New Delhi: India’s crude output fell 4 per cent from April through February in fiscal 2018-19 to 31.36 million metric tonnes (MMT), but this isn’t a first. Under the Modi government, which had promised to raise output and reduce oil imports, crude oil production has actually seen a steady fall.
From 37.5 MMT in 2014-15, when the Modi government came to power, India’s total production dropped to 35.7 MMT in 2017-18 — a 5 per cent drop, despite NDA’s promises to the contrary to make India more self-sufficient in oil production.
In the same period, India’s crude oil imports rose from 202.85 MMT in 2015-16 to steadily increase to about 217 MMT, said a statistics website. The 6 per cent rise in imports came even as the Modi government chalked out a roadmap in 2015 to bring down crude oil imports by 10 per cent by 2022.
According to data published by Petroleum Planning and Analysis Cell, under the Ministry of Petroleum and Natural Gas, oil production was lower by 6.1 per cent this February alone.
Data showed public sector oil exploration majors Oil & Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) actually saw a de-growth in production of 5.1 per cent and 6.5 per cent, respectively, in February.
However, a government official who didn’t wish to be named told ThePrint, “India has made considerable progress and many steps have been taken to boost exploration, but it takes time.”
According to a government statement in March, there has been a loss in production due to miscreant activities in operational areas and “less than planned contribution from work over well and drilling wells”.
Why imports have risen
Speaking about the higher level of imports, analysts told ThePrint that the development went unnoticed due to overall subdued global crude prices during the 2015-17 period, keeping the oil import bill in check.
“No concrete step has been taken to boost oil production. Our imports have, in fact, gone up. The only thing that has come as a big boon is the global crude oil price which had dropped significantly keeping our import bill in check,” an analyst, who didn’t wish to be identified, told ThePrint.
The analyst added that investments in oil fields have not picked.
“Most banks are not ready to give loans for geological research that needs to be undertaken to find the oil reserves. Until the oil reserves are discovered, there is no money, so there is a risk element attached.”
India is among the top five consumers of crude oil at present, with imports accounting for almost two-thirds of its crude requirements.
In this scenario, a drop in production would mean increased imports and higher outgo for the central government, which could have a direct impact on the current account deficit — the difference in outflow and inflow of foreign currency.
A government study published in 2016 had said the drop in production was due to a host of reasons, including a natural decline of mature fields in Mumbai and “less than envisaged production from new and marginal fields”.
A major chunk of India’s oil production is undertaken by the public sector oil companies.
A former ONGC official said the company focused primarily on the acquisition of Hindustan Petroleum Corporation Ltd (HPCL) in the last fiscal.
“Acquisition of that scale is not easy and this was almost a diktat from the Centre to go ahead with the merger. So these (kind of decisions) disrupt the core activities too,” said the ONGC official on condition of anonymity.
In 2017-18, Finance Minister Arun Jaitley announced in his budget speech that the government was keen on creating integrated oil behemoths, and ONGC’s acquisition of HPCL was aimed at merging the central public sector enterprises with a view to giving them wider capacity and scale.
Global crude prices
Crude oil prices have risen considerably in calendar 2019. Analysts said that with supply squeeze, oil prices are likely to remain high in the coming months.
After touching over $110 a barrel a day in August 2013, global crude oil prices have been falling since mid-August 2014. In 2016, prices had crashed below $50 due to a slowdown in emerging markets and China.
However, prices have been fluctuating since and touched over $75 a barrel in October. It closed at almost $72 last week.
“This is even more of a concern. If imports are up and so are oil prices, it will put pressure on the macroeconomic parameters,” said the analyst quoted above.