India’s Energy policy – For the people or against the people

Wrong policy leading to oil shortages

India most vulnerable to oil shocks

Raising concerns over the rising oil prices and alarming the people is not the reason a government is elected. The 2007-2008 oil shock was substantial reason to wake up and formulate a policy which would lead to energy security. Instead, 5 years later we have an energy crisis on hand. The energy crisis of a nature which can throw India of its tom tommed high growth rate into the abyss of negative growth. So where has the policy initiative bungled up.

Has the much promised strategic petroleum reserve been created?
In December 2009 the Government had indicated the setting up of an SPV called Indian Strategic Petroleum Reserve Limited (ISPRL) that would create a storage facility of five million tonnes by 2012. This was to effectively increase India’s strategic reserve to 8.5 mt which would be enough to meet 90 days of consumption. However this has yet to see the light of day and it would really go a long way if the government would give more information on the same. At present the website does not provide any status information and the site was last updated in September 2009.

While Cairn comforts, RIL increases anxiety
The manner in which the government has gone about handling the Cairn issue and dealing with KG6 crisis leaves little to be desired. While Cairn which produces oil was subject to harassment for no wrong doing on its part, RIL is allowed to toy with India’s biggest energy find ever. Lack of transparency right from the cost of the project to gas throughput leaves the average citizen wondering what’s going on? Today government met to discuss the KG6 issue but what is the action initiated? Will the government continue to play with the common man just to pacify the largest corporate of private India.
IMHO just like the army was invited to build the overhead bridge in Delhi which collapsed prior to the Commonwealth Games, similarly the army should be given the charge to find out the exact issue which is crippling gas production at KG6 and if possible rectify the same.

CBM policy still no gas production
Its been many years since the CBM policy was announced and barring for Essar oil and another company’s Ranigunj blocks none of the corporates ho had been issued blocks have reported any progress. Of the 17 year licences 4 years have already passed. And I was under the impression that it is much quicker to develop a CBM field than a natural gas well!

Coal production –wishful thinking or time wasting
India has the 4th largest coal reserves in the world, yet we import coal. From the time a coal block is allotted on an average it takes 8-10 years to develop a coal block in India as against 4-5 years overseas. Beaurocracy and red tapism is what prevents progress and we hear that the PMO is going to do something about it.

Nuclear production – pursuit of the wrong fuel
India has the 4th largest reserves of thorium in the world and these are sufficient to fuel 2500 years of electricity needs. With technological development available as far back as in 1970 one only wonders why we want uranium and I keep scratching my head as to why would the government not promote this fuel source. You would be probably scratching your head 40 years from now still trying to figure this one out.

Shale gas – huge potential with game changing propositions for India’s fuel security. Alas government policy
India has large shale deposits, with good prospects in the Gangetic plain, Punjab, Rajasthan, Gujarat. Tamil Nadu , Andhra and the north-east . If these reserves are tapped it would make India self sufficient in energy. Besides being cheap, the revolutionary potential of shale gas, has the potential to revolutionise both the world energy scene and global geopolitics and virtually turn India into a super power. However the national policy is not in place and the draft is gathering dust in the corridors of Delhi.

So where do we go from here?
If the government does not, act one thing is sure that the reforms initiated since 1991 would be reversed. Already the financials are looking similar to 1991. And even if the government pacifies the populace with white lies, the stock markets and currency will enlighten everyone by tanking abruptly.
In these accelareted times of world economics and the energy crisis created by the US -Iran stand off, India is most vulmurable as nearly 80% of the crude oil is imported. If the various arms of the government would come together to iron out a consolidated energy policy the world be at India’s beck and call. Else shit would hit the fan.

Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

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