Over 85mn gas cylinders have been availed under Gareeb Kalyan Yojana: Dharmendra Pradhan
Dharmendra Pradhan said the government has proposed to give free refills for PMUY (Prime Minister Ujjwala Yojana) consumers for a period of three months with financial assistance of Rs 13,500 crore.Updated: Jun 04, 2020 05:33 IST
Union Petroleum and steel minister Dharmendra Pradhan spoke to Rajeev Jayaswal about the challenge of delivering cooking gas cylinders to 274 million consumers during the lockdown period, the impact of the rise and fall in crude oil prices, the push for energy security, new supply contracts with the US and Russia, and the role public and private players in the oil sector, among other issues. Edited excerpts:
Soon after the national lockdown to check the spread of Covid-19 began, the government announced that it would give free cooking gas cylinders to poor households for three months. What is the progress?
The government has proposed to give free refills for PMUY (Prime Minister Ujjwala Yojana) consumers for a period of three months with financial assistance of Rs 13,500 crore. The scheme has been operational since April 1. As on May 31, Rs 8,494 crore have been transferred to the bank account of beneficiaries though DBT (direct benefit transfer). And the beneficiaries have availed the delivery of 852.49 lakh (over 85 million) cylinders under the PM Gareeb Kalyan Yojana.
Low oil prices provided good fiscal space to the government to mobilise resources to fight Covid-19. But crude oil prices have started rising now. Does this worry you?
This may not be a matter of worry. The OMCs (oil marketing companies) are basically dependent on cracks -- the difference in the prices of crude and petroleum products in the international markets -- for their profitability, and not on the crude prices alone. I would say that high volatility in prices is in nobody’s interest. India always looks for a reasonable and responsible price regime.
Both the Centre and states raised levies and mopped up almost all benefits of low international crude oil. But petrol and diesel prices were kept frozen. Why?
The prices of petrol and diesel depend on the prices of these products in the international markets. Then there is the 15-day cycle to take the moving average of these products to estimate prices in the domestic market. Although crude prices came down, the product prices did not come down by the same percentage. The cracks actually became negative, hurting the books of Indian OMCs.
The oil industry, too, was faced with an extraordinary situation. There were no takers for the crude being produced; the world literally ran out of storage space for the crude and petroleum products. The reduction in demand has led to a peculiar situation where product prices are less than the price of crude. These negative margins and low crude prices do not reflect the real economics of oil refining and the pricing of end products.
The pandemic has had a huge impact on government revenue. Therefore, mopping up resources has become inevitable to deal with this unprecedented crisis.
Global oil prices have softened. Is this the time to reduce India’s import dependence on politically volatile Middle East?
To improve its resilience to disruptions in crude supplies due to geopolitical factors, India has significantly diversified its sources of crude oil over the years. Last year, we secured steady supplies of crude oil despite significant challenges to security in the Middle-East, particularly the attacks on Saudi oil facilities and the flare-up in US-Iran tensions. Over the last four years, we significantly diversified sources of crude oil to reduce excessive dependence on the Middle-East. As the US became an exporter of crude oil, we took proactive steps to import crude oil from the US since 2017. In a short span of two years, the US has now become one of the top 10 sources for crude oil imports. Earlier this year, in February, our companies added Russia as a source for crude oil by signing a term-contract starting this year. Our companies are also exploring sourcing of crude oil from other regions, including North and South America.
It will be our constant endeavour to continue to diversify our oil and gas import sources from price-competitive countries or regions to reduce our dependence on the Middle-East. India imports its crude from about 25 countries, and no doubt the Middle East supplies the majority of that crude. During recent years, India has imported substantial amount of crude from the US, Nigeria, Mexico, Brazil etc.
On May 17, the government announced a Public Sector Enterprise (PSE) policy. Do state-run oil and gas firms come under the list of strategic sectors?
Oil and gas sector play a predominant role, as over one-third of the energy required is met by hydrocarbons. A considerable part of the infrastructure for the government’s push to a gas-based economy, including untouched areas, is also being steered by CPSEs (central public sector enterprises).
It was announced that, in strategic sectors, at least one enterprise will remain in the public sector but the private sector will also be allowed. Does that mean there will be just one integrated oil PSU?
The government believes in creating a level playing field in which both public as well as private players compete with each other and contribute to the overall growth of the sector. Other decisions, like how many PSUs in which sector are strategic, are subject to market conditions prevailing in each sector.
This government recently completed the first year of its second term. What are the key achievements, and what is the road ahead?
The government recognises that our supply security is a critical element in ensuring our energy security. To diversify the import of crude oil, IOCL (Indian Oil Corporation Ltd) has entered into long-term contract with the US and Russia to source crude oil. Further, taking advantage of the low crude oil price, India is filling the strategic petroleum reserves (SPR) to their full capacity. This will result in savings of approximately Rs 5,000 crore for the government towards filling the vacant cavern. This will boost India’s energy security.
The government has taken a number of initiatives to encourage the use of alternative fuels and incentivise production of ethanol and biodiesel. In order to encourage the production of biodiesel from used cooking oil (UCO), the OMCs have floated expressions of interest (EOIs) for the supply of UCO biodiesel from 200 locations across the country. Till April 2020, 31 entrepreneurs submitted their EOIs for production of biodiesel from UCO from 50 plants with a capacity of 1,042 MT/day.
Oil and gas will continue to remain vital for India’s energy security in the foreseeable future. A concerted effort is required by all stakeholders to ensure that India is appropriately positioned to take advantage of the existing opportunity. This may require end-to-end planning, synergies, and trade-offs across sectors.
You also handle the steel ministry, which has been facing headwinds due to several reasons. What are your plans to boost this sector?
The main thrust of the steel ministry has been to bring in cost competitiveness, and thereby improve steel usage in India. The possible disruption in iron ore availability was addressed by policy changes enabling public sector captive units to carry out the market sale of the mineral, apart from ensuring a smooth carry over of regulatory permissions to new leaseholders post the auction.
There has been a thrust to facilitate local industries for which the ISPs (integrated steel plants) of SAIL have come out with a programme to incentivise local manufacturers. For the planned development of the sector and ancillaries, steel cluster projects under Purvodaya have been given impetus.
By setting up a data system which gives better visibility regarding the imports in the sector, the SIMS (steel import management system) platform will prepare the ground for informed investment decisions by domestic industry, in turn contributing to local production and employment. The system has been made operational last November in association with the commerce department.