--By Prof Dr Kamal Raj Dhungel
South Asia is home to over one billion people. A majority of them are living without access to electricity. Electricity is an essential prerequisite not only for modern life but also to power machines to produce goods and services. Modern technology is based on the availability of electricity. Most of the South Asian countries obtain power from both non-renewable sources such as nuclear, coal and natural gas and from renewable sources such as hydro, solar and wind power. Both these sources to some extent are home-grown. All countries in the region are endowed with one source or another. Coal is available in India. Bangladesh and Pakistan are rich in natural gas, so is Nepal and Bhutan in hydropower. There is a golden opportunity to produce electricity from these indigenous sources.
Among the potential sources, coal is highly exploited and has remained a major source of power for nearly a century and is expected to remain the same in the days to come. Hydro and natural gas remain untapped. They are yet to be exploited. These resources, if developed wisely, would be a boon for the development of South Asian countries. It would provide ample opportunity for South Asian countries to exchange power with each other plugging a particular country’s demand and supply gap. It would help to ensure energy security and provide scope for regional market integration. Also, almost all the countries have HEP potential, but to some extent the degree of availability varies. This represents a renewable source of energy.
Obtaining a higher economic growth rate to the extent of it being in the double digits is the primary goal of the South Asian countries. However, double digit growth rate requires huge units of electricity. Presently, this is constrained by inadequate power supply. Thus, the goal is conditional upon an adequate and uninterrupted power supply. Electricity consumption and economic growth are closely interrelated. This article aims to investigate the causal relationship between economic growth and electricity consumption in five countries of the region.
Like natural gas, the region’s economic hydropower potential remains untapped. The South Asian region is fortunate to have such vast hydropower potential, a renewable and non-polluting source of energy. Most of this remains untapped. The region is able to harness 28 GW (table 1). The countries of the South Asian region are energy starved on the one hand and they are not able to harness their vast potential resources on the other hand. They are importing petroleum products from gulf counties in order to achieve targeted economic growths. In the process, pollution is created in the atmosphere a stimulating factor for climate change. Thus, in the light of this, the benefits of exploiting hydropower is manifold. It facilitates to a) utilise the region’s untapped resources, b) ensure energy security, c) hold energy trade across the regional countries, d) create an environment to integrate the regional market, e) reduce the import bill of petroleum products and f) reduce greenhouse gas emissions.
Five countries in South Asia produce 1374.693 billion KWh of electricity. Coal is the major source of electricity. It accounts for more than 52% of total electricity production. The share of hydro, natural gas and renewable energy to total electricity production is 12.22%, 12.83% and 16.03% respectively. India alone produces 86.1 percent of the total followed by Pakistan (9.01%), Bangladesh (3.1%), Sri Lanka (1.2%) and Nepal (o.48%) (table 2).
Electricity is a major source of power. A nation’s economic activity depends on its availability. Per capita electricity consumption, in modern usage, is taken as one of the measuring rods of development. Higher per capita electricity consumption shows a better development of a nation. The per capita electricity consumption of selected countries is given in table 3. India has the highest per capita electricity consumption (684 KWh) indicating it to be a relatively more developed country in the South Asian region. The second highest is in Sri Lanka with a per capita electricity consumption of 490 KWh followed by Bangladesh (259 KWh), Nepal (106 KWh) and Pakistan (49 KWh).
Economic Growth Stimulator
As mentioned earlier, the countries of South Asia are trying to achieve double digit economic growth. This requires huge units of electricity and higher electricity consumption is a measuring rod for higher levels of economic development. It indicates that a one percent increase in electricity consumption would increase the economic growth rate by 1.31 percent. This clearly reveals that a unit change in electricity consumption would change the GDP by more than a unit. The EEC for individual countries is also estimated. In the case of Bangladesh the EEC is 0.81, which is less than one, which reveals that a 1% increase in electricity consumption would lead to an increase in the economic growth by 0.81%. For the rest of the countries a 1% increase in electricity consumption would lead to an increase in the economic growth by more than 1%, the highest in Pakistan and lowest in Nepal (table 4).
All for One, One for All
India alone produces 86% of electricity and in turn commands the highest consumption. The per capita electricity consumption (684 KWh) represents the highest in comparison to the sampled countries of the South Asian region. The second highest is in Sri Lanka with a per capita electricity consumption (490 KWh) followed by Bangladesh (259 KWh), Nepal (106 KWh) and Pakistan (49 KWh).
An estimation of the electricity elasticity coefficient reveals that a proportionate change in electricity consumption would lead to change in the economic growth rate by more than a proportion. It clearly reveals that South Asia’s economic growth rate is electricity dependent. Thus, in the light of this, South Asian countries must mobilise their resources together to produce electricity and to, furthermore, trade in energy to supply surplus energy to the needy.
The author is retired Professor of Economics, Tribhuvan University