India at 75, the Mineral Security Partnership, and DE's Gas Diversion — Issue #17
The Big Picture
It’s Independence Day. India has now been free for 75 years.
How have these years been? The country has trounced some of the demons that threatened it at the time of independence (like the fears that the country wouldn’t hold together). It made limited progress against others (poverty persists, as do religious and caste fissures).
Even as some of the older problems persist, the country faces a clutch of new demons today. India will soon be the world’s most populous country, with the added complication of rapidly unravelling environmental foundations. With political parties degenerating into kleptocracies, the social contract between them and the people has all but evaporated. With that, the country’s capacity to respond to crises has shrunk. Take Mumbai. Despite the city’s acute environmental stress, commingled real estate and political party interests still want the forest at Aarey to be axed.
The notion of a Constitutional Democracy, where the State and the law treat everyone as equals, is also under threat. As political observers say, India is becoming an apartheid state, a very far cry from the progressive, humanist nation its founders had dreamt of.
The founding values of the republic are in danger. Today is a day of celebration – and introspection.
PS: Why is a newsletter on energy talking about India’s Independence Day?
That is because social democracy goes hand in hand with economic democracy. In country after country, rising inequality has resulted in the rich having a bigger say over economic policy than the majority. In India, too, the interests of a few firms sizably determine the country’s economic policies – like the contours of its energy transition.
News of the Week
With that as prologue, what made headlines in the week gone by? India’s energy dependence on Russia has increased. In July, Russia became India’s third-largest supplier of Coal. This is new, said Reuters. “Russia has historically been the sixth-largest coal supplier to India, behind Indonesia, South Africa, Australia, and the United States, with Mozambique and Colombia alternatingly featuring in the top five.”
So too in Oil. In June, Russia overtook Saudi Arabia to become India’s second-biggest crude oil supplier.
It’s too early to say if this trend will continue. In Crude, there are signs of a peak. In addition, as this newsletter reported last week, India’s Gas imports from Russia are dropping.
A report last week explained why. “Germany has started diverting the agreed amounts of Yamal LNG, forcing the Indian energy giant GAIL Ltd. to limit the country’s gas supply,
” said a report. This needs to be understood. A long-term supply contract between GAIL and Yamal LNG nets GAIL 2.5 million tonnes of LNG annually. However, instead of buying this Gas directly from Yamal LNG, India routes its purchase through Gazprom. More specifically, a firm called Gazprom Marketing and Trading Singapore (GMTS) serves as both the buyer and the supplier on behalf of Gazprom.
The catch is that this company’s a subsidiary of Gazprom Germania – which was taken over by the German government in early April. “Given that Germany is now in charge of GMTS and that Russia’s gas supply to Germany has decreased, the LNG supply is probably being redirected to Germany,
” say analysts. According to Reuters, GMTS has warned Indian businesses it would be unable to fulfil its contractual commitments.
India could have asked Yamal to supply directly. But under its deal, GAI buys Gas from Yamal LNG for up to $500 per thousand cubic metres. Gas now costs $1,350 per thousand cubic metres on the market.”
Given such numbers, Yamal – and its intermediaries -- are better off paying a fine and reselling to Europe.
The outcome, however, is Gas shortages in India.
From hydrocarbons to renewables. According to ICRA, India’s three-wheeler market is switching fastest to EVs. A whopping 56% of all three-wheelers sold in May were electric three-wheelers. A PLI scheme is on the anvil for offshore wind turbine manufacturers. Tamil Nadu wants to create 10,000 mini-forests this year. The Adani juggernaut continues. Besides acquiring two road companies from Macquarie, the company also announced a foray into Alumina. In a matter of months, the group has diversified into two sectors with entrenched players – cement and now aluminium.
