India set to emerge as one of the leading economies of the world over the next two decades. At a growth rate of 6-7 per cent, the country's GDP will increase three-fold by the year 2020. Achieving this growth rate critically depends on the availability, cost and efficient use of energy. India is presently an inefficient user of energy, with energy intensity (measured as energy consumption per unit of GDP) at 3.7 times of Japan and 1.5 times the world average. Even if the efficiency were to improve to the level of the world average by 2020, India's primary energy requirement would increase by close to twice the present levels.

At stake is the energy and economic security of the country. Presently, fossil fuels account for about 95 per cent of the total primary commercial energy consumption. The pattern of energy supply is not expected to change significantly in future with around 96 per cent of the total energy requirement in 2020 likely to be met by fossil fuels. Recent spurts in coal and oil prices across the world have highlighted the dangers of the high degree of reliance on hydrocarbons. The rapidly growing demand for energy in China and India-which together are likely to account for around 33 per cent of the total incremental primary energy demand between 2000 and 2020-is expected to exert more pressure on global resources. It is widely believed that high crude oil prices are here to stay. It is important for India to have a plan in place to respond effectively to these challenges.

India's oil and gas reserves are getting rapidly depleted, and at the current level of production they are expected to last between 24 and 35 years. Thus, the demand-supply gap will only widen in the years to come. It is imperative to channel resources, both finance and technologies, to ensure the country's energy security in 2020 and beyond.

The government has taken appreciable steps to enhance domestic production. Players like Reliance-Niko Resources, Cairn Energy, ONGC and GSPC have made key discoveries in recent times. More such discoveries are expected as the blocks are progressively explored. These discoveries should play an important role in bridging the demand-supply gap in energy. It may be relevant to note that only around 16 per cent of India's total sedimentary basin area can be classified as well to moderately explored. There could be many more potential finds waiting to be discovered.

The government needs to encourage exploration activities in the north-eastern region, and enhancement of recovery (EOR) programmes, such as the one undertaken at Bombay High. It is also important to consider better exploitation of marginal fields-ONGC's move to give out these fields to other players under service contracts is a positive move in this direction.

The burgeoning demand for energy cannot be met purely through domestic resources. It is critical for India to look beyond the boundaries for oil security. The government has demonstrated that it recognises this fact and has ably supported the Indian companies' foray into the international arena. These companies, led by ONGC Videsh, have acquired stakes in oil and gas fields in countries such as Russia, Vietnam, Sudan, Nigeria, Libya, Ivory Coast, Syria, Iran, Myanmar, Indonesia and Australia. The government recently has also constituted an "oil diplomacy" cell for facilitating these initiatives. This is a step in the right direction and is long overdue, considering that the Chinese national oil and gas companies have already made a head start in this area.

Global resources of oil are limited. The global production of oil is expected to reach its peak around 2030 (which could be delayed by a few years with increased investments), after which production is expected to decline. In recent years, natural gas has emerged as an alternative to oil. Gas as a fuel is cheaper, more efficient and more environment-friendly as compared to oil. The increasing importance of natural gas as fuel and feedstock for the power and fertiliser sectors is expected to drive the demand for natural gas in India. Gas is also being increasingly used as a fuel by the transportation sector and there is tremendous potential for the use of gas as an industrial fuel mainly due to its eco-friendly nature.

Importing gas either in liquefied form or through transnational pipelines is fast emerging as a viable option to bridge the demand-supply gap. The gas discoveries by Reliance-Niko and Cairn Energy off the east coast in the Krishna-Godavari basin have provided a fillip to exploration activity. However, production from these finds is not expected to significantly diminish the need for gas imports. It is important to make concerted efforts to import gas from neighbouring countries such as Bangladesh and Myanmar, in addition to the agreements that have already been signed with countries like Qatar and Oman for LNG imports. Projects for gas imports from these countries have been hanging fire for the past few years, primarily due to political reasons despite favourable assessments about their economic viability. Opportunities for importing gas from gas-rich nations of the Caspian region also need to be actively explored both at economic and political levels.

While hydrocarbons will continue to remain the primary source of India's energy requirements, the need to explore alternatives cannot be overstated. India should target meeting a significant part of the incremental energy requirements from such alternatives. India has good potential for exploitation of hydro-electricity. The share of hydro-electricity in the total generation has declined over the years. It is important that we arrest this trend and use hydro-electricity wherever it is considered economically competitive with other fossil fuels. This is all the more so in light of the fact that India has harnessed only around 15 per cent of its total hydro potential compared to Norway (58 per cent), Canada (41 per cent) and Brazil (31 per cent).

