Pragmatic energy policies key to India growth narrative

Thoughts by Sashi Mukundan, Regional President of BP India on how India is well poised to take off if we temper expectations and pragmatically assess the future
Date: 2 May 2016
The global world faces acute market weakness and volatility. Oil prices continue to slide. As the IEA’s recent oil market outlook states “the oil market could drown in over-supply” in 2016. 

These tough times see countries bracing for more shocks. Companies and producer countries too have aggressively cut spending in the wake of lower oil prices. A survey of global cumulative decline presents a bleak outlook.  Over a $ 1 trillion of value has moved from the producer to the consumer.  More than $1.2 trillion of future capital spending has been cut from the sector.  This is the only time in the last three decades that spending has fallen for two consecutive years. Low growth, retrenchment and downslide in capital spending are compelling policy makers to rejig strategies in a bid to attract investment and keep the industry going in their countries.
India is at a good place - with a foot firmly on the accelerator, to surge ahead when recession lifts.
Sashi Mukundan
With oil tumbling more than 50 per cent from mid-2014 levels, India spent $60 billion less on crude imports in 2015 than the previous year even while buying four per cent more. The Indian sun shines on  with 7-8% GDP growth despite the looming global energy price clouds that darken the horizon. Further to the boost from low oil prices, India is undertaking an aggressive and comprehensive structural and policy-driven changes making it a busy summer. 

Several key announcements are expected to spur increased activities. The all-encompassing revised hydrocarbon exploration licensing policy, a new crude oil import procedure, the new guidelines for development of stranded marginal discoveries, and a policy for marketing and pricing freedom for the gas to be produced from difficult areas. These initiatives coupled with improved management of current PSC blocks provide the right context and are expected to jumpstart activity in the hitherto sluggish oil and gas industry. Additionally, the government is focusing on developing a gas based economy to provide clean energy to fuel the growth.  All of these initiatives will work towards fulfilling the aspiration to reduce imports by at least 10% by 2022.

When the ‘Make in India’ campaign starts generating the additional 100 million jobs taking the manufacturing share in the economy to 25 per cent it will drive more energy demand. Domestic investments to the oil and gas sector and augmented by advantaged and secure imports will ensure the Indian economy is energized. So if we temper expectations and pragmatically assess the future, India is well poised to take off when the skies clear.