Fuelling India growth story | Ministry of Petroleum & Natural Gas doing all it can to ensure energy is 'Made in India'

As the country's economy has metamorphosised from agriculture to manufacturing — adequate, efficient, reliable and affordable energy has become essential for sustainable development and inclusive growth of the country. A year ago, India had surpassed Russia to become the third largest energy consumer in the world after China and the US. Oil and gas accounted for around 35 per cent share in India's energy consumption.

Cutting down on energy imports

The main challenge facing the Ministry of Petroleum and Natural Gas today is the fact that a hefty 77 per cent of the country's energy requirements — oil, gas, and petroleum are sourced from abroad, thereby consuming large reserves of India's foreign exchange. Prime Minister Modi has asked the ministry to work overtime to reduce this import dependence to 67 per cent by the year 2022, but it is a tall order.

Government strategies to cope with challenges

While initiatives are underway to reduce dependence on imports, there is a lurking danger that crude oil dependence will increase to 84 per cent by 2021-22. To address the concerns of this high import dependency in energy, the government had set up a committee which proposes a five-pronged strategy which comprises:

(i) Increasing domestic production of oil and gas.

(ii) Promoting energy efficiency and conservation measures.

(iii) Giving thrust to demand substitution.

(iv) This involves capitalising on the untapped potential in biofuels and other alternate fuels/ renewables.

(v) Implementing measures for refinery process improvements.

Shortfall in LNG

The ministry has much to do to ensure that dependency on oil and natural gas is reduced. For instance, it has engaged in the expansion of Natural Gas Infrastructure (NGI) through pipelines, LNG terminals, City Gas Distribution (CGD) Network and the Compressed Natural Gas (CNG) retail network in the country. This is necessary, as according to a report by Citi Research in 2016, India is the largest LNG importer after Japan, Korea, and China and its import capacity over the next four years is expected to double to 45 million tonnes per annum (MTPA) against 22 MTPA currently.

Increasing investment in LNG terminals

The way to do this, the government believes, is to encourage investment in LNG, and in this regard it has permitted 100 per cent foreign direct investment (FDI) in LNG terminals. Thus, interested players can be allowed to develop LNG terminals based on their own techno-commercial feasibility. Further, the ministry has also framed and notified relevant rules providing for minimum eligibility criteria for establishment of LNG terminals in the country with the condition that they have mandatory "open access" on the common carrier principle.

Shortfall in crude oil

Another challenge has been the production of crude oil. So far, experts say that targets have not been met because of the decline in production from the major producing fields of the country, particularly in Mumbai, Gujarat and the North-east that have ageing fields. Production of crude oil has also been affected due to bandhs in Assam and delay in commencement of production from wells in Andhra Pradesh.

The government has introduced several schemes to deal with the problem. One of them has been the Indian Strategic Petroleum Reserves Limited (ISPRL), which ensures meeting of the requisite energy requirements during times of war, or other threats to national security that includes sea blockades by adversaries. Over decades, blocking oil supplies has been seen as an effective tool in war. In fact, many believe that even though the Indian Navy was not involved in the Kargil war, its effective blockade of the Karachi port — ensuring no vessels loaded with arms could reach the Pakistani troops — helped the war end quickly.

Soon after Kargil, India has looked to increase the capacity of ISPRL, and it has been proposed to increase capacity to the extent that these oil reserves match the country's demands for at least 45 days. In this regard, the Government, through ISPRL, has constructed strategic crude oil reserves with a storage capacity of 5.33 milllion metric tonnes at three locations — Visakhapatnam, Mangalore and Padur.

An expenditure of Rs 4,098.35 cr has already been incurred on creating Strategic Petroleum Reserve facilities in these locations. The Vishakhapatnam cavern has been commissioned by filling it with crude oil and nearly one half of the Mangalore storage facility has also been filled with crude oil. The storage facility at Padur could not be commissioned due to non-completion of a small portion of the pipeline.