In other news, India has been left out of the Minerals Security Partnership, a US-led group of nations (Canada, Australia, Finland, Germany, France, Japan, South Korea, Sweden, the UK and the European Commission) that seeks to reduce members’ dependence on China for supplies of cobalt, nickel, lithium and the 17 rare earth minerals. This is a problem. India has launched a PLI programme to indigenise battery manufacturing. Its plans for self-sufficiency, however, hinge on access to these minerals. The Union Finance Ministry has reportedly sought the Ministry of External Affairs’ help to find a place for India in the new alliance.
More news. India’s going to miss its renewable energy goals. In 2018, the country had said it would produce 175 GW from renewable energy sources by 2022. “As per the targets, 175 GW of renewable energy capacity was to be installed by 2022, which includes 100 GW from solar, 60 GW from wind, 10 GW from biomass, and the remaining 5 GW from small hydropower,” wrote the New Indian Express. “However, the official data shows only 57.71 GW of solar power and 40.71 GW of wind energy have been installed till June 2022.”
In solar, both rooftop solar and on-ground installations have struggled. The reasons run deep – ranging from poor discom health to atrocious market design for renewables.
And now, the polycrisis roiling the world. Rains have been weak across north India. And so, rice sowing this year is down 13% in the main paddy-producing states. This is a problem. Wheat output has already fallen due to the heatwave.
Elsewhere in the region, Bangladesh saw energy riots over high petrol and diesel prices.
Climate Long-Reads
1. Talking of the Mineral Security Partnership, also see this. “The climate crisis is melting Greenland down at an unprecedented rate, which — in a twist of irony — is creating an opportunity for investors and mining companies who are searching for a trove of critical minerals capable of powering the green energy transition."This report, however, has to be read in conjunction with this one about Russia’s inroads into Ukraine’s energy, metal and mineral deposits. “Based on SecDev's review of 2,209 deposits, Moscow controls 63% of Ukraine's coal, 11% of its oil, 20% of its natural gas, 42% of its metals, and 33% of its rare earths, including key minerals like lithium.”
2. A new report on Gautam Adani’s growth and growth. “A bigger worry is a top-cited complaint among analysts and money managers: that the value of his tightly held companies has been puffed up through opaque Mauritius-based funds. After group stocks took a nosedive in 2021, a government minister, in a written reply to parliament, disclosed the securities regulator was investigating some Adani companies without providing more details. Such probes can go on for years and quietly fizzle out. For its part, Adani says that the regulator continues to approve all its proposals. Whatever the merits, such reputational concerns could hinder Adani’s ability to rally external support if leverage or access to capital ever become a problem.”
3. From New Scientist: “Just ten financial institutions own nearly half of the unburned fossil fuels from the world’s largest fossil fuel companies.”
4. China’s housing bubble is deflating, says WSJ. “Home prices are dropping in many cities after a long period of increases, data from Chinese real-estate developers and official statistics show. Sales of apartments nationwide by the country’s largest developers have slumped annually for 13 consecutive months.”
5. And, on India’s forests. “If Indian forests could think (and talk) what would they tell us, 75 years after they were made the ecological property of a newly created nation-state?”
PS: And in the public interest, read about the new variant of Covid from Nature. "India seems to be at the epicentre of the spread of BA.2.75. This mutation-laden lineage evolved from the BA.2 subvariant of Omicron, which spread widely in early 2022."
Book of the Week
Given its Independence Day, a couple of books on India’s journey as an independent country:
On the founding idealism: Saeed Mirza, Ammi: Letters to a Democratic Mother (2008)
On the years since: Ramachandra Guha, India After Gandhi: The History of the World’s Largest Democracy (2017)
On the changing social contract between political parties and people: K Balagopal, Ear To The Ground: Selected Writings on Caste and Class (2011); Barbara Harriss-White and Lucia Michelutti, The Wild East: Criminal Political Economies in South Asia (2019)
People, State and Forests: Madhu Ramnath, Woodsmoke and Leafcups: Autobiographical footnotes to the anthropology of the Durwa (2015)