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Uncommon Ground | Mukesh Ambani and RK Pachauri on Energy and the New Realities

Uncommon Ground | Dec 12, 2008

This is an edited version of Rohini Nilekani’s Uncommon Ground, where she brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. In this episode, she moderates a discussion on energy with Dr. RK Pachauri, Director General of The Energy Research Institute (TERI) and Chairman of the Intergovernmental Panel on Climate Change (IPCC), and Mukesh Ambani, Chairman of Reliance Industries Limited.

Uncommon Ground brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge. The host uniquely placed to moderate these discussions as she traverses both sides herself, demonstrates that the relationship between business, society and state need not be necessarily confrontational. Rich in insights, Uncommon Ground highlights the critical importance of dialogue in our democracy to create a shared vision of the future. It is a significant contribution to the ongoing debate on development and equitable growth in India.

 

Rohini Nilekani: Millions of Indians use informal energy sources including wood, and eight crore households do not have access to a light bulb. What do we need to do for them first?

RK Pachauri: We need to look at the end uses for which energy is required. Lighting is a critical need, and so is cooking energy. Unfortunately, we have not focused on solutions in these areas. For instance, if we look at lighting, we only rely on extending centralised power generation, transmission, and distribution, however people don’t have the money to get connections to their own homes. Now we have come up with a program called Lighting a Billion Lives. We’ve developed solar lanterns, and if we’re able to shift the subsidy from kerosene to this particular commodity, we could bring light to every home in two years.

RN: Does the private sector have a role to play in investing in alternate sources of energy? Should this be part of CSR or philanthropy? 

Mukesh Ambani: It’s important for businesses to meet needs in an economy, and energy is fundamental to growth. We have to understand the ground realities today and ask ourselves tough questions. When we subsidise oil in a way that means future generations will have to pay between 80-100,000 crores a year, are we really seeing the benefits of that subsidy? I believe that new, sustainable solutions are possible with innovation and technology, and India offers the biggest innovation market to leapfrog energy solutions into the future, and a distributed energy solution is key. As Reliance, we’re aggressively investing in solar energy. In Maharashtra, we have electrified 82 villages that have never seen any power before on a decentralised basis. This is a new business model, and we believe that alternate energy models are sustainable. As Reliance, we’re working in solar very aggressively, as well as in biofuels —on biodiesel as well as bioethanol, which can replace gasoline as well as diesel. India is blessed in terms of solar energy, and by investing in new decentralised solutions, I believe we have the capability to change the world in the next 20 years. 

RKP: A decentralised solution would make a big difference to the lives and livelihoods of farmers because a lot of their produce is wasted right now. If we can provide those cold chains, if we could have decentralised energy solutions and announce a program in this area, I’m sure corporates would see it as an opportunity and jump in. In terms of biodiesel, there is good and bad biodiesel. At the institute, we are working on Jatropha and started in a small way on cellulosic ethanol which comes from waste products and agricultural residue. India has hundreds of tons of agricultural residue. If we can convert that into modern fuels, it would really open up an enormous opportunity. This is not philanthropy, this is not something that we’re doing for charity, it’s something that represents the future of business.

RN: What is the challenge for the corporate sector to use the myriad opportunities in different sources of energy? 

MA: We need to have a national vision and commitment among all sections of society, whether it be regulators, consumers, government, businesses, NGOs, etc. The immediate opportunity that I see is in the natural gas market, because India is endowed with natural gas. We need a national decentralised model, where we say that we will take this gas to 50 million households. We had a similar situation in 2001 with telecom services when we had only half a million subscribers. At the time, a lot of people thought our aim of turning this into 500 million subscribers in six years was a pipe dream, but today it’s a reality. By taking the energy source to the household, we will empower the customer and free them of a whole host of vested interests of business, government, and regulators.

RN: How do we strike a balance between the car economy and our energy usage? Can we expect industry in general to shy away from an opportunity when consumers increasingly want energy-intensive products? At the same time, there are environmental repercussions to this as well. How do we build consensus? 

