The budget often deals with short-term problems and there are several of those relating to energy that we need to attend to urgently. The biggest is our concern for energy security to make India as aatmanirbhar (self-reliant) as possible  to reduce our dependence on fossil fuels, much of which we import – 85% of oil, 50% of gas and almost 20% of coal. Over the long run, India has to depend on renewables such as solar and wind. Another important issue is severe air pollution in India's cities due to coal-based power plants and vehicular pollution.

However, the short-term policies have to keep in mind the long-term vision. India has promised decarbonization leading to net zero by 2070. This is important for the world but also for India, as the country is highly vulnerable to climate change. It is, therefore, in our interest to see that the world attains net zero as soon as possible.

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Energy security requires that we promote renewables to replace coal in power generation and also promote electric vehicles as much as possible and cut down the use of fossil fuels.

In doing these, two issues need to be addressed. Many of the power distribution companies (discoms) make significant losses. The reason is large AT&C losses (short for aggregate T&D and commercial losses, an euphemism for power theft). For example, in 2022-23 they were 22.33% in Uttar Pradesh, 21.85% in Odisha, 20.55% in Madhya Pradesh, and 19.04% in Maharashtra. Many initiatives by the central government, including the latest revamped distribution sector scheme (RDSS) promising money for reducing AT&C losses, have not worked as expected. Also, most discoms are state-owned and have inadequate incentives for efficiency. The free power promised by various political parties compounds the problem. Privatization of discoms would be a solution but it is not acceptable to most state governments.

A measure needed

We need a measure that incentivizes the employees of discoms to reduce AT&C losses.

The privatized Tata Power Delhi Distribution Ltd has brought down AT&C losses to less than 10% from almost 50% in a few years. I asked a senior manager to go and explain to other discoms how they had done it. His reply was they tried to do it and the reaction was, 'why have you come to kick us in our belly?'

I suggest that the budget provides additional resources to discoms to give bonus to their staff, the level of bonus depending on the percentage point reduction in AT&C losses attained in the year and inversely related to the AT&C losses.

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Renewable power requires a much larger upfront investment. To replace one megawatt of coal plant which can generate power 80% of the time, we need to invest in 4 MW of solar plant which runs only 18-20% of the time. Fortunately, the private sector has moved in to set up renewable plants. Unfortunately, the power they generate is not fully absorbed. The government policy is to impose a renewable power obligation (RPO) by which a discoms is required a have a specified share of power from renewable sources. Many discoms do not fulfil this obligation because of their power-purchase agreements with old suppliers under which they find it cheaper to buy power from them. The solution to this is specifying the RPO level taking this in to account. The budget can provide resources to the ministry of power to compensate discoms who have PPAs preventing them to meet their RPOs.

Balancing power

For large-scale adoption of renewable power, we need balancing power. This can be supplied by flexible power generating units or energy storage. Large-scale energy storage in lithium-ion batteries would mean dependence on China, which today is the major supplier of such batteries. The budget could provide special incentives for developing sodium battery in the country. They have a smaller power density capacity per kilo gram of battery weight than lithium-ion batteries but this doesn't mot matter for stationary storage such as next to a solar or wind plant. An option for balancing power is off-river pumped storage hydro plants. These can be built in much shorter time and almost half the cost of a large hydro plant. Also, the problem of displacement and resettlement would be much less. The budget should encourage such plants.

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To reduce consumption of petroleum products, the government is rightly pushing electric mobility. Electric vehicles (EVs) require battery with high density of storage, which requires lithium. The need for oil products could also be reduced by promoting public transport. However, public transport has to be as convenient in time and cost of travel as private vehicles. This requires substantial investment, which the budget can encourage.

Finally, to rationalize the use of petroleum products and natural gas, they should be put under GST.

Some of these suggestions require complementary policies which are not discussed here.