ONGC production has not picked up. The company missed out on the opportunity to shut-down its Neelam oilfield to prevent deteriorating production when oil prices were low. As the Opec president has ruled out a revision in production targets before March 2000, prices are unlikely to dip till then.

This means that India will have to rely on expensive imports to meet its requirements. The commissioning of the 14-tonne Reliance refinery would help ease the burden, but not to a large extent since its crude requirements would still have to be met through imports. What makes matters worse is that not only are crude oil and refined products becoming more expensive in dollar terms, the rupee has also depreciated to a large extent.

Thehigher oil import bill will have a bearing both on the oil pool account and inflation. While it is true that the government could have done little to prevent the rise in oil prices, it could have sheltered the country from the effects of the price rise, at least to some extent. The privatisation of exploration and production at an earlier stage along with the refining sector could have helped contain the cascading effect on the economy. Further, by allowing oil companies to hedge their purchases, the government would have ensured that increasing prices do not have an adverse impact on the profits of oil companies and the pool account balances.