South Asia, with its population of above 1.6 billion, is home to about one fifth of the world’s population. The vailability of energy, that advances – or at least is compatible with – long term human well being and ecological balance, is a key to the sustainable development of this region. This aspect of sustainable energy supply is critical in the context of South Asian region, as it is poised for higher growth. This is evident from the fact that the growth rate in GDP in the South Asian region was about 4.2 per cent and 4.8 per cent in India during 2002, while the world average was about 3.0 per cent for the same year.
The growth of economy, along with the population growth in South Asia, has resulted in rapid increase in energy consumption, which is well above the world average of Organization for Economic Cooperation and Development (OECD) rates. Thus, the South Asian region faces the ‘sustainable development’ challenge of meeting the rapidly increasing energy demand as well as conserving the natural resources and protecting the environment.
With both Indian and Pakistani annual GDP growth rates now in the 6 to 8 per cent range and an increasingly young
and urbanized population throughout the region, already approaching 1.5 billion people, the South Asian states face instability unless they can quickly find external sources of energy. A future where these states will largely depend on petroleum imports, particularly given the increasingly competitive world market, means that energy security is a primary concern in their foreign policy.
South Asia accounts for about 5.9 per cent of the world’s commercial energy consumption. This does not include the non-commercial energy sources such as wood, animal waste and other biomass that account for more than half of the region’s total energy consumption. Despite rapid rise in demand, South Asia continues to average among the lowest per capita energy consumption of 443 kilogram of oil equivalent (KgoE), which amounts to 26.2 per cent of the world average of 1692 KgoE. However, energy consumption per dollar of GDP is amongst the highest in the world, which indicates the inefficient utilization of energy.
Improved energy security is vital to South Asia’s economic growth and stability, given that demand for energy in the region is expected to double over the next 15 years. South Asian nations rely heavily on imported energy, yet the region has large amounts of untapped energy resources. The lack of regional energy cooperation and trade compounds the problem. Energy cooperation has the potential to be mutually beneficial for all regional players, with some countries acting as net suppliers, some as net consumers, and some as net distributors of energy. Paucity or lack of capacity, awareness, development of regional energy resources, and sustained regional dialogue is a barrier to increased regional energy cooperation and, therefore, economic growth and could lead to instability. (USAID 2006).