ASSUME INDIA did not have to import 169.7 million tonnes of crude worth $130.6 billion (Rs 6.8 lakh crore) as it did in the last fiscal. How would it affect the economy? Such a situation is imaginary, but a recent report by consulting firm PricewaterhouseCoopers, titled It’s Our Turn Now: E&P Partnership for Energy Security (“E&P” for exploration and production), states that if India didn’t have to import crude, it would not only be less vulnerable to global oil price fluctuations but also add 6.5% growth, or $125 billion, to the economy. That would take care of the country’s fiscal deficit of 5.9% of GDP ($92.5 billion in 2011-12). Not just that. If India were to invest $130.6 billion in the oil sector, it would generate half-a-million jobs every year for the next 20 years.
To meet the oil trade deficit of $85.5 billion, India had to draw $12.8 billion from its forex reserves (the rest comes from the oil companies’ funds). “We wouldn’t have to draw from the forex reserves if another 17 million tonnes of crude were produced,’’ says Deepak Mahurkar, leader, oil and gas, PwC India, and author of the report. But that wouldn’t be easy because India’s current production is 34 million tonnes and it will have to raise production by 50% to achieve that.
Moreover, higher domestic production of crude would jack up revenues of both the central and state governments through royalties, sales tax, value-added tax, the government’s share from production from an oilfield, etc. Thus, bringing down crude imports would, in one stroke, resolve several issues: It would arrest rupee depreciation, contain inflation, cut down import and subsidy bills, and shore up revenue—all that a cash-strapped government would give its right arm for.