JOIN USThe Government of India’s bold, new initiative of 100 smart cities has put the need for efficient infrastructure under the scanner for the last year. The Smart Cities Mission (SCM) is nothing less than a challenge given the rapid and chaotic urban growth which has resulted in traffic congestion, air pollution, rising greenhouse gas emissions, and poor public health.
At the rate at which urbanisation is taking place, the country is also about to face substantial increase in energy demand in the next few decades which will translate into higher demand for electricity. Despite making significant strides to meet the energy requirements, the sector encounters a series of concerns like availability of fuel and its environmental impact. All this is nothing but a reflection of the fact that cities are struggling with the growing urban population.
At this stage, the government’s step to seek sustainable development and smart solutions for the future has been quite a relief. The SCM promises an inclusive development to drive economic growth. A key feature of the mission is energy management.
In the Paris Agreement last year, India had also pledged that non-fossil fuels would account for 40% of its total energy generation capacity by 2030. In this regard, utilising energy from cleaner alternatives such as gas can play a crucial role in India’s transition to a smarter future.
The importance of a cleaner fuel at this stage cannot be stressed enough. Natural gas is not only credible and a clean source of energy that can address the growing energy demands of India but it also offers a fuel option that is cheap, safe and much more efficient than other sources.
The price of natural gas at the burner tip is also lower than liquid fuels, and is likely to remain so in future. The advantages of natural gas thus extend to India's quest for energy security and cost reduction, and also its cherished ecological goals.
However, currently, the level of gas utilisation in India is less than 9% of the country’s overall energy requirements, against a world average of 24% of the overall primary energy mix. Even though the gas industry has witnessed reasonable growth in terms of demand, it has remained limited to just a few regions and states whereas large parts of country continue to struggle with basic infrastructure for its distribution.
Thus, extensive fiscal, policy and regulatory actions are required which should encourage gas production and consumption. The overall framework should provide incentives to energy users to make the transition to gas by allowing a reasonable return on investments.
A major challenge is that of taxation. Despite enormous environmental and health benefits associated with use of gas as a fuel, natural gas trade attracts higher tax rates compared to competing fuels. Thus, under the current system, delivered price of gas from the same source of supply varies considerably on account of taxation differences. For instance, the VAT rate on gas in Tamil Nadu is 4% whereas in Uttar Pradesh it is as high as 26%.
Such high tax rates render natural gas an unviable investment option. Interventions sh-ould be made to accord the status of “Goods of Special Importance” to gas under section 14 of CST Act 1956, that limits the power of states to levy tax and other incidence to a maximum of concessional rate of tax under CST, which is currently 2%.
Regulatory framework
An enabling policy and regulatory framework is also critical for the development of gas infrastructure. However, India unlike other countries, does not have a single Central body that is responsible for energy policy and regulatory affairs. This results in inconsistency for sub-sectors namely coal, oil, electricity and gas. The option in front of the government is to create policies that allow the right balance of fuel mix, which is to say bringing the usage of coal, liquid fuels and natural gas at par in the mix.
India will continue to grow its existing towns and smaller cities into future cities but all of this demands cognisance and inclusion of smart solutions in policy administration. There is also an urgent need to enhance the quality of life of citizens and promote eco balance.
In the last two years, the government has launched various projects for urban sector such as Pradhan Mantri Awas Yojana Housing for All (Urban), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Swachh Bharat Mission and Heritage Development and Augmentation Yojana (HRIDAY) etc.
However, ultimately there is a need for integrating these initiatives in a way that they aren’t at loggerheads with one another, making way for more holistic development. For instance, natural gas will not just help India achieve its 2030 pledge but it will also offer a long term solution to the rapidly diminishing air quality in the country.
Thus, the government should reassess how India produces and consumes energy and, toge-ther with its stakeholders, work towards a lower-carbon future. It is imperative that such sustainable solutions be at the core of smart cities development.
(The writer is a Fellow at University of Sussex. He was formerly with Observer Research Foundation, New Delhi)