Pradhan Mantri Ujjwala Yojana

This scheme was launched in 2016-17 to provide energy security to rural households. The government has approved Rs 8,000 crore under the scheme to release Rs 5 crore deposit for free new LPG connections to women of BPL families over three years from 2016-19. Provided at an initial cost of Rs 1,600 in the name of the woman of the household, government data shows that till December 2016, some 1,26,67,567 new LPG connections have been released under PMUY covering 647 districts

Direct Benefit Transfer of Kerosene

An add-on to the Pradhan Mantri Ujjwala Yojana, the Ministry said that under the DBT Scheme, PDS or public distribution system kerosene prices were being rationalised. The scheme involves kerosene being sold at non-subsidised prices to the public with the subsidy amount transferred to BPL consumers directly into their bank accounts. This move was aimed at rationalising subsidies and plugging leakages. Since then, Jharkhand has become the first state in the country to implement DBT, but the response from other states is awaited.

Recently, Union Minister Ravi Shankar Prasad claimed that Rs 58,000 crore had been saved in DBT schemes in various schemes that included kerosene. He also claimed that 3 crore fake gas connections had been unearthed as a result.

Daily revision of petrol prices

While such measures are certainly laudable at the macro level, the government has received criticism for its policy on daily revision prices, on the micro level. The move, designed to help the common man, was announced in June this year whereby petrol prices would be revised daily, instead of twice a month as was earlier the case. The idea, government officials said was to ensure transparency in the pricing process and ensure the best possible prices to the consumer on the day.

However, this hasn't happened. Ever since the scheme has been announced, petrol and diesel prices have gone through the roof. Last week, petrol prices in Delhi were at Rs 70.83 per litre, whereas in Mumbai a litre of petrol cost Rs 79.99. This was just a little less that the second-half of August 2014 when it was priced at Rs 70.33.

In a bid to stabilise prices, Finance Minister Arun Jaitley cut basic excise duty on petrol and diesel by Rs 2 per litre on October 4, said to cushion the common man against rising international prices of oil. However, the scheme is certainly a reflection of the challenges the Modi government will face as it sets out to put forth its reforms in the oil sector.

GST & PETROLEUM PRICING

1. Currently, consumers pay Excise Duty & VAT charged by respective states
    
2. If GST is applied on petroleum products, it subsumes both VAT and excise duty
    
3. Assuming fuel is charged at the highest tax slab of 28 per cent, prices will fall sharply  
    
4. For instance, if 28 per cent GST is levied on dealers’ base price of Rs 30.70, the consumer shells out Rs 39.30 for a litre of petrol
    
5. This is Rs 31 less than the existing price

Percentage Increase in Excise Duty of Petrol since May 2014
133.47%

Percentage Increase in Excise Duty of Diesel since May 2014
400.86%

Budget allocated to Ministry of Petroleum and Natural Gas 2017-18
Rs 29,157.57 cr

Budget Estimate 2016-17  
Rs 30,160.62 cr

Revised Estimate 2016-17      
Rs 30,241.76 cr

Expenditure for the first three quarters of 2016-17
Rs 22,600.91cr

GLOBAL APPROACH WITH INDIA AT CORE

Pipeline projects: India looking abroad

Turkmenistan, Afghanistan,Pakistan, and India (TAPI)
On December 13, 2015, a ceremony at Mary, Turkmenistan marked the work on the Turkmen leg of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. The ceremony was the result of an agreement in November 2014 when, during the Pipeline Consortium, the TAPI Pipeline Company Limited (TPCL) was established in the Isle of Man. The shareholders agreement of TPCL was signed on December 13, 2015.

The shareholding percentage in TPCL was 85 per cent for Turkmenistan, 5 per cent for India, 5 per cent for Pakistan and 5 per cent for Afghanistan. However, the implementation of the pipeline project has been delayed due to a decrease in gas prices and a crisis in the energy market.

Iran,Pakistan and India (IPI)
The Iran-Pakistan-India (IPI) pipeline was envisaged to transport natural gas from South Pars gas field of Iran to Pakistan and India, with a carrying capacity of 60 MMSCMD of natural gas, to be equally supplied to India and Pakistan. The total length of the pipeline up to the Indian border (near Barmer) was about 2,135 km (1,100 km within Iran and the rest within Pakistan). According to past estimates, investments required for this pipeline were in excess of $7 billion.

India has been involved in discussions on the India-Pakistan-Iran (IPI) pipeline project as part of the Joint Working Group on oil, gas and petrochemicals with Iran. However, in light of the sanctions on Iran, the IPI project has not moved forward.