Prof M K Bhat
Aachay Din Aayee (good times have arrived) dictum of Modi Government may get eclipsed if the present crises in West Asia will prolong for too much time. The ISIL terror group purportedly supported by Sunni Saudi Arabia and Qatar is getting a fertile environment from the biased attitude of Shia Government of Iraq’s Nuri al-Mulki. The initial success of ISIL has got restrained with the Shia clergy appealing for joining the war, Iran too seems fishing in the murky waters by openly advocating to interfere if Shia religious places are targeted which was openly refuted through a veiled warning by Saudi Arabia. It lamented that outside countries should not interfere with the internal matters of Iraq. The conflict after attaining its religious overture has got the potential to spread in the whole of west Asia and America – the country with maximum influence in the region seems least interested to fudge the prevailing adverse conditions as its need for oil has decreased drastically with the advent of its shale energy. The same does not apply to India because the religious interpretation can lead to internal conflict between Shia and Sunni sects of Islam in the country, the atmosphere in Lucknow has already gone tense. Besides this, 57% of its crude oil comes from the States threatened by the abnormal conditions prevailing in west Asia- Saudia Arabia, Iran, United Arab Emirates, Kuwait and Iraq. Iraq is the second biggest crude oil provider to India from this region. The crude oil crisis can easily apply a break on any planning to lift the economy from its present State.
No economy can grow at a fast speed if it has low level of energy at its disposal. Though nature plays its due role in having energy reserves yet better exploration or manufacturing, management and planning could have given enormous results. There is no way to stop the misuse of energy. One can use petroleum or electricity to the extent he or she can buy. There is no thinking about curtailing the unnecessary use of energy. The demand may escalate many more times in the years to come if things are not restrained. It may not be out of context to point out that 70% of the rural population still uses Biomass energy rather than LPG for cooking purposes. There have been no bio gas production attempts on mass scale in the rural area. The Government is neither interested in discouraging the misuse of fuel nor is it showing any concerted effort to grow new sources of energy. The ministry seems interested more in raising the rate of natural gas or petroleum rather than encouraging solar or wind energy at a high speed.
This Shia Sunni conflict will have a devastating effect on Indian economy which is already undergoing its low growth rate of 4.5 % in the last two years. It has exposed that we have no strategic thinking to find out alternative sources of energy like nuclear energy, solar or wind etc .It is customary with us to think about alternative sources of energy at the time of any untoward happening in west Asia and neglect the things afterwards . India imports 80% of its petroleum needs. It has attained the highest position in India’s import bill .It stands today as the fourth biggest consumer of hydrocarbons in the world despite the fact that we have enough coal reserve, it is the country’s biggest fuel source accounting for half of the country’s total energy use and producing two thirds of its electricity. Unluckily at present it is plagued by lack of environment clearances, land availability and indecisiveseness of bureaucrats .In 2012-13 coal shortage of 165 million tones effected the availability of power in the country. Thorium supplies are unlimited in India but little has been done to convert it into usable energy .The same is the case with solar energy which can be produced in abundance provided there is a concerted effort in this direction. India’s 3.14 million square meter sedimentary basin has not even been moderately explored. There is a need of involving private players and foreign investment in these areas at a war footing. India can think of joint exploration with Bangladesh in the Indian Ocean or it can also think of increasing LNG Gas supply from Russia.
The gross mismanagement becomes evident by the high subsidy given to the petroleum consumers in India. This subsidy is given in the name of poor but the maximum benefit of this subsidy has gone to the rich people over the years because they can afford vehicles, tractors ,pumps and what not. This is not only a big burden on exchequer but also leads to a gigantic increase in the oil demand. The oil demand in 2012-13 increased by 4.7% – the highest in the recent years. India’s oil import bill has increased from RS. 409077 crore in 2009-10 to Rs. 726386 crore in 2011-12. The low cost of fuel has encouraged people to keep smoke producing vehicles. There has been least attention on non petrol using vehicles. The car producing companies got an easy market at the behest of low cost energy. It seems that the successive Governments have failed to encourage energy efficient technology in the country.
The current turmoil will lead to the shortage of oil supply. which may hike oil prices and thereby the current account deficit may rise .The current account deficit is at a lower level at present and as per Mr. Raghuram Rajan’s ( governor Reserve Bank of India ) recent statement that the country has enough foreign exchange reserve to deal with any fallout .This may be true in the short run but if the war goes on for a long period not only deficits will rise and the fall in the value of rupee may catalyze the situation. The exports may lose their competitiveness.
The transport cost may increase leading to inflation .The high inflation may decrease demand and low demand will not allow the weak industrial sector to grow. The supply may decrease leading to cost cutting in the form of sabbaticals ,layoffs and other measures. The unemployment may increase and it may be difficult for the country to come out of its vicious circle of low economic growth rate.
It is prudent for the finance minister in the budget to provide more subsidies to alternative sources of energy to increase their demand than to subsidize the conventional energy. Fuel efficient technology, conservation of energy and target for producing energy through un conventional means should be given topmost priority in the years to come else the country may have to be ready for bearing shockwaves of price rise on crude oil every now and then.
(The author is Deputy Director, MAIMS GuruGobind Singh Indiraprastha University Delhi)
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