INDIA'S ENERGY SECURITY CHALLENGE
Like China, India is a growing giant facing the critical challenge of meeting a rapidly increasing demand for energy. With over a billion people, a fifth of the world population, India ranks sixth in the world in terms of energy demand. Its economy is projected to grow 7%-8% over the next two decades, and in its wake will be a substantial increase in demand for oil to fuel land, sea, and air transportation.
While India has significant reserves of coal, it is relatively poor in oil and gas resources. Its oil reserves amount to 5.9 billion barrels, (0.5% of global reserves) with total proven, probable, and possible reserves of close to 11 billion ...view middle of the document...
But the most attractive oil domain outside the Persian Gulf is the Caspian Basin where India is trying to befriend the region's leaders and, if possible, gain a foothold. To support energy security interests in Central Asia, India has already stationed troops in Tajikistan, provided it with $40 million aid package and undertook to refurbish an air base near the Tajik capital Dushanbe. India is also pursuing relations with Kazakhstan, Azerbaijan and Iran.
India policy of source diversification has problematic implications. First, many of the countries with which India is dealing are known for severe violations of human rights, sponsorship of terrorist activities, and general misuse of oil revenues. Further enrichment of oil supplying countries like Sudan, Syria and Iran is not in the interest of India, a country which itself is a prime target of Islamist terrorism. Second, the exploration of overseas oilfields, especially in the area of the South China Sea, could bring India in direct competition with fellow Asian countries like China and Malaysia. Most importantly, this policy contributes to accelerating global depletion of non-Middle East oil reserves, and will lead India and the rest of the world to a point in which dependence on the region would be far stronger.
In addition to its struggle to secure supply, India is becoming increasingly aware of the fact that its economy is highly vulnerable to supply disruptions. Till recently, India did not have an energy security policy or contingency plans to fall back on in case of crisis. Nor is it a member of any organization like the International Energy Agency, which was born in the aftermath of the 1973 oil crisis to protect members from any future disruptions in the energy market. To minimize the impact of global fluctuations, India is building a strategic crude oil reserve facility on its southern and eastern coasts.
Other policies implemented by the government are:
• Increased fuel efficiency through a cut in state subsidies on all petroleum products, except some household necessities such as kerosene and cooking gas which receive the up to 40% subsidy to benefit the poor.
• Shift to...