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India's Energy Development Programmes and Inclusive Growth, Shri R V Shahi, Former Secretary, Ministry Of Power

India's Energy Development Programmes and Inclusive Growth
[R V Shahi's Weekly Column for Infraline, January 7, 2008]

The Institute of Management Technology, Ghaziabad (U.P.) in association with the Decision Sciences Institute, U.S.A. and University of Alabama, U.S.A., organized an international conference on Decision Sciences & Technology for Globalisation on January 2 - 4, 2008. In many ways it was truly international because of a large number of participants and also speakers from abroad. I had the honour of inaugurating this conference. The conference contents covered all the aspects of functioning of industry and business (viz. production, marketing, finance, I.T. etc.), because the decision making process cuts across the entire spectrum of organization's working. For my own inaugural address (extempore) I chose the theme "India's Energy Development Programmes & Inclusive Growth".

Why did I choose this topic? Personally and professionally I do believe that we, as a nation, have achieved a lot primarily on account of our scientific and technological excellence and attainments. We are a member of the global nuclear club. We have successfully launched satellites. We have demonstrated our capabilities that we can design and operate sophisticated and complex technologies. India's Scientists, Engineers, Software professionals, Doctors and experts in other fields are being recognized globally with respect in whichever country they work. However, highly paradoxically our record on eliminating poverty, enhancing the standards of our rural population (also of people below poverty line living in towns and cities), providing healthcare services of quality, and our performance on education delivery systems, has been not only unsatisfactory but abysmally poor. That is why quite often people talk of two India - the one which lives in large towns and metros and the other India which is composed of almost 70% of our people living in villages, both having entirely different types infrastructure facilities and life styles.

Secondly, I also believe that a substantial portion of the blame for not so good development of our villages, and therefore the system not being able to raise the quality of life of rural people, can be rightfully attributed to lack of availability of energy and electricity in these areas. It need not be over emphasized that energy, more particularly electricity, is the most important determinant of development of a village, district or a state or a region. If we look at the consumption profile of energy and electricity across various regions of the country, there is a one to one co-relation between the per capita consumption of electricity and level of development of the state or the region. For example, Gujarat is the state where per capita consumption of electricity is more than 1,000 KWH. This is a State which has been growing at the rate of 10 to 12% and has been able to provide, to comparatively much larger proportion of its population, reasonably good standard of living. By contrast, in most of the states in eastern and north-eastern regions, the per capita consumption of electricity is one tenth (less than 100 KWH) of Gujarat, Punjab, Haryana etc. More than 90% of rural households in Bihar, do not have even access to electricity; and those, who have the connectivity, do not get the electricity for days or sometimes weeks together. Similar is the situation in many other states in these regions.

Thirdly, electricity, in today's context of technological developments, and therefore opportunities for availing the benefits of these technical advancements, has become the prime mover for almost everything that has to happen. There cannot be a good medical and healthcare system equipped with modern testing and other facilities unless we have reliable power supply to these instruments, equipment and computers. An area which can provide reliable power can also think of getting modern hospitals, dispensaries and testing and diagnostic centers and consequently quality medical treatments. Equally pressing is the need for reliable electricity if we have to deliver quality education through our schools, colleges, polytechnics and other institutions. Lack of electricity or its erratic supplies are leading to not only inadequate educational infrastructure but, in most rural areas of a large number of states, total absence of these facilities are crippling the quality of educational deliverables. Rural urban divide is getting widened on account of lack of energy and electricity supplies. There are many challenges faced by energy and electricity professionals and those who are at the helm of affairs in formulation and implementation of energy policy. However, perhaps, the most challenging of these challenges is about tackling the problem of making energy and electricity available to rural India - a sine qua non of an inclusive growth.

Fourthly, ever since the present government headed by Hon'ble Dr. Manmohan Singh took charge, the government and more specifically the Prime Minister himself have been emphasizing on the need for an inclusive growth. Quite often, there are experts of a school of thought according to which GDP growth alone may not be sufficient. GDP growth is essential but it might sometimes give a misleading satisfaction. Unless many other parameters and indices of development, pertaining particularly to needs and progress of rural areas, are appropriately tracked, we might get misled by a growing GDP which may not, in a highly co-related manner, necessarily mean enhancement of living standards of people in rural India.

