Resource information
The power sector in India plays a
fundamental role in the economic development process. The
country faces formidable challenges in meeting its energy
needs in an environmentally sustainable manner and at
reasonable costs. The planning and operation of the sector
has hitherto been conducted without due regard to the
environmental consequences. As a result, additions to
capacity in recent years have been sub-optimal. Moreover
different types of capacity are treated differently.
Hydropower is required directly to bear more of its external
environmental costs than other sources. The recent Supreme
Court ruling has reinforced this tendency. Looking forward,
much of the large capacity additions required over the next
few years are likely to be coal-fired, with concomitant
effects on the country's environment. Against that
background, the paper looks at India's power generation
planning process; whether and how it might adapt in the
light of increased attention to environmental costs and
benefits; and if there are other, better ways of
internalizing environment externalities. It takes as its
starting point the conclusions of the companion paper by
Anil Markandya. These are that the external environmental
costs of fossil fuel generation are as high or higher than
estimates derived for developed countries; that estimates of
the external costs of both fossil-fuelled and hydro for
India should now be determined more precisely and used at
the strategic level in planning, at the regulatory level in
setting standards, in designing economic instruments and in
plant sitting decisions; and that the polluter pays
principle, which currently applies in the case of hydro,
should also be applied in other power sector developments.
