HindustanTimes Thu,23 Oct 2014

Government mulls $10-bn sovereign wealth fund

Anupama Airy, Hindustan Times  New Delhi, August 22, 2011
First Published: 21:00 IST(22/8/2011) | Last Updated: 00:43 IST(23/8/2011)

Taking a cue from China, India too is working out the modalities of setting up a $10-billion sovereign wealth fund (SWF) to acquire energy assets abroad.


A group of ministers (GoM) on energy security issues headed by finance minister Pranab Mukherjee is set to meet on Tuesday to formulate the modalities to set up an SWF.

A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally.

The concept of such a fund for India was first mooted by the Planning Commission at the GoM’s first meeting on July 8.

“Acquisition of oil and gas supplies in different countries holds the key to energy security,” said a senior petroleum ministry official, who is privy to the GoM’s July 8 meeting.

“The finance minister has already desired that feasibility for creating the Sovereign Wealth Fund be examined by the deputy chairman, planning commission, Montek Singh Ahluwalia,” the official said.

On its part, the Planning Commission has said 2% to 5% of the country’s present foreign exchange reserves should be deployed in setting up the fund. “The Planning Commission has told the GoM that deploying such a quantum of forex reserves will not pose any problem to the balance of payments and should be done to meet India’s energy security goals,” the official disclosed.

China, which already has a SWF, has heavily invested in Africa, the Caspian and other regions to acquire energy assets, which has helped it reduce its dependence on imports for the energy sector, which is crucial to contain energy cost in view of the steep rise in the prices of oil, gas and coal.

“Acquisition of oil and gas supplies in different countries holds the key to energy security,” said a senior official.

“Initiatives have been taken to source oil from countries in Africa, and Malaysia and Venezuela and to diversify sourcing of crude oil," he said.

India has a huge dependence on oil and gas imports and is also importing large quantities of coal for power generation. Officials said the finance minister mentioned at the GoM meeting last month that oil imports are likely to grow by four times of current level during the next 20 years. The import dependence of oil is seen increasing to 90% (from the present 80%).

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