Special: Oil boils over

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R. Kalyanaraam
A comprehensive energy, transport and foreign policy would help most India is currently the fourth largest consumer of crude oil after the US, China and Japan. Crude oil consump tion in India, which was 6,43,000 barrels per day in 1980, had grown to 34,26,000 barrels in 2011.
During the same period, production went from 1,82,000 barrels per day to 7,82,000 barrels per day . The deficit, which is imported, has gone up from 71 per cent to 76 per cent. The dependence on import would cross 90 per cent in another 20 years.
Oil import constituted 25.4 per cent of the import bill in 2000 but grew to 31.7 per cent of total imports. With the looming Syrian war, there will be an oil shock similar to the 1971 price rise and the 1991 increase caused by the occupation of Kuwait by Iraq. This would lead to a vicious cycle -rise in dollar prices of crude and consequent increase in prices of diesel and petrol, inflation in India, fall in the value of the rupee and, therefore, further increase in prices of petroleum products.
At the same time, the Current Account Deficit which has already grown to unmanageable proportions would further tions would further increase, resulting in a further fall of the rupee, again leading to an increase in the prices of petroleum products and, consequently, inflation.
The worrying factor is that consumption of petroleum products has been price insensitive. Despite sharper increase in prices, consumption of petroleum prod ucts has not gone down. It is but natural in a growing economy that this would happen. But the growth has not been supported by growth in infrastructure like roads, railways and other means of mass transport, both within and between cities.
The absence of mass transport or its inadequacy, even in places where the MRTS is present, has forced commuters to use personal vehicles. This has resulted in huge consumption of petroleum products. The only other alternative is to increase production.
Various efforts to promote exploration have not resulted in an increase of production of crude oil. OVL, the overseas arm of ONGC, has also not been successful in acquiring oil fields. China has either been outbidding us or has created trouble, like in Vietnam. Indian foreign policy has been US-centric, ignoring mineralrich (including oil) Russia or major oil producers like Iran.
The need of the hour is to have a multi-pronged, co-ordinated lti-pronged, co-ordinated effort. They would be, one, reduce or at least cap oil consumption. Second, increase short term produc tion and source from strategic sources. Third, establish long-term supplies.
First, the need to reduce consumption: There can be no difference of opinion on the need to reduce consumption. reduce consumption.
Petroleum minister Veerappa Moily's idea to reduce operating hours of fuel outlets was opposed only because it would not be effective and would on the other hand increase black marketing dur increase black marketing during nights. The solution to this would be to have exponential growth in quality public transport and the consequential reduction in private transport.
Nuclear power would also be a very viable option. Currently the most reliable source of electricity are fuel-oil based generators. Also, when nuclear-electric powered trains or mono rails replace cars on roads, there is obviously a large reduction in the use of imported petroleum.
Another factor here has been the near-zero improvement in railways. Populist policies in not raising railway fares, adding new tracks only to suit political needs and the consequent stagnation of rail connectivity has also resulted in increased use of private trans port or buses for long hauls. Second, the shortterm increase in production: This can be achieved by increasing throughput in existing sources like Bombay High and Assam. For many reasons, the production from these sources has stagnated in the past 15 18 years. New oil wells of significance have not been step would be to added. One step would be to increase throughput from these sources. This in a minor way is like killing the goose that lays the golden eggs. Crude reserves are limited and faster exploitation of these reserves would result in shortages in the distant future. But a current crisis is more threatening than a potential crisis in the future.
The last but most significant step would be to tie-up strategic longterm sources. India in the last two decades since the fall of the USSR has literally been a satellite of the US, tailoring its foreign policy to suit the needs of Washington. China is interested in protecting its interests.
India should learn from China, and Japan. Despite having no reserves, Japan has been the third largest consumer for a long time.
The need for India is to put its priorities, especially its energy needs, ahead of other fancy ideas.
Recently the Centre gave a struggling Europe more than $10 billion to improve their economy . There were no strings attached. India has been ignoring Iran to please the US. A small country like Vietnam has stood up to the bullying of China while India has not been able to stand by Vietnam.
