Finance Minister Palaniappan Chidambaram has accused the oil producing countries' cartel for robbing India of one per cent GDP growth by resorting to speculation and unjustifiably increasing crude prices. The price has crossed $70 (Rs 3150) per barrel a few months back.
Participating in a plenary panel discussion at the annual India Economic Summit, organised by the World Economic Forum (WEF) and the CII, which opened on Sunday, Chidambaram called upon developed countries like European Union bloc and the United States to take a stand against the 'exploitation unleashed by oil-producing countries'.
Citing the 8-9 per cent annual increase in crude consumption, Chidambaram proposed a price band for crude between $40-50 per barrel.
Chidambaram said that both oil producing and oil consuming countries should mutually determine the price band.
He pointed out that the Russian budget had been prepared with the assumption that oil prices would be $45 per barrel. "When the prices topped $70 per barrel, they (Russians) made a killing," said Chidambaram.
Chidambaram noted that in India the government has to divert a large chunk of its development revenues to foot the bloated oil import bill.
He said the government issued oil bonds which was "unfair on future generations". Oil bonds would ensure staggered payment to oil companies that are importing crude. Over 70 per cent of India's crude requirements are met through imports.
He disagreed with Infosys CEO Nandan Nilkeni and CII President R Seshasayee that the volatility in crude prices was 'purely due to the demand - supply gap'. The Finance Minister attributed the rise in crude prices from $55 to 78 to 'pure speculation'.
"Better sense should prevail on the oil producing countries," he said. They should stop this speculation and increase in crude prices thereby hurting the development agenda of developing countries like India.
He cautioned that if such speculation continued, the millennium development goals - mitigation of poverty -- set by United Nations could not be met by developing countries.
While UAE-based Chairman of Emaar Properties Mohamed A Alabbar skirted the crude pricing issue, US-based Chairman of CH2M HILL Companies Ralph R Peterson conceded, "There is an exploitation going on".
Even on issues like emission of green house gases, Chidambaram took a hard line against the developed countries. He was unwilling to accept the argument that poorer countries contributed to larger green house gas emission. "If energy consumption is lower then the green house gases emission would also be lower," Chidambaram said.
He asked developed countries to provide resources and clean coal technologies to countries like India and financial support to African countries. "We do not need money. They (EU and US) should provide access to resources and technologies," Chidambaram said.
Chidambaram also set aside the argument that China and India were primarily responsible for green house gas emission.
Earlier, making his initial presentation on "India in a World at Risk", Chidambaram identified water as the biggest challenge. Comprehensive policy framework coupled with desalination, water recycling, conservation and right pricing was recommended by the panelists.
Finance Minister also stated that economic growth should be made inclusive so that anti-globalisation sentiments do not result in protectionism. Chidambaram said that in democratic polity, young generation was driving greater liberalisation.