28-05-2025
Wastage as an economic, environmental opportunity
The chairman of ONGC, Arun Singh, and I were sitting in the Gaya airport lounge after addressing the IIM Bodh Gaya convocation in early April when I noticed some inefficiency at the airport and mentioned to him Kunal Shah's attention-grabbing comment about 'inefficiency being the world's biggest employer'. He smiled and offered another profound observation 'India's biggest opportunity is curbing waste'. He went on to say India and the world both need it and defended his argument with some telling statistics in the energy sector. This article is a result of his insight. In this era of tariffs, reciprocal tariffs, and punitive tariffs, our single biggest import item is oil. How much wastage is there in the use of oil, gas, and power?
In this piece, we do not take up the wastage that bedevils our agriculture, especially its management of water; we focus only on energy use. Last year, India's oil bill stood at $137 billion. India consumes around 2,300 million barrels of oil though it produces only about 210 million barrels of crude oil a year. India's domestic production so far has only produced ~2.5 billion tonnes cumulatively, requiring us to import the bulk of our oil need.
It is odd that a country of India's size does not have greater oil reserves. The fact is that it does. India has 12 billion tonnes of verified and proven oil and oil equivalent hydrocarbon reserves. Many estimates put the theoretical limit closer to 42 billion tonnes of oil and oil equivalent hydrocarbon reserves. However, this oil is not as easily accessible as in a clutch of West Asian and other oil-exporting countries. India only extracts about 35% of the oil from a domestic well on average. Most drilling sites are undersea ones and, after a certain depth, are not easy to extract economically.
Despite oil's importance to India, there has been little technological innovation to make more domestic extraction, in a manner that makes economic sense, possible. Hence, most of the oil below the ground stays there. We import the bulk of our needs. In a Ricardian world (after David Ricardo, one of classical economics' giants) where global trade and comparative production advantages of countries maximally benefit national economies, that might have been fine. But, in today's splintering world, this leaves us exposed.
There is a lot that can be done — from utilising state-of-the-art techniques for acquiring reservoir data to advanced drilling methodologies. Even a 10% increase in the overall recovery factor would have reduced our overall import bill by $12 billion annually over the past 10 years. To a lesser extent, the wastage extends to natural gas, too. Natural gas prices have been volatile after the Russia-Ukraine conflict. India is dependent on imports for half of its overall consumption. The gas lost during the overall transmission is referred to as Lost and Unaccounted for Gas (LUAG) and is computed at around 2.7%.
If we dig further, we find that the internal combustion engine (ICE) does not use fuel efficiently. The latest ICE cars operate at an efficiency level of around 30%. If ICE engines operate at the efficiency of electric vehicles (EVs) — around 90% — we could cut 33 million metric tonnes of India's oil demand. Every five percentage points of improvement reduces oil demand by about 2,000 tonnes. If the ICE engines operated at the same efficiency levels as EVs, it would have an impact of $19 billion on India's oil import bill. Not only would we import less oil, but it would also be a boon for the environment too. For instance, by converting all ICE vehicles in Delhi to EVs, we can reduce PM2.5 levels by about 40 points on the air quality index. However, the topic of wastage does not end there.
Just consider other instances of fuel consumption; imagine how much fuel airlines consume circling airports due to the lack of runways before landing. Similarly, ICE trucks transporting goods, apart from the poor efficiency in fuel-energy conversion, often return to their depots empty or with half loads due to information gaps and the absence of an efficient clearing platform. This raises logistics costs and makes manufacturing in India more expensive.
The problem of wastage extends equally to power consumption as well. India's technical losses in transmission and distribution have significantly reduced the 'green' impact of EVs. Despite good progress in adding renewable energy capacity, India's overall power consumption is still dominated by thermal sources (contributing over 70% of the power drawn). The thermal-dominated grid incurs large transmission and distribution losses of around 15%. While significant progress has been made to address this, we are still four to five times more inefficient than China. Even a 1% reduction in the losses reduces the overall carbon footprint by around 2,400 million metric tonnes of CO2 equivalent. This is equal to converting all the four-wheelers in Delhi to EVs.
Wastage is a big consumer of energy in India, a consumer we should not cater to today. As the world becomes more volatile and our economy bigger, en route to becoming the third largest economy in the world, the whole world would like us to consume less. As the explorer, Robert Swan, said, 'The greatest threat to our planet is the belief that somebody else will save it.' Let's begin a war on wastage to help ourselves!
Janmejaya Sinha is chairman, BCG India, and Kaustubh Verma is managing director and partner, BCG. The views expressed are personal.