For the last few years our economy has been doing very well. We have now almost overcome our hurdles of remaining stuck-up at 5 to 7% GDP growth. For last 4 years, the average annual growth has been of the order of 8.6%. Infact, in the year 2007 which has just ended, our economy clocked a growth of 9%. The government, the corporate, the financial sector and above all the people at large have acquired a confidence that India can, in a sustainable way, achieve 9 - 10% growth rate. The Eleventh Plan document, which was recently approved by the National Development Council, envisages an average annual growth of 9% during the Eleventh Plan. There are some concerns on account of slow down in the U.S. and its likely impact on the rest of the world including on India. There are strongly good reasons, however, to believe that since Indian economic growth in manufacturing and in service is primarily driven by domestic consumption, there would be very little impact on the growth target in so far India is concerned. Even those who believe that there could be some effect put the growth rate at 8 to 8.5%. In support of this argument what is being mentioned is that private consumption in India constitutes almost 65% of GDP, as compared to 55% in Japan and slightly above 40% in China. Therefore, what is being said is that the slowdown in the U.S. might affect China's growth significantly because of the nature of the Chinese economy being more export oriented. In case of India, because of economy being primarily driven by domestic activities and consumption the effect may be much less.

Foreign exchange reserves have already crossed 270 billion dollars and it is expected that during the year 2008 it might cross 300 billion dollars (compare it with just 1 billion dollar of reserve in 1991). The government has already decided to utilize a part of foreign exchange reserve for infrastructure projects. If the tempo of infrastructure development continues - it should, and perhaps would, continue because these have been badly needed all these years - it would lead to a spur in construction activities, leading to increased requirement of steel, cement, machinery for power plants and other facilities and consequently sustained momentum in manufacturing, all these leading to a self reliant economic growth less dependent on factors outside such as U.S. slowdown.

Top ten business groups in India, according to a recent assessment, have crossed the market capitalization of 20 billion U.S. dollar each, and another ten business groups have their market capitalization more than 10 billion U.S. dollar each. In the last one year the valuation of these companies has so radically increased that the market capitalization of the listed companies has more than doubled, to a level of Rs. 55 lakh crores. Thus, we have a paradoxical situation of a large number of business groups and individuals joining the club of world's rich companies and people, a large number in the middle income group moving to higher income group brackets on the one hand, and on the other we have more than 25% of our population (more than 250 million) people living below poverty line with an income level of less than 1 U.S. dollar (Rs. 40) a day.

Energy development programmes encompass development of highly capital intensive thermal power projects, hydro electric projects, gas field development, oil discoveries and recoveries, and coal extraction and production. Many of these projects lead to dislocation of large population. Their whole economic activities, earning profile, social status and interactions, and lifestyles undergo radical changes. Even after projects get developed, in many cases, these project areas constitute island of prosperity with the neighbouring areas still struggling with poverty and problems. This obviously creates social tensions and frustrations, quite often giving rise to resistance amongst the people against such projects. Enlightened project developers evolve consciously strategies for suitable rehabilitation and resettlement measures and appropriate community development programmes. In last few years, many of them have adopted Corporate Social Responsibility (CSR) as a well conceived approach to integrate local community with project development and growth. These concepts when extended to cover larger areas, and be accepted and implemented by all corporate entities, could obviously make a significant dent towards inclusive growth. Greater the recognition of the need not to exclude any section of the society from the benefits of the outcomes of economic development, growth and prosperity, larger would be the possibility of a smooth, acceptable and participative process of economic development. Another important point that needs to be emphasized is that the objective of inclusive growth has not only to be met through government interventions. Though it is an important task of any welfare oriented and democratically structured government system to ensure equity and justice and to see that all sections of society are looked after well, but if the process of economic development itself slowly and gradually shifts to corporate and such other institutions, both in the state and private sectors, the role of these organizations obviously gets widened to make definite programmes aimed at achieving inclusive growth in the society.

