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The Indian proposal for a SAARC power-grid, revived by Union Minister Piyush Goyal, has the potential to increase power-generation in South Asia. It also has the potential to reverse the way the South Asia thinks about itself - and the world thinks about South Asia, besides cutting oil bills of countries like India.
Chairing the SAARC Energy Ministers' conference in New Delhi on October 17, 2014, India's Piyush Goyal talked about a regional power-grid for South Asia. Confined to the bilateral sphere just now, the Indian initiative has the potential to change the face of South Asia.
India is and will continue to be the single largest energy-consumer in South Asia, followed by Pakistan and Bangladesh. It owes to the size of the nations, populations and overall economies. Himalayan States like Nepal and Bhutan have the potential to generate hydro-power that the other three badly need, but at present they themselves are starved of energy.
India's ongoing plans for setting up hydro-power projects in Bhutan and Nepal for meeting its needs will help the Himalayan nations to meet their own too. When the hydro-power potential of these two nations, as also Bangladesh, are tapped, Bhutan and Nepal in particular would be net-exporter of energy by huge volume.
It does not stop there. The revenue generated by selling hydro-power to India would make a big jump in their national budgets and GDP. Bhutan and Nepal can then truly become 'welfare States' and possibly provide for their relatively limited populations then. The comparison with the post-1973 Gulf-Arab nations' lavishing on their populations after the OPEC decision/mechanism on rising oil prices and controlling production is inescapable.
What India has now proposed is to expand its bilateral needs into a regional ambition for all of SAARC. It is likely that the Indian policy-makers may not have considered the possibilities, which are otherwise immense. Other things being equal, India providing transmission lines between the eastern Himalayan nations and Pakistan and Afghanistan, even for a symbolic transfer of hydro-power is as politically ambitious as they are technically feasible. If nothing else, it will be a 'SAARC statement' to itself and the rest of the world.
Cut in oil-import bills
Studies have shown that India, among existing/emerging global economic powers, has the potential to consume what it manufactures, and even more. In the two-plus decades of economic reforms, India shifted focus from manufacturing to services sector for GDP growth. While much of the manufacturing used to be focussed on the domestic consumer, though without deeper pockets in the pre-reforms era, now it's the export-driven services sector that is at the centre of economic planning.
It's thus that when the western economy or any part of it faces a slow-down purely owing to domestic reasons and causes, India too takes the hit. In politico-electoral terms, as much as in economic logic, Indians do not understand it. Owing to the big business of 'body-shopping' and the overseas employment that it provides relatively bright Indians, economic recession or political instability in any of the western nations has its fallout on the poor man on the Indian streets. The less said the better about those in other South Asian nations.
The Indian proposal for a SAARC power-grid, revived by Minister Piyush Goyal, now thus has the potential to increase power-generation in South Asia, and for South Asia. For individual nations, particularly larger economies like India, it would also mean a huge cut in their oil import bill. However, India will also have to find the large investments required for the Himalayan hydro-power projects.
Of course, the tendency to re-evaluate the benefits from Himalayan hydro power against the falling global oil prices will be there. So will be the prediction that in a year of poor rains, where would these countries go? Maybe, ahead of launching such an ambitious programme, every nation in South Asia may/will have to create 'strategic oil reserves' of their own for the 'non-rainy' day, as they do otherwise, too. Maybe, a 'strategic oil reserve' for the whole of South Asia could be a possible answer.
All this is as far as the Himalayan hydro-power projects go. Going beyond them, South Asia needs to look at other options, too. The recent Indian decision to fast-track long-pending environmental clearances for captive coal-mining to feed private sector power projects that are otherwise on the limbo would go a long way in providing the time that South Asia needs to harness hydro-power in a big way.
Land-locked nations of South Asia apart, even island-nations like Sri Lanka and Maldives would stand to benefit from such a 'power-grid', if implemented imaginatively. Already, India and Sri Lanka were talking about exporting power from one country to the other - first from India to Sri Lanka, and later in the reverse. That project has not taken off for a variety of reasons, but that is workable, still.
In the case of Maldives, during President Abdulla Yameen's post-inauguration visit in January, India promised to supply oil required to run power units across the archipelago-nation. India and SAARC will have to include Maldives too in their scheme, and look at the possibilities of supplies going to the country from their 'strategic stocks'.
Far-fetched, still?
For all the possibilities, it's all far-fetched. Or, so it would seem. Compared to other regional groupings of the kind, SAARC has been a late starter and a slow-process. SAARC may not have benefited the way the EU and ASEAN, among others, have benefited over the past decades. At the same time, SAARC has not suffered the same way as the other two, over the same period.
The economic crises that individual member-nations of the SAARC have suffered from time to time have been their own making. Neither the neighbour - particularly the larger Indian economy - nor the regional grouping can be blamed for the failures of individual member-nations. It was not the case with ASEAN in the Nineties, and the failure of euro to take off after a promising start a decade later.
Yet, SAARC cannot put off decisions for long. Domestic savings in the region is higher than the global average and that should have driven both the markets and the economy. What instead South Asia is witness is to a play and ploy by western FIIs, who are demanding in terms of concessions - and are reckless in pulling out. The consequences for the domestic economies are there for South Asia and South Asians to see.
What the region, particularly since India took to big-ticket economic reforms in the Nineties, is not necessarily blind-folded globalisation but liberalisation of procedures. India, for instance, requires FIIs only in areas where new technologies are involved. Where such technologies are made unavailable, Indian scientists have proved their worth in space and nuclear sectors - both on the energy and military fronts.
They too needed encouragement, which has since been forthcoming, but to keep home-hearths in western countries warmer. A home-driven investment, manufacturing and consumption pattern would also ensure that 'labour reforms' of the western kind are replaced by what were originally intended in the South Asian context - of protecting jobs and wages, not investors and their ever-increasing profit-margins.
In context, the peoples of South Asia cannot eternally allow India-Pakistan problems, or Afghanistan-Pakistan or even the 'ethnic issue' in Sri Lanka, and non-stoppable political polarisation in countries such as Bangladesh, Maldives and Nepal delay the collective prosperity of their people(s). In working towards a SAARC power-grid, SAARC satellite, as mooted by Indian Prime Minister Narendra Modi and SAARC currency - the forgotten proposal of Sri Lankan President Mahinda Rajapaksa - member-nations have to be as ambitious as they are cautious now.
Coming as it does ahead of the Kathmandu SAARC Summit in November, the Indian proposal for a SAARC power-grid thus may mean much more to the region and the people than what has thus far been intended. It has the potential to reverse the way the South Asia thinks about itself - and the world thinks about South Asia. What's needed is not problems. They are already here. Instead, SAARC and South Asia have to think of solutions. They have to think big, collectively - both as member-nations and also in terms of projects and proposals.
(The writer is a Senior Fellow at Observer Research Foundation, Chennai Chapter)
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
N. Sathiya Moorthy is a policy analyst and commentator based in Chennai.
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