PM meeting with experts has to result in action
Prime minister Narendra Modi has done well to meet global oil and gas experts for over two hours—with senior colleagues such as finance minister Arun Jaitley, oil minister Dharmendra Pradhan and power minister Piyush Goyal—to discuss how to increase the share of gas in India’s energy mix and how to get fresh investment in the country’s oil and gas sector. But with India’s top private sector oil and gas producers—Reliance Industries and Cairn—fighting bruising battles with the government in the court and even the public sector ONGC finding it difficult to explore for gas given the current gas prices, it is difficult not to dismiss the meeting as so much more gas. The UPA had put in place a mechanism for hiking gas prices to near market levels—and had set up a committee to examine how to completely free up the market—but Modi’s government went and nixed this. As a result, there has been no fresh exploration in the deep waters since the government came in. The UK-based Cairn Energy—the India operations were later sold to Vedanta—emerged from nowhere, after buying the Rajasthan fields Shell had given up as duds, and became India’s largest crude oil producer with a 27% share in 2015. Despite the company’s promise to invest several billion dollars in Rajasthan if its lease was extended, this has still not been done for 21 months now—if the company has no visibility on how long it is going to have the field for, how is it expected to invest?
Indeed, while Cairn Energy was rightly recognised as the poster-child of India’s private sector oil policy, the firm has been hit by a retrospective tax and despite both the PM and the finance minister denouncing the tax—and promising not to use it in the future—there has been no progress in the case. Similarly, both Cairn India and Reliance Industries have an ongoing battle on the government clearing their dues, and while Cairn Energy and Reliance have arbitration battles, the government has been delaying these. In such a situation, it is difficult to see how the prime minister’s target of reducing India’s oil import dependence by 10% by 2022—and 50% by 2030—is going to be achieved. No promises made now—of market-determined oil/gas prices, for instance—are going to hold water till the older problems are resolved; in any case, it is a bit odd to be promising market-pricing of gas now since even the current law is promising this.