In one of the recent issues of Economic and Political Weekly (December 22, 2007), there is a comprehensive and critical analysis of rehabilitation of affected families of the Indira Sagar Hydro Electric Project in the state of Madhya Pradesh. I was personally associated, this being a subsidiary of National Hydro Electric Power Corporation (NHPC), in ensuring that the project construction proceeds smoothly and the long felt needs of people of Madhya Pradesh and other concerned States, both for electricity and irrigation water, are met. Perhaps this is one of the largest hydro projects in the country where expenditure on rehabilitation and resettlement is very large, of the order of almost Rs. 1,500 crores. While the project management authorities set aside this fund, gave it to the State Government, the entire process of development of infrastructure and of townships, compensation and rehabilitation measures etc. were undertaken by a specially constituted agency of the State Government. One of the conclusions of this paper is alarming. Though it has given considerable amount of credit to the work done through the state agencies but is critical of infrastructure in most of the private sites. It would be necessary to get this investigated. An extract from this paper is given below :

"In our survey of 429 families (out of a total of more than 30,000 households accounting for much more than a lakh people) displaced due to ISP, we found that living standard of every single family has deteriorated after the R&R process [see web posting alongside article]. The cash compensation and SRG package has been grossly insufficient to help families make adequate productive investments. Most of the government resettlement sites lack basic amenities like access to markets and employment opportunities, proximity to affordable and cultivable land and forests, availability of trees, grazing land for cattle, basic infrastructure like proper roads, drainage, and in some cases, clean water supply. The inability of the state to provide decent resettlement sites is the reason that majority of the oustees chose to resettle privately. While government sites are slightly better on aspects of roads, water and electricity supply, many privately resettled sites fare slightly better on the more fundamental economic aspects like the proximity to markets and the relatively favourable price of land. However, most private sites do not have even the basic infrastructure like roads, water, electricity and primary school. Moreover, the oustees resettled in private sites face hostility from the neighbouring host community whose resources (like water, trees, grazing land, schools, primary healthcare facilities) they share and with whom they compete locally for labour work and other employments. On the whole, we did not observe any significant difference in the extent of deterioration in the standard of living between those settled privately and those resettled in government sites. No family covered in the survey has been able to rebuild its lost livelihood even after two to four years of displacement and resettlement."

Tehri Hydro Electric Project (1,000 MW) is another example of developing a large township with modern facilities apart from compensation to individual project affected families. In this project also almost Rs. 1,000 crores were spent on rehabilitation and resettlement. In all such cases there is a need for even better appreciation of the requirements of people and the area. In the energy segment, hydro projects and coal projects require huge areas where both, a large number of families could be affected, and also large forests would be involved. We need to revisit our conventional approaches so that acceptability for these projects is much larger and wider. What is even more important is that the funds which are earmarked for the purposes of rehabilitation, resettlement, infrastructure development, catchment area treatment and for afforestation etc. are fully and properly utilized. One of the most important considerations to have allowed the concerned state government to take 12% of power generated by hydro electric plants free of cost was to use the revenue generated from such power for the community and local area development. It has not happened even to the extent of 1%. Naturally not only resistance of people against hydro projects gets justified, it is totally contrary to the approach of inclusive growth. Hydro energy development programmes could get a big support and boost if the revenue of 12% power is appropriately used for these areas.

Since electricity emerged as one of the three important ingredients of basic infrastructure for rural India, which include electricity, road connectivity and drinking water (Bijli, Sarak and Pani), we in the Ministry of Power, in 2003-04, formulated a scheme and, after approval of the cabinet launched the scheme for electrification of one lakh villages and one crore households. The scheme provided for complete funding arranged by Central Government and Rural Electrification Corporation, with substantial amount of grant funding. It was recognized that unless we provided electricity to rural India not only they will be deprived of electric light but economic development itself in these areas will continue to remain constrained and handicapped.