RKP: I have nothing against small cars, but I am against the absence of a public transport policy. This is a country where we have so many poor people, even if a substantial number can afford cars, we also need to cater to the needs of the poor. In terms of industry on a larger scale, we have to provide the right price signals and there has to be some degree of regulations. There is a huge construction boom in this country. At last count in Delhi, there are 70 shopping malls that are coming up and each one of them will be an energy guzzler. These are proliferating all over the country. Why can’t we have regulation, education, and price signals whereby every new building that comes up of a certain size must use state-of-the-art, energy-efficient technology? There’s also a governance issue because unfortunately a lot of these decisions, particularly when it comes to the environment or rehabilitation and resettlement of people and so on, are done on a centralised basis. I think we now have to get down to a level where some of these decisions are taken locally. In our own work in rural areas, we have seen that if people are involved at the local level, they can customise things to suit their own needs and have excellent ideas which would not have emerged if there were several levels in between us and them. 

MA: It’s critical to build trust and the most important thing in terms of building trust is fair play. If you were to give up land, what is the fair price of land, what are the other alternate areas? How do you create new economic opportunities for families? How do you really make sure that you allay the fears of citizens around? It is important to get local communities to become part of projects and see the benefits for themselves. For example, in our retail business, we worked directly with the farmers, and we disintermediated everybody in between. The farmers were very happy that we could work with them, because they could get immediate money for their produce and we could tell them how they can improve their produce. They can create production which is demand-led more than anything else. When you have that direct contact, you are able to build trust and confidence. We cannot curb the aspirations of people, and today these aspirations are driven globally. So when a billion Indians talk about a higher quality of life, it is very different from a wasteful lifestyle. We cannot deny our present and future generations access to a better quality of life. It is important that we use technology, innovations and new business models that create and deliver what people want.

RN: In terms of a sustainable energy future, what exactly are the challenges before India today? As our country grows, how do we keep control of our emission levels? 

RKP: Firstly, we need to make the right moves to reduce emissions of greenhouse gases. The second challenge is to be able to do this without sacrificing growth. We have to eradicate poverty, but in a manner that doesn’t accentuate the problem. This really is a challenge, and it’s where we need the involvement of government, industry, civil society — all sections of our society. At an international level, there is an enormous disparity in consumption levels between the North and the South, and certainly between India and some of the developed countries. But for our own good, we cannot possibly follow the Western model of development because our resource endowments are very different. We don’t have plentiful energy like other countries did 60 years ago, and the cost of energy in the conventional sense is increasing. But we do have a lot of sun, wind, and biomass. These are our major resources and if we were to invest in research and development, in creating markets and enabling institutions at the local level, there’s no reason why we can’t be leaders in this field. So, we can grow without an increase in emissions.

MA: Over the next 20 years, we will be the only country in the world that is becoming younger as the world grows older. We have a newfound energy in our young people. We need to commit to making sure that while the average growth is at 9%, the bottom of the pyramid grows at 25%. And I think that it is very easily achievable. We have data to demonstrate that within 12-18 months, the average income per acre at the farm level has gone up from Rs. 5000 to 12,000, and this is at the 100,000-acre level. We can now scale it up to lakhs and crores of acres. We have data in the IT industry where we’ve seen that young people now can earn lakhs of rupees a year, and we just need to be optimistic about it. Within this, I think we will be able to provide the solutions for energy that really are next generation. What we need is for the world to set a price on pollution. Today, relative to our billion people, we pollute the least. The developed world which has polluted a lot more than us should actually pay for us, if there was a price tag on what they have done. That’s where we should use these offices in the international arena, so that developed countries who have become rich by polluting the world should pay us if our markets work. We can really change the world in a much bigger and faster way if we were to start doing the right things ourselves. That’ll give us moral and political authority, where we can say,”Our model of development is what’s needed by humanity, for a better future.” 

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