Seeking clarity on energy

Sep 20 2013, 09:07 IST
Comments 0
SummaryWe need a coherent political message on demand, cost and pricing reform: Varun Gandhi

like ONGC and GAIL to shoulder the burden of the OMCs while providing delayed subsidies to OMCs. Domestic gas is highly regulated with irrationally low prices ($4/ MBtu; imported LNG is $12/ MBtu). Gas allocation is weighted towards the price-sensitive power and fertiliser sectors and away from industries. Maintaining this complex system, with little revenue addition, entails significant administrative costs; monitoring cost recovery, under-recoveries and pricing. Why would anyone invest in the exploration or retail segments?

Dismantle this complex regime and replace it with market-determined diesel and gas prices, poor-focused fuel cash vouchers and a production-focused open leasing exploration policy. Populist fuel subsidies for the middle class and the fertiliser sector will not do any more. Let the market determine gas allocation, with sufficient investment encouraged in LNG terminals. Privatise the OMCs and ONGC; give them managerial autonomy and production-focused incentives. ONGC Videsh must be encouraged to continue investing in Russia and Africa. Encourage investments by E&P firms like Cairn, BP and Reliance, particularly in Enhanced Oil Recovery (EOR), coal bed methane and shale gas.

Reforming these three energy segments is critical to economic growth. As the IEA notes, our energy players need to be commercially viable, with managerial autonomy and access to financing. Ownership should not imply ministerial fiefdoms. Pricing mechanisms should not be rigid, with end-use prices supporting realistic opportunity costs and a rational allocation of resources and value. Implementation of energy policies through enhanced intra-ministerial coordination is required on a timely basis, cutting down on cost escalation. These are hard measures, which call for significant sacrifice and adjustment. But rebuilding India was never supposed to be easy. We have lost decades in ignoring our energy needs while handing out subsidies; we cannot afford that any more.

Varun Gandhi

The writer is a BJP MP in the Lok Sabha

Single Page Format
Ads by Google

More from Op-Ed

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...