Subsequently, in 2004-05 the Ministry of Power formulated an improved version of the earlier scheme with the objective of creating Rural Electricity Distribution Backbone (REDB) aimed at electrifying all villages by 2009 and providing access to all households by 2012. The scheme provides for 90% grant by the Central Government and is named Rajiv Gandhi Grameen Vidyutikaran Yojna. The scheme was implemented during the Tenth Plan and toward the end of Tenth Plan, it was accepted in principle to continue the scheme in Eleventh Plan also to complete the work. Now the government has already approved, with the required funding, to complete the work during the Eleventh Plan period.

In 2005-06, the Government of India made a very comprehensive programme of Bharat Nirman which aims at providing road connectivity, electricity, water, tele communication and other infrastructure. This programme, if implemented properly, will bring about radical changes and make the most important and significant contribution toward inclusive growth.

Very gratifyingly, Corporates have started going even beyond the programmes of rehabilitation and resettlement of project affected people. Infact, they are going beyond the bounds of geographical contiguities of concerned projects and have started looking at education and health measures and such other important needs of rural India to be organized by them or sponsored by them. Corporates have started talking of Triple Bottom Lines - financial accountability, social accountability and environmental accountability as the corner stones of a well conceived and sound corporate governance. They recognize that people would not judge them only by the profit bottom-line of their balance sheet but their annual reports shall have to reflect in terms of what they have or have not done toward environmental protection and enrichment and social responsibility. A large number of writings have appeared in recent weeks in some of the leading economic weeklies. I propose to give extracts of only a few of them which adequately reflect the major shift in the mindset and in the thinking of the leaders of corporate world toward the issue of inclusive growth.

"Leaders in this century will need a completely different set of skills since their role will go well beyond the confines of their geography and also beyond purview of business. I believe that the 21st Century leader must remain in sync with dramatic changes sweeping the globe. A forceful leader must also be sensitive, caring and compassionate".

Mukesh Ambani, CMD, Reliance Industries Limited
Business Today (January 13, 2008)

"Noted American economist Milton Friedman had once advocated that only social responsibility of business should be to turn in a profit. Surely, these aren't many today who would subscribe to the view. But we still have not reached a point where every corporate sees its interest inseparable from that of the society. Corporate leaders in India do need to do some soul searching on the issue, particularly so when the economy is doing so well."....."Helping the under privileged to ascend the ladder will also assist the corporate sector in the long run. A healthy and educated population is a great source of quality manpower."

Sunil Mittal, CMD, Bharti Group
Business World (January 7, 2008)

"I believe that companies need to embrace the liberating idea that the "business of business is human well-being". There is a striking paragraph I read somewhere stating that the business of business is to generate growth and profits or else it will die; however, if that is the sole purpose of a business, then it should die, for it no longer has a reason for its existence. After fulfilling their first responsibility of being viable and making profits, companies, with their managerial resources and financial muscle, should reach out to the needy. Inclusive development for the largest number of people is in the interest of companies themselves......"

Anu Aga, Director, Thermax
Business Outlook (January 12, 2008)

I recall my days of long association with two large central public sector organizations. In those days social objectives of public sector were being viewed with certain degree of reservations and there was a school of thought which would go to the extent of even ridiculing the approach. May be, it might have been on account of the fact that many of the public sector organizations were not doing well commercially, may be it was just due to certain mindset. Things have changed and are changing fast. In quarterly reviews of public sector companies like NTPC by Ministry of Power, I remember, we kept activities under social responsibilities as a standing agenda item. In 2004-05, NTPC decided to set aside 1% of profit for such activities. The annual profit of NTPC would be of the order of over Rs. 10,000 crores; Rs. 100 crore for these activities would obviously make a visible impact, though there is a case for a higher percentage of profit for such programmes. If all energy companies - in fact all companies - both in public sector and private sector could adopt similar strategy, it would make a major impact.

These are, without doubt, trend setting shifts in thinking and approach. Within a few years these approaches are bound to percolate down and permeate across the entire spectrum of corporate world. The government and its planning process has already assimilated the inclusive growth strategy at policy level. A committed implementation would be essential. When the government efforts are supplemented with the corporate endeavours the goal of inclusive growth would definitely materialize.

Copy right : R.V. SHAHI