Clean Power To Agriculture: A New Year’s Reform Wish List For India

Here is a wish list of policy reforms that India desperately needs, and will give coherence to what has already been implemented.

Some have been promised by the government but have not been delivered. Some merely need to leverage existing policy infrastructure and institutions. Some, admittedly, call for political courage, a virtue that dares approach Indian politicians only when it manages to hitch a ride with a crisis. But hey, this is the new year, let us policy beggars ride!

Let us begin with the policy reforms that have been promised. One is a storage policy for renewable power. For such a policy to make comprehensive sense, it must embrace transmission and new technology, including for carbon capture and storage.

The Storage Question

India has repeatedly been asking renewable power producers to cut back generation, as the grid is not able to absorb the power generated. Adani has gone in for battery energy storage systems, whose supply chains negate the emissions mitigation renewable energy kicks in, and, worse, makes India’s energy infrastructure dependent on Chinese benevolence — China is the world leader in battery materials, battery technology and mass production of batteries.

Some battery storage is inevitable, to keep the grid stable, even in the presence of an hour-ahead market for power. When renewable energy supplies fluctuate over their standard hours of supply, battery supply/storage must be triggered to keep the grid frequency at the desired level.

However, for large-scale energy storage, we need pumped storage and green hydrogen. If sites can be located that minimise environmental and social disruption for building pumped storage systems, renewable power can be transmitted to such sites over HVDC transmission lines that minimise loss while achieving high throughput.

Coal, Reimagined

Coal gasification also entails initial energy input to burn the coal in oxygen-scarce conditions underground and to pump out the resultant synthetic gas, to scrub the gas clean and separate natural gas from it.

India imports around 250 million tonnes of coal and 26 million tonnes of LNG. These are avoidable imports.

India has one of the world’s largest reserves of coal. The most efficient way to use that coal is to gasify it underground, and burn the synthetic gas that comes out to produce power, convert the syngas into natural gas, use the gas to produce power, or pyrolyse the gas to produce hydrogen and pure carbon, and burn the hydrogen in a turbine to produce power.

Gas can be piped to distant locations to minimise the disruption of forested areas that cover coal deposits.

Coal, once gasified, can be used to produce ammonia, which can be converted into urea, for which India relies on imports to a large extent. When gas is burnt to produce power, carbon dioxide will be generated. To contain this emission, carbon capture and use technologies will need to be developed and deployed.

Can we hope to get an integrated policy for generating clean power that combines solar, wind, nuclear, coal, gas and hydro-electricity under a single ministry for energy? The policy was promised in 2024.

New Approach To R&D

The 2025 policy promised public-private partnership for building infrastructure. Capacity utilisation in manufacturing is stuck at below 75%. There is no pressing need for the industry to invest in expanding capacity. Very low rates of inflation, riding on very low inflation in food prices, suggest stagnant farm incomes. That does not augur well for any investment in augmenting industrial capacity.

The only way to increase private capex is in infrastructure and new industries. PPP policies will be different for different parts of the infrastructure. India needs an entire range of electronics production to replace Chinese kit in power transmission and distribution, telecom and computer networks that underpin the digital public infrastructure, and in the newly emerging drone ecosystem.

India needs to build all kinds of defence and satellite systems with minimal import content, if we are to acquire immunity against foreign sabotage.

This calls for a new approach to R&D and R&D funding. The Budget announced an allocation of Rs 1 trillion (Rs 1 lakh crore) for R&D, but has announced that funds for R&D would be made available as loans, rather than as grants. Not all research is guaranteed to result in commercially viable new products and processes. How can anyone take loans to fund R&D?

The most sensible way to utilise the R&D funds from the Budget is to set up Indian Capability Centres on par with the global capability centres, where multinational companies hire Indian talent to develop new intellectual property, paying local talent a fraction of what similar talent would cost them back home.

Let industry and startups contract out research to such Indian Capability Centres, to build up their intellectual property. Allocate 5% of all retirement savings to investment in funds that provide capital to startups at different stages. Let our companies deploy AI in efficient applications across all value addition, instead of spending vast amounts on creating yet another large language model.

The Reform Trifecta

Let us wish for a vibrant, deep market for corporate debt, in which debt of different grades is traded, with differential risk premia reflecting differential quality. May the entire range of derivatives arrive to hedge against different kinds and degrees of risk. Let non-banking finance companies that have the courage, skill and manpower to lend to small enterprises raise funds from such a debt market, bring down the cost of capital for our small and medium enterprises.

May the government find the wherewithal to abandon its current policy of differential rates of protection for different industries and for products at different stages of value addition, to replace them with a simple, low, unified rate of protection from foreign competition. This would accord all sectors of domestic production a uniform rate of effective protection and promote genuine competitiveness.

Let the government find the courage to mandate the use of the Central Bank Digital Currency, the e-rupee on the blockchain, to pay all taxes. This can lead to traceability of all tax payments, and put an end to input tax credit fraud in GST, as well as create traceable audit trail for all sales and value addition, leading to uncovering untapped income bases for taxation.

Political Courage For Reforming Agriculture

Reforming agriculture calls for political courage more than technical nous. Today India grows water-guzzling sugarcane in the arid Deccan, on the strength of subsidised power and water, subsidised fertilisers and artificial cane prices that make Indian sugar exportable only with an export subsidy.

India grows more wheat and rice than it needs, and allows expensively procured and stored grain to be used as feedstock for fermenting into ethanol. As much as 56% of ethanol is produced from grain. Diversion of maize for ethanol is making chicken feed, and therefore, eggs and poultry, expensive, as well as taking away land from soybean for maize. That results in higher imports of edible oil.

Will the government find the courage to accept that the ethanol blending policy is pure rot, and replace it with a transport policy that prioritises mobility and public transport? Private vehicles should run on electricity, preferably from fuel cells fed by hydrogen, rather than batteries whose supply chains are controlled by the Chinese.

Low Import Duty

Let the import policy promote generalised efficiency, rather than selective protection. For that, India needs a low, uniform rate of import duty.

A political economy has taken hold, in which funds are transferred to citizens to win their electoral support, emaciating state capacity for both governance and essential investment. India collects just about 18% of GDP as tax, runs up a combined, centre plus states, fiscal deficit of 7-8% of GDP, and has non-tax revenues, like user charges and licence fees, amounting to less than 3% of GDP.

The government system in India does not have enough resources to sustain high levels of transfer payments and invest in building social capital that would allow India to thrive in the age of Artificial Intelligence.

May we have the wisdom to use the precious time our young spend in education to develop their intellectual ability and curiosity, rather than on learning some skill or another that will turn redundant as technology develops.

India cannot progress as a nation without social harmony and coherence. The sustained use of sectarian politics to mobilise political support is breeding the current schism and sowing the seeds of future disruption. Let our politicians find the sense and the courage to carry out a serious course correction.

Author:   TK Arun

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coal power plant power demand energy agriculture