Despite loud talk for decades by successive governments for increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20% of our requirement – balance over 80% continues to be imported. This heightens our vulnerability to a point whereby a slight disruption in any of major source of our imports [be it imposition of sanctions by USA against Iran or attack on oil installations in Saudi Arabia] creates ripples and causes a major destabilizing effect on the Indian economy. The problem is not with lack of resources [India has 26 Sedimentary Basins covering an area of 3.14 million sq. km.] but lack of a conducive policy environment besides cumbersome regulatory processes which...
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Category: Alternative policy scenario
Promote self-sufficiency
The big bang reforms proposed by the Government for the oil and gas sector are laudable but without a stable and predictable policy environment in place, they can’t make much headway The Union Government is considering far-reaching reforms in the gas sector. These include the setting up of a local gas trading platform to facilitate price discovery, stripping the power sector off its priority status by withdrawing priority allocation of natural gas and hiving off the transportation unit of the Gas Authority of India Limited (GAIL), a public sector undertaking (PSU) which currently holds an overwhelming 75 per cent share of the gas transmission network. The stated objective of these reforms is to enable energy firms to invest in exploration and...
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Gas reforms – holistic approach needed
The Union Cabinet is considering far reaching reforms in the gas sector. These include inter alia setting up of a local gas trading platform to facilitate price discovery, stripping power sector off its priority status in the allocation of domestic natural gas and hiving off the transportation unit of the Gas Authority of India Limited [GAIL] – a public sector undertaking [PSU] which currently holds an overwhelming share of the gas pipeline network. The stated objective of these reforms is to enable energy companies to invest in exploration and development of gas fields in India so as to increase indigenous production and ensure that the country achieves self-sufficiency in this major source of clean energy [currently, 50% of our gas...
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LPG – don’t involve OMCs in subsidy transfer
In a meeting with ministry of petroleum and natural gas [MPNG], parallel marketers of packaged domestic liquefied petroleum gas [LPG] viz. Reliance Industries Limited [RIL], Nayara Energy [formerly Essar Oil] and Total have demanded that the government allow them to have a level-playing field with the state-run oil marketing companies [OMCs] viz. Indian Oil Corporation Limited [IOCL], Bharat Petroleum Corporation Limited [BPCL] and Hindustan Petroleum Corporation Limited [HPCL]. At present, only IOCL, BPCL and HPCL are allowed to sell subsidized LPG wherein consumers pay the full price upfront, but eligible beneficiaries [those with annual income < Rs 10 lakh] subsequently get back the subsidy amount in their bank account. Further, all domestic LPG producers have to supply their total output...
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Oil retailing – end PSUs monopoly
At the current juncture, when the economy is battling the consequences of the steep increase in the international price of crude [India depends on imports for over 80% of its oil requirements] and there is an urgent need to mitigate the adverse effects, logically the focus has to shift to explore all potential areas for cost reduction. An important area relates to enticing private sector in marketing of petroleum products which today is the monopoly of public sector undertakings [PSUs]. The infrastructure for storage, handling, import terminals, transportation, marketing and distribution of petrol, diesel, LPG, kerosene etc is dominated by oil PSUs viz. Indian Oil Corporation Limited [IOCL], Bharat Petroleum Corporation Limited [BPCL] and Hindustan Petroleum Corporation Limited [HPCL]. Out of...
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Fuel woes – CED cut could be catastrophic
With the petrol and diesel prices crossing a new landmark of Rs 80 per litre and Rs 70 per liter [in Delhi], there is a big hue and cry in political circles. The sharks prowling for an opportunity to lambast Modi – government are demanding a steep cut in the central excise duty [CED] to enable corresponding reduction in the price to consumers. They argue that during the last 4 years, the centre allegedly mopped Rs 1100,000 crore from increase in CED. A portion of this money could be used to giver relief, they contend. The international price of crude had declined from US$ 117 per barrel in November 2014 to US$ 28 per barrel in January 2016. Leveraging this,...
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Royalty/cess on oil – Modi ends a bizarre practice
In the past, governments have used profit making public sector undertakings [PSUs] in the oil and gas sector viz. Oil and Natural Gas Corporation [ONGC] and Oil India Limited [OIL] for reining in fiscal deficit that was getting out of control – most of the times – due to profligacy in revenue expenditure triggered by sheer populism to garner votes. The prominent measures used were asking them to give discounts on sale of their crude output to downstream oil PSUs such as Indian Oil Corporation [IOCL], Bharat Petroleum Corporation [BPCL] and Hindustan Petroleum Corporation [HPCL] so that the latter in turn, could sell petroleum products viz. LPG, kerosene et at subsidized price to the consumers; insisting on high revenue share...
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Shun differential pricing of gas
Prime Minister Narendra Modi has set an ambitious target of cutting India’s import dependence for oil from existing around 80% to 67% by 2022 and further down to 50% by 2030. To meet the target, his government has taken several initiatives to create a conducive ‘policy’ and ‘regulatory’ environment for boosting domestic production of hydrocarbons. A path-breaking policy initiative was introduction in July, 2017 of the Hydrocarbon Exploration and Licensing Policy [HELP] in place of the subsisting New Exploration and Licensing Policy [NELP] that was launched in 1999. Also dubbed as Open Acreage Licensing Policy [OALP], under HELP, bidders can get a single license for exploration and production of conventional hydrocarbons such as oil, natural gas as well as unconventional including shale...
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Fuel worries – the ball is in state court
The steep increase in the prices of petrol and diesel by over Rs 3 per liter each post the assembly elections in Karnataka since May 14, 2018 [currently, these are Rs 78 per liter and Rs 69 per liter respectively in Delhi] has yet again led to build up of unprecedented pressure on Modi – government to reduce the excise duty [ED]. Between November 2014 and January 2016, ED on petrol went up from Rs 9.48 per liter to Rs 21.48 per liter or 2.26 times, whereas on diesel, the increase was even sharper from Rs 3.56 per liter to Rs 17.33 a liter – almost 5 times. That coincided with steep decline in the international price of crude oil...
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Self-reliance in oil and gas – HELP could be a game-changer
The current steep hike in the international price of crude oil [courtesy, re-imposition of US sanction against Iran and increasing global demand] has once again drawn attention to India’s unconscionably high level of dependence at 83% on import for meeting its energy requirement. This also brings in to focus the commitment of Modi to increase the share of domestic production by 10% in 5 years. Domestic supply – ‘precariously’ low There would have been some consolation if India did not have the resources to support the demand. But, despite the country having abundant resource and seven decades after independence, the domestic production of oil continues to languish at about 15-20% of the requirement. This is entirely due to lack of...
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