Economic package is a mix of supply-side and demand-side measures: Dharmendra Pradhan

The oil industry is faced with an extraordinary situation. Our government’s view is to take a cautious and conscious approach of a balance in price, save it and use it for welfare, says Petroleum Minister

Petroleum Minister Dharmendra Pradhan speaks to Nistula Hebbar on the lockdown due to COVID-19, oil prices and global oil politics set to heat up the world over…

Do you think a harsh lockdown, the kind we have had in India, was justified?

A decision was needed in the interest of saving lives. It was made. That gave us precious time to prepare as a society to fight the virus, prevented our systems from being overwhelmed and allowed us the space and opportunity to calibrate our response. We are still in the fight and there might be more benefits that we are not immediately appreciative of.

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With lakhs of inter-State workers hitting the highways to go to their native places, do you think they could have been given time to do so before the lockdown was announced?

The decisions were and are in the interest of all Indians as a whole necessitated by a pandemic staring us in our face. These are tough calls we need to take as one nation and we are fortunate to have a leadership who could take those calls. The inter-State workers wanting to go back to their homes was very natural. We did calibrate our steps at the earliest moment of necessity, allowing buses to operate and introducing Shramik trains to ensure much-needed relief to the migrant workers.

Having said that, we as a society and nation must introspect deeply on the issue of migrant labourers. There is an urgent need for more geographically uniform growth in the country. Honourable Prime Minister has always maintained that the next wave of growth must come from the eastern part of the country and has worked towards that. Our government has also worked towards greater formalisation of the economy and providing social security to workers which will, in the long term, benefit our workers and empower them.

Globally the price of petroleum has tanked but India is charging its citizens more than three times the price. Even accounting for the fact that revenue needs to be generated, are you considering lowering the rate as that in itself would be considered a stimulus to the economy?

The oil industry is faced with an extraordinary situation. These are not normal times. Slippage of crude prices is coupled with disappearance of demand worldwide. The situation arose first because of the price wars between oil exporting nations. Earlier, the oil producing countries could resolve their differences and reduce production, then COVID-19 struck. Due to the lockdowns in major economies, the demand dried up. There were no takers for the crude being produced, the world literally ran out of storage space for the crude and petroleum products. The reduction of demand has led to a peculiar situation where the product prices are less than the price of the crude. These negative margins and low crude prices do not reflect the real economics of oil refining and pricing of end products. Our government’s view is to take a cautious and conscious approach of a balance in price, save it and use it for welfare.

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Finance Minister Nirmala Sitharaman’s economic stimulus package has been termed stingy by the Opposition. What is your view on the direct income support they have been asking for instead?

The Prime Minister’s faith is on empowering people. In order to prove the resolve of Aatma Nirbhar Bharat, the four parameters — Land, Labour, Liquidity and Laws — have all been emphasised in the Aatma Nirbhar Bharat Package of ₹20 lakh crore — equivalent to 10% of the GDP. Learnings from the experiences of 2009-13 have prompted the government to be responsible while announcing the ₹20 lakh crore and not splurge. The economic package announced is a mix of supply-side and demand-side measures, including putting money directly into people’s hands by increasing the allocation towards the rural employment guarantee scheme. Strictly supply-side measures also have a demand-side component. If the Micro Small and Medium Enterprises (MSME) get greater liquidity, a significant part of it will go in paying wages. It is a sound philosophy because ultimately the dignity of a human is more when he thinks he is contributing, earning honest money and taking care of his family.

Oil politics is set to heat up in West Asia and Russia. How do you see India placed in this scenario especially looking at our import basket?

India has over the years significantly diversified its sources of crude oil to improve its resilience to disruptions in crude supplies due to geo-political factors. During the last year, we managed to secure steady supplies of crude oil despite significant challenges to security in West Asia, particularly attacks on Saudi oil facilities and also due to flare up in U.S.-Iran tensions. The problem we are facing now is a combination of serious effects on the demand side due to the global pandemic and the efforts of OPEC and OPEC-Plus countries to moderate the supply-side factors to address the demand contraction.

So far, the Indian oil marketing companies (OMCs) have not had any problems in securing their supplies as the market is well-supplied despite the production cuts beginning of this month (May). In my discussions with the Energy Ministers of top producing countries and in the G20 Extraordinary Energy Ministers’ meeting in April, I have stressed the need for addressing the crude oil price volatility while allowing consuming countries such as India to source crude at affordable prices. I think, in the coming months, we are going to see more efforts to balance the supply-demand factors as a majority of countries are trying to resume economic activities with gradual lifting of lockdowns. I am confident that the revival of our domestic demand will surely help improve the global supply-demand equilibrium, thus bringing greater energy market stability.