We can't get on a 9% growth path if we underprice energy: Montek Singh Ahluwalia
Interview with Deputy Chairman, Planning Commission
Indivjal Dhasmana & Sanjeeb Mukherjee / New Delhi Jan 21, 2013, 00:45 IST

Of late, there have been moves to correct the under-pricing of energy. Is the government moving the way the 12th five-year Plan document wanted it to?
If prices do not reflect the real cost of energy, why will anyone invest in energy-saving equipment? Also, if prices don’t reflect the marginal cost of supply, which is imports, why will people invest to produce energy? Our problem is that energy is generally under-priced. Diesel, cooking gas and kerosene are under-priced. Coal is also under-priced, in the sense that the market price when coal is sold in auction is much higher than the normal price, and the price of imported coal is even higher.

We need a complete rethink on energy prices and align close to world prices. We cannot close the gap at one go but phased adjustment is necessary. Nobody likes to pay a higher price but we must recognise that we cannot expect to get on a nine per cent growth path if we don’t align its energy prices with global prices.

Also decontrolling diesel?
That should be our objective. It is not possible immediately and the government has indicated a practical compromise.

What should be the direction in coal?
We need some difficult decisions there. In the Plan, we have clearly said the nationalisation of coal needs to be reconsidered. There is no economic logic in keeping the private sector out of coal if it is allowed in petroleum and natural gas. Why do we allow the private sector in these areas? Because we want to bring in as much investment as possible into energy production and we want new technology.

So, why not in coal? Such constraints on domestic supply are not justified. I am very aware that these are politically sensitive issues but the country needs to consider the matter objectively. If we are importing coal at high prices, it is odd that we will not allow the private sector to mine Indian coal but will allow people to import from private parties in Indonesia and Australia. That doesn’t make any sense