Cutting Crude Import Bill is no Easy Task

Cutting CrudeImport Bill is no Easy Task

India’s energy needs are enormous with a daily consumption of around 5 million barrels and a refining capacity of 250 mmtpa (million metric tonnes per annum), which is the third-largest in the world. To maintain energy security and to fulfill the objective of providing energy justice to each of its citizens, Indian energy companies buy from all major oil producers in the world. On an average, India has the unique distinction of servicing 60 million visitors at its petrol pumps every single day.

As the Russia-Ukraine crisis continues to impact the world globally and on oil prices in particular. However, the surge in oil prices does not imply a decline in requirements. Thus, it makes it important for government to ensure access to affordable energy to our citizens. We have two viable alternatives, we can focus on encouraging domestic production of oil and transition towards alternate sources of energy.

Steps taken by Government in this regard:
• Urja Sangam 2015 was launched by the PM which was the then the biggest global hydrocarbon meet aimed at shaping India’s energy security. All the stakeholders were urged to increase the domestic production of oil and gas to reduce import dependence from 77% to 67% by 2022 and further to 50% by 2030.
• The government has also introduced various policies for increasing domestic production of oil and natural gas under the Production Sharing Contract (PSC) Regime, Discovered Small Field Policy, Hydrocarbon Exploration and Licensing Policy (HELP), New Exploration Licensing Policy (NELP), etc. However, projects under domestic oil production have a long gestation period. Pricing and tax policies are not stable and the oil and gas business requires huge capital, which means high risks for investors.
• The Government of India promotes the Ethanol Blending Programme (EBP) with the aim of reducing the country’s dependence on crude oil imports, cutting carbon emissions and boosting farmers’ incomes. The Government has advanced the target for 20% ethanol blending in petrol (also called E20) to 2025 from 2030.

What else can be done to reduce India’s Oil Import Dependence?

•  Increase the share of Domestic Production
• As India aims for 10% GDP growth we must realise that our demand for oil is only going to increase.
• The only way we can reduce our dependence on imports is to increase the size of India-owned exploration and production assets overseas. We can learn from China in this regard.
• It is crucial that we back ONGC as it takes steps to increase the production by redeveloping its existing matured fields. The government also needs to support by investing in oil recovery technologies.

•  Focus on Green Energy
• With COP26 commitments in place, the demand for Renewable energy is at an all-time high, which calls for substantial capacity addition.
• The wind sector is gaining momentum however the solar sector is taking leap forward as it continues to be backed by global supply of solar cells and modules at favorable prices.

•  Realising the potential of Wind Energy
• While both solar and wind are susceptible to intra-day and seasonal variability, from a technological and resource perspective as well as from the commercial angle, wind is a better bet in helping India achieve its RE aspirations.
• However, lately, there is a policy overdrive in favour of solar, which is resulting in a decline in wind capacity addition. While there is a short-term tariff advantage, in the long term it is essential to have a balanced diversified resource mix.
• Wind is more desirable in India’s power basket due to higher capacity utilisation and throughout the day generation of power. It also complements solar, providing a more consistent and viable generation profile.

Way Forward:
Despite the initiatives taken to reduce India’s oil import dependence, the situation remains dismal. India must rework on this reality. The strategy should be that key energy uses, like for cooking and transport, shift to other sources like green energy. On their part, the policymakers have to ensure that all stakeholders are on board and there is no policy flip-flop.