The establishment of a regulatory mechanism and the development of a national gas grid network for transporting new gas discoveries to the consumer markets are critical for attracting investments

India also needs to explore options for utilising other energy sources such as solar, wind, gas hydrates, bio fuels, ocean energy and hydrogen energy. Japan, for instance, has formulated plans to increase its photovoltaic energy capacity and is also exploring the commercial viability of utilising gas hydrates. The US is investing an estimated $1.2 billion (Rs 5,280 crore) to develop technology for using hydrogen- powered fuel cells. In particular, vehicular applications using fuel cells have shown considerable promise and are likely to become commercially viable as the technology develops.

Even within hydrocarbons, alternative fuels such as coal bed methane (CBM) should be actively explored. India has an estimated 800 billion cubic meters of CBM reserves, which can serve as a clean source of fuel particularly for power generation. The government has launched the competitive bidding for the award of CBM blocks for exploration and blocks have already been awarded under two rounds of bidding. A clear strategy needs to be evolved for exploration of the coal mines based on the quality and availability of CBM. India is endowed with large reserves of coal. Estimates suggest that the country has sufficient proven coal reserves to last over 100 years at the current rate of production. Development of clean coal and coal gasification technologies will go a long way in facilitating use of coal in meeting the country's energy requirements. ONGC has taken a significant step in the area of underground coal gasification (UCG) with the signing of a contract with Skochinsky Institute of Mining, Russia, for converting "unmineable" coal reserves into combustible gases.

Globally, a number of projects have been launched to develop technology for harnessing emerging energy sources in a commercially viable manner. In Australia, scientists have reportedly made a breakthrough in efficient utilisation of solar energy for generating hydrogen from water. The US Department of Energy is working on the practical application of hydrogen energy technology. The world's first commercial fuel cell factory has been established in the US, which will initially produce 50 fuel cells per year at half the cost of the earlier version of fuel cells. Many countries have launched solar electrification programmes for electrifying regions, particularly those that cannot be serviced by conventional grid lines in an economically viable manner. The Japanese government plans to install 62,000 building-integrated solar generators by the end of the decade.

As one of the largest users of energy, India must play an active role in developing appropriate technology for the supply of energy as well as for its efficient use. India has demonstrated in the past the prowess of its technical personnel in various fields. In a world increasingly governed by a strict patent regime, access to technology on our own terms will be vital. Indian industry must take the lead in this regard, if necessary through collaborations with other countries that are already working on developing the technology.

India needs to also undertake effective energy management measures to increase energy efficiency. The regulatory reforms and measures for deregulation of prices of fuels such as coal and oil products, which has been initiated by the government, are moves in the right direction. The Energy Conservation Act, which was passed in the year 2001, facilitated the setting up of the Bureau of Energy Efficiency as an apex agency for implementing energy conservation programmes and introducing stringent norms for energy generation, supply and consumption. The government, in collaboration with industry associations, has also launched energy conservation initiatives for major energy consuming industries. The initiatives include replacement of old and inefficient equipment, fuel switching and technological upgradation, and promotion of fuel-efficient practices and equipment. Such initiatives must be followed through to their logical conclusion.

The policy framework of the country needs to provide the necessary impetus for efficient and appropriate use of energy. It should offer the right incentives for appropriate utilisation of the various fuels, but without over-regulating industry. Fiscal incentives should also be offered for developers and users of renewable alternatives to encourage usage and technology development.

The establishment of a strong regulatory mechanism and the development of a national gas grid network for transporting new gas discoveries to the consumer markets are critical for attracting investments in exploration activities. The pricing of domestic gas as well as LNG will be crucial in determining the role of gas in the country's future energy mix.

Long-term energy planning makes it imperative that we start building an energy supply mechanism that will address the energy requirements along with fulfilling the country's environmental compliance requirements. The Kyoto Protocol and other greenhouse gas emission norms, which are bound to grow more stringent in the future with increasing environmental awareness, will make it necessary for India to adopt a less carbon-intensive path for fuelling economic development. Even though renewable energy is not expected to play a very significant role in meeting the country's energy requirement in the next two decades, it is necessary to promote hydro-electricity and other forms of renewable energy wherever it is economically feasible. The government needs to facilitate the use of hydro-electricity by taking measures to remove procedural delays and providing incentives for financial closure of hydro-electric projects. Appropriate fiscal incentives can also be provided for projects based on other renewable energy sources.

The establishment of independent regulatory agencies, removal of inefficient subsidies and more market-driven pricing mechanisms will not only help reduce over-utilisation and wastage but will also help attract private investments in the energy sector. These measures, coupled with technological upgradation, renovation and modernisation, particularly in user industries, will help enhance energy conservation and energy security.