India should have a comprehensive energy policy , transport policy and, most important of all, a foreign policy that takes into account India's needs.
Most importantly there should Most importantly there should be a consistency in our poli cies for at least a period of 5-10 years to have lasting effect.
 (The writer is an analyst)
Next: Policy protects inefficient oil companies

Policy protects inefficient oil companies
A controversy has erupted between the petroleum and finance ministries. Since export parity prices are lower than trade parity prices, the finance ministry wants the former to be used to calculate the subsidy to be given to oil companies. This will reduce the subsidy burden but the oil ministry is against it as it will reduce the money paid to oil companies.
Since many PSU refineries are not efficient, the oil ministry fears that oil companies will suffer losses. In a way, inefficient oil companies are getting the protection of the subsidy regime. In case the petroleum sector is fully deregulated, many of these refiners may be forced to shut in the face of competition from private refineries.
Ever since the prices of crude oil soared and the rupee value depreciated, the government is looking to steeply increase the price of diesel to cut the oil subsidy burden. Currently petrol is fully de-regulated so the government is not paying any subsidy on its sale. But under-recovery on diesel, LPG and kerosene has increased.
The government had in January allowed oil companies to raise diesel prices by 50 paise per month so that subsidy on it is fully removed. But rupee deprecation and increase in crude oil prices have widened the under-recovery on diesel to `12.12 a litre from `9.03 per litre at the beginning of the year, despite an increase of 50 paise a litre per month since January 2013. The under-recovery on diesel had fallen to `3.73 a litre (fortnight effective May16,  2013) due to a fall in crude oil prices. — Pawan Bali
Price & Fall of Indian dream
Ashok Gladston Xavier
What concerns people the most is not high-funda develeopment but basics
A friend mailed me a pic ture of a Raksha Bandhan band a few days ago. It looked rather odd with a round pink sphere studded with shiny stones. Curious, I enlarged it to see what it was. To my surprise it was an onion studded with precious stones.
It only marks the fact that what most concerns people is not the hi-funda development but the basics. Is our country free of hunger? Do all the citizens get clean drinking water? Can all access affordable health care? It is unfortunate that these basics remain a dream to most Indians.
Some substantial steps have been taken in this direction. The number of poor has decreased.
How? We decided to bring down the marker and say those who earn less than `32 a day in the urban and `28 in the rural areas are the poor. In doing so, those who earn `33 and `29 are above the poverty line. This is nothing but mocking not only at poverty but also at the poor. The worst part is that the situation is maintained despite the quadrupling of the prices just in one year of the basic ingredi ents that make up one square meal.
Adding fuel to the fire, literally, is the sky rocketing fuel prices. It used to rise once or twice a year sometime ago but now it seems to go up several times a year! It comes down once or twice a year only to hurry back to its peak in just a few days. They say it is all linked to the international oil pricing. Strangely, it never seems to drop when the global oil prices drop.
Little needs to be said about the linkage of the oil industry to the daily needs of the people. The connective spectrum is ever too wide, deep and corrupt. As one pin falls, the others that stay close follow to collapse and finally there is an overall increase in everything. For most common people this process appears unreasonable and they continue because it is unfathomable. They are not able to make sense of the fact that `500 can't even feed a family of three for three days. It wasn't so bad even a year ago.
Even experts are not able to give a satisfactory answer. All they can say is that the rupee is reacting to the international market.
Right to Education Act, Direct Cash Transfers, National Food Security Bill and the Land Bill are being considered as game changers. The game is called politics and the players are the politicos. The common man is the ball that gets kicked around. Surely the netas can afford it because most of them are crorepatis.
The question at hand is whether the voter understands these dynamics and will respond to this as he has been doing in the past.
Sure he will. But the level of response is based on the timing of the issue. The closer the issues are to election the more impact they will make. So it is important to wait and watch what influences the ballot. Will it be the poor man's need or the rich man's greed?
(The writer is Dean of Arts, Loyola College, Chennai)