Low crude oil prices helped India save Rs 25,000 crore: Dharmendra Pradhan

‘Government will reinvest that money for the welfare of the people’

If I compare between May 2019 and May 2020, around 65% of the demand has resumed, says Petroleum & Steel Minister.

A lot of us woke up fearing if we were going to see a third warfront. You have seen one with Covid-19, second one with the economy and today we are hearing about escalated military confrontations likely with China. How real or unreal are these fears?
We all should be safe in the hands of honourable Prime Minister. With his decisive and strong leadership, India is safe and we need not to panic or worry about it. Let us come together to manage the Covid-19 situation in the country and see how we can recoup or revive our economy. That is the primary job in front of all of us. Let us work in that direction as a team.

What must have also given a lot of elbow room to this economic stimulus package would have been the low crude oil prices. Has India managed to take advantage of the lower crude oil prices and how will it continue to do that?
India is a consuming country. We are the number three energy consumer of the world but our per capita energy consumption is one-third of the global average. Let me put the facts out. Due to glut and due to oversupply by some of the OPEC and non-OPEC players like America in the pre-Covid situation, they were producing more in comparison to the global demand. On the other hand, due to Covid-19, there was a serious disappearance of global demand. India in the month of April lost 70% of the demand in comparison to 2019 April.

Prices crashed gradually but it has already started reviving. But with this low oil price, India took two decisions. One, we do not want to create any panic among the consumers. We put the price at a fixed point because with this low oil demand, what is the meaning of price management? It means we have to put the price at a stable point. We save some money and we want to reinvest that money. Knowing the difficult situation ahead, the Government of India saved that money and will reinvest that money for the welfare of the people and in the developmental activities that will be taken over by the central government and respective state government.

On the other hand, India has a strategic storage facility of 5.33 million metric tonne. We could fill up all the cabins by this time with this slow oil price of April. India purchase around 9 million metric tonne of crude and we put that crude at high sea through some floating vessels and with inland product and crude oil in and around refinery and different terminals, we could store 25 million metric tonne putting together around 38-40 million metric tonne of oil or product we could save capturing the low oil price of April. That saved us around Rs 25,000 crore for the treasury. These are some strategies we could take. The demand is gradually picking up and I am hopeful with this slow oil price and low foreign exchange spending, India’s economy at this juncture needs some savings and some states sponsor spending for the development and welfare of the people.

Rs 25,000 crore is massive. Our strategic reserves are full but going forward, how will we continue to make sure that we have a windfall gain? Our strategic reserves are full and demand is also coming back. Are we now going to sign fixed contracts or renegotiate existing contracts?

No, we have to live with the global scenario. This economic slowdown is not only in one part of the globe. It is in all parts of the globe. So there was low demand in the month of March and in the month of April. And in the month of June also, it won’t be business as usual. This is one story. Another story is the producing countries had gone for a production cut but with that cut, there is a substantial amount of production and there is overproduction.

Due to overproduction during the first quarter of this calendar year, all the storage facilities of the globe are now nearly full. Sizable amount of floating ships are now converted to floating storage facilities and all the pipelines and inland storage facilities are full. Certain refineries are already shut down. Looking into this scenario, when our consumption will grow, I can visualise our consumption starts growing in May. If I compare between May 2019 and May 2020, around 65% of the demand has resumed. This has come back. I think this kind of demand with moderate prices will help the economy.

You managed to make sure there would be very bold reforms which many of us thought would never happen; whether it was the gas price formula or the proposed privatisation of BPCL. But now of course, there is a problem where companies may be hesitant to invest in the oil and gas sector. How will you find the balance?
I do not see this kind of situation in the energy industry because energy is an essential commodity and an inevitable thing in our livelihood. We have to see how we are preparing ourselves for the energy basket of the country. You put two to three questions in one basket. Let me answer one by one. You asked, how do we become atmanirbhar in energy. Yes, this is a mission we all have had for a long time. India is a leading country for energy diversification in its basket. We do not want to depend on one area of energy and want to take advantage of our abundance of coal. We want to take advantage of low LNG prices, our diplomatic relations and want to have more assured crude oil looking into our demand. We want to convert in a big way towards renewable energy, India is a country which has an ambition of 400 gigawatt of renewable energy power. We are very much focussed on solar energy, wind, biofuels and biogas.

With this recent reform, the finance minister mentioned that India is going to give priority to coal gasification. We do not want to use our coal only for thermal power generation. We want to add value to our coal for gasification. More clean energy will come out of coal gasification when it will be in the gasified form and there will be multiple uses of the coal energy. India is totally prepared to put this roadmap for a diversified energy basket and we are investing capital. There is spending there by the government of India and by the respective state governments and through our policy we are encouraging private entrepreneurs to participate in our oil and gas and energy industry and nobody in the global energy trade or energy business is not interested in India. Everybody is eyeing India's market because for the next two to three decades, pre-Covid situation, India is the hotspot of energy business. That is very loud and clear. Entrepreneurs and investors are interested to be a part of India’s journey.

Another part of your question was what to do about BPCL? In principle, you might have seen that the finance minister also mentioned there will be a new roadmap for the PSUs of the country. So there will be more techno-savvy players, more investment and more capital. It will not be monopolised by any government agency only. The government of India is of this opinion that the government has no business being in business. With that philosophy, we have decided to divest BPCL in principle. But it is a matter of business strategy. The DIPAM ministry will look into the details of that. Till now June is the deadline. Looking into market conditions, looking into the situation of the market, DIPAM will take an appropriate decision. But in principle, the decision of the government coming out of business will be taken. That is clear and very categorical.