India has to import 85% of its crude requirements & recently overtook Japan to become Asia’s number two crude oil importer. Is there a pressing need to for us to remain aligned to the trend?
Why is India losing its Oil story?
Why are we failing to acknowledge that the time is ripe for us to relook at our energy policy (or the lack thereof)?
India is a country of oil have-nots. It does not have a conducive terrain nor is it flush with hydrocarbon deposits. Whatever is known to be available must be effectively sourced & not simply glanced over. Private oil companies are willing to invest, have technological understanding & have proven credentials to extract oil and gas. However, they will only invest if they’re guaranteed conducive policies and stable contractual regime – None of which the Indian Government is willing to assure, at this stage. Every time a major reserve is found, everyone – from the stakeholders at the centre to the media – feels outraged that national wealth is being looted and monetised by private companies. They do so without ever willing to understand the benefit the country stands to gain from such discoveries. The government is in the best position to alleviate such misgivings by highlighting the importance of these private players and creating an enabling environment that encourages investment. However, collective effort of the government has been to penalise and extract the most it can from private companies. This is not ethical nor advisable: Not ethical when private companies are adding handsomely to royalties and taxes while securing the energy base of the country; not advisable when its own PSU companies do not have anything substantial to present.
Oil is a material. It not only powers cars & engines, but also does a lot more, directly or indirectly… Automobiles, plastic industries including pipes, chemicals and resins, paints, footwear manufacturers etc are all dependent on the oil industry. A developed, robust domestic oil and gas sector will not only secure our energy needs, but will also have a positive effect on various other sectors. Presently, due to crash in crude prices, upstream sectors are negatively impacted. However, this is the moment for the government to come together and support the upstream sector by renewing and easing contracts and stabilising revenues and taxes.
NK Verma of ONGC says the current oil prices are a temporary phenomenon & unstable in the long run. Given the situation, prices will go up & India – that largely relies on oil imports – will feel the “heat” again. The World Bank says India is poised to be the world’s fastest growing economy & manufacturing industry will play a substantial role. For manufacturing industry to take off, India needs to decrease its dependence on imported oil and gas, relook at the long-term energy policy of the country and work towards securing oil and gas domestically. Of course, some may argue that this is an excellent opportunity for India to go ahead and buy oil wells across the world. But that cannot be the only solution. Domestic expansion must be part of energy reforms for any country to prosper.
Despite low oil prices and political challenges faced by the Mexican President Enrique Pena Nieto’s government, Mexico has declared that it will continue implementing wide scale reforms in its energy sector. Analysts from Brookings Institute say that Mexico’s vision is a long-term vision, and not a short-term measure. Why cannot India, the fourth largest consumer of oil, adopt a similar vision? The time is now, and there is no room for complacency.
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