The energy sector absorbs the largest chunk of resources invested in the Indian economy, and also accounts for the largest share of the national imports bill. All these resources go towards supplying increasing amounts of energy to the Indian economy, though there continues to be a deficit in both energy supply and in access to supply.

How is this energy being used? Is it being used productively and efficiently, and is it contributing to our economic growth and competitiveness? Or is it a millstone around our economic neck? Let us compare and contrast energy use in India with that in five other large economies (USA, EU, Japan, China, and Brazil); using economic and energy data for 2004, the last year for which data is available.

The purchasing-power parity (PPP) based energy intensities of all the six economies range between 0.13 and 0.21 kgoe/$-PPP, with the energy intensity of the Indian economy lying in the lower half of the band at 0.16 kgoe/$-PPP. The two economies with lower energy intensities than that of India are Japan and Brazil. In other words, while the energy intensity of final consumption in the Indian economy is moderate by global standards, there is much scope for improvement when compared to Japan. For purposes of further understanding the economic efficiency of energy use, let us disaggregate this into two parts: the final energy consumption in households and the final energy consumption in all the other sectors (i.e., industry, transport, agriculture, and commercial and services sectors). The main reason for this desegregation is that energy use in all the non-household sectors results in economic activity leading to GDP creation. On the other hand, the energy consumption in households is an essential component of ensuring quality of life.

The per capita household energy consumption is extremely low in India, and there is a large difference between India and the OECD countries. Further, almost 70% of household energy in India is supplied by biomass, which is used inefficiently. The challenge to the Indian energy economy is to increase per capita household energy consumption efficiently, without adversely affecting the overall energy intensity of the economy. While there are many interventions that can help towards achieving an efficient transition, the key to this challenge lies in the efficient use of biomass energy. The gasification of even two-thirds of the currently-used biomass energy (amounting to about 110 Mtoe) to produce cooking gas or fuel for electricity generation, would triple the available end-use household energy, while obviating the need for over 50 million tons of LPG or over 100 million tons of coal every year. This would enhance energy supply, as well as enhance access because of the distributed nature of the resource. However, this is no easy task – it requires the development and deployment of appropriate products based on biomass gasifier technology, the creation of demand for these products, and the establishment of business models which enable private-sector participation to provide cooking gas and/or electricity on a distributed basis.