Intro: To not be affected by surge in oil prices, India will need to have an independent regulatory body in oil and gas sector.
The oil and gas sector is the most important sector for India's economy today. This is because of the fact that global economy continues to hinge upon hydrocarbon based energy. In spite of the fact that continuous dependence on oil, its derivatives, and natural gas has severely damaged the environment causing patterned climate change and other adverse effects, no viable environmental friendly alternatives of energy generation have been developed till date.
India's oil import bill accounts for 36 per cent of its total imports and imports account for 75 per cent of our oil sources. That makes India a vulnerable economy, liable to be affected by surge in oil price. In the past, especially between 2010 and 2013, the severe Balance of Payments (BOP) shocks and domestic inflationary pressures that India had to suffer on account of huge oil price rise are known to all. Hence, the importance of greater self reliance in oil and natural gas production cannot be overemphasised. It is more so considering the fact that 60 per cent of prognosticated reserves of 28,000 metric tonne (MT) of oil in India are yet to be harnessed.
The new government's policy initiatives for shoring up the domestic production of oil and gas through big, fresh investment in production facilities are welcome but the single most important point of deficiency in this sector is the absence of a strong regulatory body which will fix the price of oil and gas based on rational and sound economic considerations. A strong, independent regulatory body in oil and gas sector is the pressing need of the present times. The Ministry of Petroleum has no business to fix up the prices as was being done in the past, when the Ministry, the Group of Ministers (GOM) and the PMO were involved in fixing pricing decisions. The price fixing of Krishna Godavari (KG) oil basins of Reliance Group by the government attracted lot of controversy and adverse criticism. A strong, independent regulatory body of professionals and technocrats whose price fixing, competition regulating and arbitrating mechanisms are sound and whose decisions will be fair is immediately required to be established in India.
We do not have to shut our eyes to the cold facts of our existing Public Sector Units (PSUs) and Companies in oil sector like Indian Oil Corporation (IOC) not being able to benefit commercially from decline in imported oil price because of government regulation on price of octane and diesel.
An independent, professional body as a regulator which will fix prices of petroleum products for end consumers in the best economic interests of both producers and consumers is badly required in our country, as already suggested above.
India's petroleum refining facilities are having a global competitive edge which is evident from the fact that despite being a net importer of crude oil, India has become a net exporter of petroleum products by investing in refineries designed for export. The Gujarat Refineries facilities of IOC in Baroda are the prime example of this. This is India's Unique Selling Point (USP) as an investment destination for oil refining business. India's advantage of low cost of production of oil and gas is another incentive for investment and this aspect needs to be highlighted to attract investment. Our central and state PSUs need to be made more autonomous and given that greater professional edge. These entities should be encouraged to expand by raising capital on their own. Government support to these organisations should be reduced as a part of this professionalisation process.
India has high reserves of natural gas also which need to be tapped. But the most important natural advantage of India is its huge coastline which makes available a large exploitable offshore region for exploration and production of both oil and gas. This potential should be systematically tapped. India's scriptures are full of strands of knowledge of transportation and aviation vehicles energised by simple fuels like water or flower petals or mercury.
We need to perform extensive research on this knowledge base to develop new technologies for transportation and aviation which are not hydrocarbon based but are environment friendly. This should go hand in hand with establishment of conventional production facilities in oil and gas sector. We should not forget, tomorrow will belong to those who have developed new, superior technologies.
(The writer is a senior columnist)