Coalgate costs

Jan 09 2014, 21:04 IST
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SummaryNot only did the Coalgate cause a loss to the state exchequer, it also held back India’s development by leagues

A vital condition for economic growth is energy usage. The energy imperative is critical in industrialisation, because of the change from usage of animate to inanimate energy. This inanimate energy has been based on coal-driven steam power and coal-based thermal energy generating electricity. Though wind and water sources have been around for ages, their energy yield is low. A lack of adequate energy resources condemned life in the past to semi-immobility and low productivity. Steam power changed that.

The use of electric power has been a major source of change in the last two centuries. Electric power removed constraints on enjoying efficiencies in manufacturing processes and made possible the redesign of entire manufacturing systems. Because of electricity usage, made possible by Thomas Edison’s creation of a coal-based electricity generating and distributing system, per capita energy consumption doubled in the last quarter of the 19th century, and led to enormous wealth increases in the US. This is when the US became the world’s economic powerhouse.

The late economist, Professor Vernon Ruttan, had documented that per capita energy consumption and gross national product (GNP) growth was highly correlated on a one-to-one basis. More per capita energy consumption led to GNP growth. More power produced led to greater growth. With greater wealth, there was enhanced power consumption. This set in motion a dynamic process leading to the emergence of the world’s largest industrial sector and the evolution of the US as the world’s richest nation.

Where does India figure?

The ratio of per capita energy consumption to GNP is an important development indicator. On that metric, India fails miserably. In fact, data for the 1990s and 2000s highlights that India’s per capita energy consumption was 12.7 British thermal units (Btu) compared with 340.8 Btu for the US and 34.5 Btu for China. China consumes three times the energy that India does. South Korea’s consumption is 154.6 Btu, 12 times India’s rate. Brazil consumes 45.4 Btu, more than three times India’s rate.

When development is analysed, South Korea and China lead the pack, and rising energy consumption has played a role. China has historically consumed more energy than India. India’s consumption has grown, but China’s consumption growth has been double India’s rate. In fact, a great leap forward has been seen in Chinese energy consumption. The dragon has acquired more and more fire. Comparatively, India’s energy consumption growth has been at the pace of an elephant.

Why Coalgate has

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