before going in for installing large size power plants both through solar thermal and solar photovoltaic technologies. It is desirable to try such plants on pilot scale so as to ascertain their trouble-free operation as well as the cost at which such power plants could be run. The activities during the Ninth Plan are required to focus on these aspects instead of merely proposing large size plants.

Energy from Urban and Industrial Wastes

6.322 The achievements during the previous Plans in this area were not significant. As such, there are no successful large- scale operation of plants to utilise urban waste for production of electricity in the country. Although several technological options are available to produce electricity from different sources like waste from industrial effluents, municipal/urban waste, tannery waste, vegetable/market yard waste, sewage, pulp and paper industry waste etc. The Ministry of Non-Conventional Energy Sources is at present implementing a programme assisted by UNDP/GEF consisting of 16 sub-projects on the above mentioned technologies.The feedback of these sub-projects would be available by the end of 1999. It is seen that a high degree of coordination between the agencies involved like the Central and State Govternments, the municipal corporations and the municipalities in towns and other local bodies is required to successfully implement the programme of energy from urban/industrial waste. In view of the reasons mentioned above, the Ninth Plan programme must be limited to the setting up of demonstration projects, creation of conducive environment for the private sector to enter into this area by providing suitable incentives, provision of necessary arrangement for State Utilities (SEBs)to buy back the power generated. Necessary legislation, wherever required, to dispose of the waste and to generate energy from such waste etc. should be undertaken Major capacity for electricity production from this source may not be possible during the Ninth Plan. However, a target oriented approach can give necessary push to this programme. A modest target of about 50 MW capacity addition under this programme can be achieved during the Ninth Plan.

Solar Energy Programme

6.323 Under Solar Energy Programme, stand-alone systems are installed for applications like the solar thermal water heaters, solar cookers, solar dryers, solar desalination systems and solar photovoltaic street lights, solar photovoltaic domestic lights, solar lanterns etc. In addition, hybrid systems using small aero generators, water pumping wind mills are also installed. The Solar Energy Centre presently functioning under the administrative control of the Ministry of Non-Conventional Energy Sources, is carrying out the activities of testing the solar thermal and photovoltaic devices. The Centre is engaged in R and D activities to develop indigenous components for solar power generation, development of materials suited to the requirement of solar thermal and PV applications etc. The ongoing activities under the solar energy programme are proposed to be continued during the Ninth Plan with enhanced target especially for rural applications like solar cookers, solar water heaters, solar lanterns, solar PV domestic lighting systems etc. While the use of solar energy for decentralised and stand alone applications is picking up, there were problems during Eighth Plan in respect of maintaining these systems. A mechanism has to be evolved during the Ninth Plan to ensure maintenance and upkeep of these systems with the involvement of the local people at the village level. Improved versions of solar cookers should be introduced. One should take note of the good technology available for solar cookers in Asia and other places.

6.324 But, for large applications like power generation, photovoltaic cells are highly expensive. SPV cells find applications in places like off-shore plants of ONGC. Similarly ,for applications like communication equipments used by Armed Forces in remote places such as Ladakh regions, etc. and for Mount Everest and other Himalayan expeditions SPV technology is found suitable. In remote areas, in any case, alternative ways of making available electricity are very difficult. Under such circumstances solar energy devices become justifiable even at their higher initial cost. The efficiency level of solar PV cells has increased from 9% to 13-14% at present and this may go up further. Therefore, more focus has to be given to R and D.

6.325 The capital subsidies provided for solar thermal systems for water heaters and solar cookers were abolished w.e.f July 1993 and April 1994 respectively. In place of capital subsidy, interest subsidy is being provided at present through MNES Budget so as to bring down the effective rate of interest on loans by commercial banks to around 5 per cent. The solar water heating systems have attained a stage of commercialisation. The application of solar water heaters for domestic, industrial and other commercial purposes has created an increased demand. In this context, emphasis is to be given to the programmes of MNES for installation of solar water heaters during the Ninth Plan for which the targets are indicted in the following paragraphs. In the case of solar photovoltaic systems, the capital subsidy is still being continued. During the Ninth Plan it is necessary to phase out the subsidy in the major programmes of solar photovoltaics also.

6.326 During the Ninth Plan a target of 5000 KW (peak) capacity of solar power packs, 5 lakh domestic solar PV lighting systems, 10 lakh solar lanterns, 10,000 solar PV water pumping systems, 13 lakh square metre collector area of solar thermal water heating systems, 5 lakh solar cookers should be achieved. A programme of this size will justify the capital and interest subsidy provided for these programmes and a large spread of these devices could create a visible impact leading to increased manufacturing of the devices. Wherever possible the programmes have to be given a commercial and market oriented approach.

Indian Renewable Energy Development Agency (IREDA)

6.327 The Indian Renewable Energy Development Agency (IREDA) a public sector financial corporation, is functioning under the administrative control of MNES. IREDA provides soft loans to the entrepreneurs to set up different types of non-conventional energy projects which include wind power, biomass, small hydro, solar thermal, solar PV etc. In order to maintain an acceptable debt equity ratio, IREDA is provided equity support by the Government of India through the budget of MNES. During the Eighth Plan, an amount of Rs. 20 crore per year on an average was provided as equity support to IREDA.

New Technologies

6.328 The Ministry of Non-Conventional Energy Sources is promoting the R and D activities in new technologies in different areas like use of alternate fuels for surface transport in order to replace hydrocarbons. The programmes cover fuel cell technology, hydrogen energy, ocean energy etc. However, all these activities are still at research level and a planned programme may not be taken up during the Ninth Plan except in the case of the alternate fuel for surface transport. In the case of alternate fuel for surface transport, battery- operated vehicles have been tried in some urban areas. While the technology for promotion of such vehicles is available, some initial support to introduce such vehicles in congested metropolitan areas is required.

6.329 The Ninth Plan (1997-2002) assessed outlays for the Non-conventional Energy Sources in public sector are given at Annexure 6.7.

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