Some harsh decisions by the government to correct anomalies in domestic fuel pricing in order to reduce oil subsidies and keep India’s fiscal health under check seem inevitable.
Prime Minister Narendra Modi on Wednesday took stock of the energy sector and reviewed bottlenecks impeding oil and gas, power and coal production besides the impact of Iraq crisis that has led to a sharp increase in crude oil prices, which has a direct impact on the country’s economy.
“Issues needing immediate attention of the government as also adequate steps to restore investor’s confidence by removing sector-specific impediments were discussed in the meeting,” a senior government official said.
Modi met petroleum minister Dharmendra Pradhan and power and coal minister Piyush Goyal on Friday to review the implications of the growing Iraq turmoil. As the global crude oil prices scale new highs, it’s a worrying sign for a country like India that imports oil worth $150 billion every year. The Indian basket of crude oil has moved up to $112.45 a barrel from $106 just two weeks back.
Sources said the oil minister informed Modi that while no immediate fuel supply disruptions are feared, a contingency plan including diversification of India’s crude oil imports from oil producing nations other than Iraq is underway in order to minimise the impact of any geo-political instability in West Asia.
India, the world’s fourth-largest oil consumer, imports around 4 million barrels a day of crude oil — costing $165 billion a year at current prices, or more than a third of its total import bill.
Other issues flagged in the meeting included steps to reduce fuel subsidies, investor friendly new gas pricing policy, ensuring security of oil and gas supplies, increasing domestic coal production, ensuring adequate coal supplies for power generation.