India needs diverse sources to ensure energy security while meeting climate commitments: Economic Survey 2024

Economic survey 2024

India needs to target a diversified set of energy sources to ensure energy security while meeting nationally determined contribution (NDC) targets, says the Economic Survey 2023-24 tabled by the government on July 22.

The diversification of sources would minimise the risks associated with energy systems while pursuing low-emission pathways, the survey added.

“Depending on the evolving and ambitious NDC targets and the objective of ensuring energy security, it is amply clear that India needs to target a diversified set of energy sources. Such diversification will help minimise risks associated with energy systems while pursuing low-emission pathways in line with national commitments,” the survey said.

The integration of renewables, alongside exploring nuclear energy and biofuels, could help achieve such diversification, the survey asserted, adding that  thermal power, especially coal-based power plants, would also play a significant role in helping meet the base-load to support large-scale deployment of renewables.

“India needs to target diversified energy sources, including renewables (solar, wind, large and small hydro), green hydrogen, nuclear, and biofuels,” the document said.

The survey, however, cautioned that India’s high dependency on imports, mainly petroleum, for its energy needs should not shift to high import dependency for solar photovoltaic (PV) panels and critical minerals, whose supply chain and geopolitics might be even trickier.

“As India aims to achieve its ambitious growth targets, it faces the dual challenge of meeting energy demands while reducing carbon emissions. Given the close linkage between energy consumption and various social indicators, the government's priority is to ensure access to sustainable and clean energy sources,” the document said.

Non-fossil fuel sources are critical to India’s ambitious NDCs and net-zero commitments. However, the survey said that phasing in non-fossil sources has its challenges, including intermittency related to renewables, handling of nuclear and solar panel waste, implications of biofuel production on food security, etc.

Lower fuel prices

The economic survey said that low fuel and core inflation ensured a downward trajectory for headline inflation, despite volatility in food prices in FY24. As the global energy price index experienced a sharp decline in FY24, retail fuel inflation also stayed low, it added.

“The central government's announcement of price cuts for LPG, petrol, and diesel led to lower LPG and petroleum product inflation,” it said.

In August 2023, the price of a liquefied petroleum gas (LPG) cylinder was reduced by Rs 200 in all markets across the country, the survey added. As a result, LPG inflation  has been in a deflationary zone since September 2023, it explained. Regarding retail fuel prices, the survey said that the central government had lowered the prices of petrol and diesel by Rs 2 per litre in March 2024.

“Subsequently, retail inflation in petrol and diesel, which is used in vehicles, moved to the deflationary zone in March 2024. Additionally, global commodity prices declined in 2023, reducing price pressure on energy, metals, minerals, and agricultural commodities through the imported inflation channel,” it added.