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India being an oil importing country witnessed significant changes in the energy consumption pattern due to the oil shocks during the 1970s. Faced with rising inflation and a balance of payment crisis in mid 1991 the government of India introduced a comprehensive policy reform package comprising currency devaluation, deregulation, de-licensing, and privatization of the public sector. The rising oil import bill has been the focus of serious concerns due to the pressure it has placed on scarce foreign exchange resources.
The Indian economy uses a variety of energy sources, both commercial and non-commercial. Fuel-wood, animal waste and agricultural residue are the traditional or “non-commercial1 sources of energy that continue to meet the bulk of the rural energy requirements even today. However, the share of these fuels in the primary energy supply has declined from over 70% in the early fifties, to a little over 30% as of today (Mukhopadhya 2002). The “commercial fuels” such as coal, lignite, petroleum products, natural gas, and electricity are gradually replacing the traditional fuels. At the time of Independence, the country had a very poor infrastructure in terms of energy production and supply.
The per capita consumption of energy was abysmally low and the access to energy was very inadequate for the common people. The economy was dependent largely on the non-commercial sources of energy for meeting the requirements of the households and on animal and human energy in case of agriculture and transport. During the last 60 years the demand for energy, particularly for commercial energy, registered a high rate of growth contributed largely by the changes in the demographic structure brought about through rapid urbanization, need for socio-economic development and the need for attaining and sustaining self-reliance in different sectors of the economy3. India’s energy consumption is increasing rapidly, from 4.16 quadrillion Btu in 1980 to 12.8 quads in 2007.
This increase is largely the result of India’s increasing population and the rapid urbanization of the country. Higher energy consumption in the industrial, transportation, and residential sectors continues to drive India’s energy usage upwards at a faster rate even than China, which experienced a 130% increase in energy consumption from 1980 to 2007. Despite the rapid growth between 1980 and 2007, India’s energy consumption is still below that of Germany (14.35 quads), Japan (21.92 quads), China (39.67 quads), and the United States (97.05 quads). In addition, India’s per capita energy consumption is well below most of the rest of Asia and is one of the lowest in the world. Coal accounts for just over 50% of India’s energy consumption.
The power generation sector uses the majority of this coal, with heavy industry a distant second. Petroleum makes up 34.4% of India’s energy consumption, while natural gas (6.5%) and hydroelectricity (6.3%) account for much of the remainder. Natural gas is growing in importance, as its share of India’s energy consumption has risen from just 1.4% in 1980, while hydroelectricity which made up 11.5% of the country’s energy usage in 1980 has declined in relative importance. Nuclear (1.7%) and geothermal, wind, solar, and biomass (0.2%) made up a very small share of the country’s energy consumption in 2007.
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