War-induced Energy Crisis a Jolt For India: Nirmala Sitharaman

The Indian finance minister was hinting at the proposed cap on import of Russian oil and gas as proposed by the G7, which India fears will lead to rise in prices

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India's finance minister Nirmala Sitharaman on Wednesday said the ongoing disruption in the international crude oil and natural gas market is a 'jolt' for India's ambition to move towards renewal sources of energy and fulfil its climate change commitments.

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"This is a jolt for many countries but for India it becomes more onerous because of the size of the country and different levels of development," the minister said while speaking at the India Ideas Summit organized by USIBC in New Delhi.

The remarks come a day after it was reported that India will only comply with the proposed cap on energy import from Russia if others major exporters such as Venezuela and Iran assure supplies at a reasonable rate. Last Friday, G-7 finance ministers mulled to impose the restriction whose details were to be figured out later. However, Russia criticised the measure, mentioning it would cut supplies to countries that put this in place, which in turn, India fears, will stoke prices.

India is the world's third-biggest oil importer and 85 per cent dependent on imports for meeting its oil needs.

"We, both India and the US, are very concerned how we are going to get over the uncertainties which stand before us and the complexities that are there in terms of climate changes. Even as we were plotting our course towards renewable energy, there came huge uncertainties in terms of availability of crude and natural gas and also the uncertainty of the war. No one thought of such extreme exigencies," said Sitharaman.

Russia is at war with its neighbour Ukraine and most of the countries have sided with the latter calling to boycott Russian businesses. However, India has said it will not react under pressure and will give priority to its economic interests.

The minister pointed out that many countries are acknowledging that capping Russian oil and gas may mean countries will have to look at coal, at least temporarily.

"Now, without blinking an eyelid, some of us are saying that we have to go back to coal for some time and I admit that there is no other way as other energy sources are becoming expensive. That argument for India, for instance, hold a big weight because even we need affordable energy for our huge population wherein our developmental milestones are put differently within the country," she said, hinting towards the expanse of the country with different levels of development

She added that there are some parts of the country which are fairly developed, and some parts which are not so developed but for all of them require affordable energy. But the jolt may push India towards using expensive and polluting coal.

In two of her Union Budgets, she had emphasized on phasing out thermal plants and focusing on transitional energy, which is natural gas, and then equally ramp up renewable energy capacity. "This has received a big jolt."

Coal-based power projects with capacity of 202.22 gigawatts is the mainstay of India's power generation. The fossil-based energy source account for more than 50 per cent of the country's power generation capacity.

Prime Minister Narendra Modi, however, at the COP26 summit in Glasgow in November pledged to cut India's projected carbon emission by 1 billion tonne by 2030 and reduce the carbon intensity of the nation's economy by less than 45 per cent by the end of the decade and net-zero carbon emissions by 2070.

"It worries me that how this coal dependency will have to be cut down and again move back towards less environment threatening source (in case India embraces coal at this moment)."

"With these developments threatening energy security, it is for us (India and the US) to see how we come up with solutions even during the transition period till before the world comes back to the normal."