From the hills of the Deccan Plateau in western India's state of Maharashtra, the world of export fuels is unimaginable. In these hill villages firewood is still the primary fuel. In the hour before the sun goes down over the hills and the temperature drops, women bearing head loads of bundles of light branches head back to their simple homes. What these families have in common with many hundreds of thousands of households in rural India is their continued reliance on wood as fuel, whether for cooking or, as in these windswept hills, for keeping warm.
In the state to the north, which is Gujarat, industry has just finished marking what they're calling a landmark in Indian industry. On Christmas day 2008, a new refinery began processing crude oil. The new refinery was built and is owned and operated by Reliance Petroleum Ltd, a subsidiary of Reliance Industries Ltd, one of India's largest companies. The new unit in the port city of Jamnagar, Gujarat, adds 29 million tonnes (580,000 barrels per day) of refining capacity to Reliance Petroleum's total - it already has 33 million tonnes of refining capacity running in the Jamnagar complex. The group is now the world's largest refining entity at a single location, and the milestone was celebrated in newspapers around the country through full-page colour advertisements released by the company.
Not one litre of the "ultra-clean" fuels that the huge new plant will produce is to be used in India. Reliance Petroleum plans to meet demand in Europe, Africa and the United States - the new plant is geared entirely to the export market, thereby bypassing entirely the domestic market in which prices are controlled by India's central government. Of course the petroleum sector has changed a great deal from 36 months ago, when the fast-track refinery began to be built, and the company is being watched carefully by its public sector competitors at home.
Two days after Reliance Petroleum announced its triumph to the country and the world's petroleum industry, India's Cabinet - chaired by the Prime Minister and which includes the heads of key ministries - approved an Integrated Energy Policy. This, according to India's Planning Commission, which authored it, includes as its aims permitting energy prices to be determined by the market and providing subsidies targeted at those families who are classified as being 'below the poverty line'.
My guess is that most of the households I saw in these hills of western Maharashtra have already been classified as being 'below the poverty line'. These are the families the Planning Commission - India's apex institution that sets the country's development agenda and method - has in mind when it speaks of targeted fuel subsidies. "India needs to sustain an economic growth of at least 9 per cent [per year] over the next 25 years if it is to eradicate poverty and meet its larger human development goals," the Planning Commission had said. "The primary energy supply (including gathered non-commercial such as wood and dung) must increase at the rate of 5.8 per cent annually for fuelling the growth."
That sounds ambitious and doesn't look like it's getting the support it needs. About a month ago, India's central government announced and immediately implemented a price cut in the major automotive fuels - petrol (what we call gasoline or motor spirit) and diesel (formally, 'high speed diesel'). The media duly repeated the government's announcements that it was "passing on the benefit of steep fall (sic) in international crude prices to the consumers" by dropping the retail selling prices of petrol by 5 rupees (about US 10 cents/EUR 7.5 cents) a litre and diesel by 2 rupees (US 4 cents/EUR 2 cents) a litre. This pushed the cheapest retail prices for the two fuels down to rupees 45.6 per litre for petrol (95 US cents/68 EUR cents) and to rupees 32.8 per litre for diesel (68 US cents/48 EUR cents).
What wasn't touched at all were the prices for cooking fuels - which for tens of millions of households in India means kerosene and LPG (liquefied petroleum gas). India's government subsidises petrol, diesel, cooking gas (LPG) and kerosene. We're told by the ministries in New Delhi that the oil companies (they're state-owned) which sell these fuels do so at below-production costs, and they're given oil bonds in exchange to partially compensate them for their losses.
What's the connection between fuelwood use in the hills of western Maharashtra, the world's single biggest zone for refinery capacity and the price of domestic cooking fuel not being dropped? It is that India doesn't seem to want to think 'integrated' when it comes to energy. The country's petroleum planners wanted to drop prices of road transport fuels to help inflation (whose rise caused havoc last year) fall faster and aid an economic boost. The state of Gujarat is home to rural populations that are just as much 'below the poverty line' and starved of affordable cooking fuels as are Maharashtra's. In neither state are regional governments counting the environmental cost of several million headloads of forest litter, brushwood or dried dung being burned every evening and every morning.
The reason they continue to be burned in such quantities is that a cylinder (14.2 kg) of LPG costs about 305 rupees (US$ 6.35/EUR 4.55), even if there is a distributor within 20 kilometres. For a rural family that supplies agricultural labour - and there are many in this state - that is out of reach. At Rs 9.15 per litre, kerosene is a far cheaper option, but that is the price through India's dense public distribution system and its front end of hundreds of thousands of what are called 'fair price' shops, and neither do they have kerosene in enough supply, nor does the fuel remain affordable in the black market. For three years till end-2008 these rural hamlets have struggled with real inflation rates which at times have been twice those in India's cities (where average incomes are much higher), driven by steadily rising food prices. These families survive outside all books of accounts, all energy plans, all central diktats. In early 2009, fuel security for far too many still means scouring the hillsides and drying cowdung.