New Delhi :India’s dependence on imports to meet its oil needs is expected to touch 90 per cent in next two decades and the country needs to diversify its energy basket through use of alternative fuels, an India Tech-PwC report has said.
At present, India imports 79 per cent of its oil needs, and spent USD 138.3 billion on the same in 2014-15 fiscal.
“Given the current trend in domestic oil production, dependence on imports is expected to reach 90 per cent in the next two decades. A higher percentage of GDP will need to be spent on oil imports, further increasing India’s vulnerability to price shocks,” the report said.
Stating that the economy can’t be fully insulated against external shocks, the impact of such shocks can be limited if dependence on oil imports is reduced.
“This essentially calls for an increase in domestic oil production as well as the securing of more reserves overseas.
“While increasing domestic oil production has its limitations, the focus should be on diversifying India’s energy basket through alternative fuels such as coal bed methane, hydrogen, shale gas and ethanol blended fuel, as well as improving extraction efficiency by infusing technology and bringing new domestic discoveries into production,” it said.
The report said significant efforts should be undertaken to shore up India’s overseas oil reserves by encouraging Indian oil companies, especially the national oil companies (NOCs), to scout for potential oil reserves in foreign countries.
“Given that oil is a perfectly traded commodity, equity oil helps offset the effect of stagnating domestic production and acts as a hedge against rising oil prices. The slump in global oil prices is a good opportunity for India to acquire assets overseas,” it said.
If India needs to reduce its import dependence, this window of opportunity should not be missed.
India Tech-PwC said for companies operating in multiple countries, it was imperative to identify which risks they are exposed to and where those risks exist.
“Sufficient third-party controls and monitoring should also be in place to ensure that the parent company is well-protected from risks arising out of the actions of other stakeholders,” it said.