This Business World column of 4 August 2003 summarizes the oil and gas policy reforms, and argues for a gas pipeline from Iran through Pakistan, which Indo-Pak hostility held up.
Between
dependence and mastery
Prime Minister
Chandra Shekhar’s tenure, mercifully short as it was, saw some memorable
events. The most traumatic of them were the queues at petrol pumps. An
adventitious rise in world oil prices coincided with India’s worst payments
crisis. Reserve Bank waited every morning to collect foreign exchange from
exporters, and gave it out in a trickle for “essential” imports; the most
essential of them was oil. Despite this privileged treatment, the oil companies
could not keep the country well supplied. Luckily it was winter and
scooter-riders did not roast in the sun. But that did not make them love the
government any more. All heaved a sigh of relief when the clueless Prime
Minister fell from power.
In those times,
only half of the oil was imported. Today the country consumes twice as much of
oil products, and imports three-quarters of its consumption. An oil shortage
today would be far more disruptive; no government can afford one. Almost
two-thirds of energy supply now comes from oil. Nor is transport the only
activity that would suffer from an oil shortage. Almost all the privately
generated electricity – which has grown as public utilities have coped poorly
with demand and have discriminated against industry – is generated from oil
products; and even utilities have increased their dependence on oil.
Luckily, the
chances of another payments crisis have receded. With exchange reserves of $78
billion, rising at a brisk pace, payments problems are the last thing to worry
about. Imported oil is now eminently affordable.
But no country
can have the same control on imports than on its own production. Imports
require stability in oil supplying countries, good relations with them, and
secure lines of supply from them. Only a superpower can aspire to achieve all
three; the rest must make the best bargain they can. Whatever its other
dimensions, the American takeover of Iraq has an oil dimension; and American
ambition is not confined to Iraq alone. It encompasses the entire oil-bearing region
from Saudi Arabia to Uzbekistan. This dimension is easily forgotten when we
debate whether to accede to the American demand for Indian troops to serve in
Iraq. Whether we get involved in Iraq or not, security of oil supplies must be
an overriding objective in our foreign policy; we have to ask ourselves what it
means in terms of alliances, equations, and military investment.
Although the
government has followed a very liberal oil exploration policy in the past five
years, it has not been able to interest the oil majors; most of the blocks have
been taken up by Oil and Natural Gas Corporation and Reliance. And the
concessions have not led to an increase in domestic production; the country has
become progressive more import-dependent.
At the same
time, underpricing of domestically produced oil has been abandoned. This has
led to a huge accretion of profits with ONGC; it has been at a loss to know
where to invest them. It has taken shares in peripheral concessions across the
world. They may enable it to maintain growth; but they are not an answer to
India’s oil requirements, which continue to grow. To secure them, Indian
companies need to participate in oil production in the Middle East and
South-east Asia, both of which are largely leased out to the – chiefly American
– oil majors. An entry strategy into these areas needs to be worked out; and
entry would be easier in cooperation rather than in competition with the oil
majors. Since they are international powers in themselves, this adds another
dimension to foreign policy.
Oil today is an
abbreviation for oil and gas; gas can replace oil in all uses outside
transportation, and is in fact preferable in certain uses like power generation
and petrochemical production. It can even be used in transport; Delhi Transport
Corporation was forced by the Supreme Court to turn to compressed national gas,
and now proudly boasts of having the world’s largest CNG bus service. Gas can
also be converted to methanol which can replace liquid fuels.
Natural gas has
less density and costs less per cubic meter than oil; so it can bear less
transport costs. Even then, India has the choice of gas from a number of
neighbouring regions – Iran, Qatar and Bangladesh being prominent. Middle East
gas could be liquefied and transported in ships, or it could be piped across.
Pipelines would be much cheaper if the quantities were large enough; and a
pipeline across Pakistan would cost half as much as an undersea pipeline. A
pipeline from Iran and UAE would be just the beginning; if American plans to
exploit Central Asian oil fructify, a pipeline from there would also become a
possibility. The government has hesitated over such plans for a decade now; it
is stopped from proceeding by its Paki-phobia. But vulnerability is mutual; if
India exposes itself to the risk of supply interruptions in Pakistan, Pakistan
would also expose itself to the risks attendant on putting India’s energy
supply in jeopardy. There is no solution to the Kashmir problem on its own; but
the more mutually dependent India and Pakistan become economically, the more
difficult they will find it to have a fight. Hydrocarbons are explosive, but
they can be turned into a force for peace.
It is time that
our foreign policy was liberated from its obsession with Pakistan, and that the
broader dimension of the country’s survival in an interdependent world was
brought to bear on it.
