India’s gas output and refining capacity is poised to jump in the decade ahead, oil minister Dharmendra Pradhan said.
In an interview to ET, Pradhan said Indian refineries would easily switch from transportation fuels to petrochemicals if needed. The minister also spoke about the proposed merger of state firms and how India was driving a hard bargain with oil cartel OPEC to extract better deals. Edited excerpts:
It’s been three years as minister. How has it been?
The vote in 2014 was of hope and aspiration. People had voted against the previous system of governance. They expected Prime Minister Narendra Modi to give an outcome-oriented, performance-oriented, transparent, accountable and corruption-free government. It has been a privilege for me to be part of such a government. In three years, we are satisfied that we have been able to make many humble efforts. We still need to do many things in the rest of the term.
When you took over as minister, did you come across anything that was perplexing or shocking that needed to be reformed?
See, this was my first experience in administration. I had worked in the predominantly rural economies of Orissa and Bihar and had political understanding of such states. But only after I became a minister that I understood the wider scope of the oil sector and its linkage with the country’s economy, diplomacy and the essential role it plays in the daily lives of common people. Therefore, I had come with no baggage. That I should reform the sector was also not much on my head. We kept taking reform measures, and we continue to do so now. As a social worker, I had fundamental understanding of a few things. One that energy access and poverty alleviation are linked, that energy security can help a person shake off poverty.
So it was learning the ropes?
I had no link with this sector before. I had never studied economics or international relations. I was a student of sociology. I am fundamentally a political organiser. So, for me everything was new. I had to read basic economics and international relations. For a country that imports 80% of its crude requirement, it is important for the minister to understand international relations. So, I have been studying these things as a student because I had the target to pass the exam with distinction. It’s been a very thrilling experience for the last three years.
You are being very modest, calling yourself a student. In Vienna, you spoke like a professor to OPEC members.
In Vienna, OPEC strongly praised India’s two key economic reforms: demonetisation and goods and services tax. They also praised the Prime Minister’s decisive leadership. They will have to listen to India now. OPEC will have to give us a better deal now.
How OPEC views this?
This is going to be a hard bargaining. OPEC decided to extend supply cut by nine months but prices fell. OPEC alone can’t control prices. They make up just 40% of the global production. Producer, financial markets as well as the consumer have a role in determining prices. Therefore, this time round I told them that if consumers need to worry about supply security, producers also needs to think about their market security.
Do you think technology would change the energy sector beyond recognition in the next 15 years?
This is what people have begun to say. There is no doubt that innovation and technology are going to be biggest disrupter in the energy business. This will provide India with an opportunity to leapfrog. Our Prime Minister often says that in the last industrial revolution, Indians worked for others, but in this round of global industrial and scientific revolution, we will work for the benefit of our country. This time, PM says, we can’t miss the bus. Energy will be the ground for experiment. We have just seen power tariff of 4 cents a unit. And this will not stop here.
How will this disruption affect our refineries?
Today, transportation fuels are the primary output of our refineries, but there will come a time when the primary produce of our refineries will be petrochemicals. Our per capita petrochemicals consumption is 10 kg while the world average in 30 kg. And we will continue to need clothes, furniture, plastic and industrial goods, which require petrochemicals as input. So, there is huge scope for petrochemicals. Today we have a refining capacity of about 230 million tonnes per annum. We will add about 150 million tonnes capacity in the next 7-8 years, including 50-60 million tonnes of brownfield expansion. After 15 years, the primary produce of these refineries may be petrochemicals. We are trying to synchronise scientific innovation, business model and market requirement to make sure India develops into an industrial hub.
How would this pan out into the upstream sector?
In the next 10 years, $20-30 billion will be spent in KG Basin alone. Should we not leverage this to turn our east coast into a petroleum manufacturing hub? Should we not turn our east coast into another Houston or Aberdeen?
Before the NDA government came to power in 2014, even a rickshaw-puller had a view on the natural gas price. A 50 paise increase in diesel prices would lead to public protests. But controversies have now ceased. How did you achieve this?
We did nothing new. A government can find a solution by making transparent decision while keeping public interest in mind, which is what we did. Government should provide a policy framework and not indulge in pickand-choose with respect to businesses — this is what we did.
When will the proposed investments in the KG Basin start reflecting in gas output?
Gas production increased in April. This is a trend and the production will continue to rise. Today we produce about 80-90 million metric standard cubic meters per day (mmscmd). By 2020-21, it will rise to 120 mmscmd. This incremental production will come both from private and public sector.
What do you plan to accomplish in the rest of your term?
We have to raise the country’s oil output. By leveraging our market strength, we aim to reduce the country’s import bill. We have begun an effort with OPEC. We can take oil from anywhere in the world; we need oil at good terms. And we mean that.
How are we progressing on the proposed mega refinery on the west coast?
We are discussing with the Maharashtra government all possible concessions the state can offer to the project. We are also talking to Saudi Aramco for their possible investment in the project. Aramco is interested in investing in the Indian market, in refining as well as marketing. They are welcome. Right now, we are just talking. How much they would invest in the west coast refinery and how much investment we would want from them is something that will be decided later.
Has there been some progress on the proposed merger of oil PSUs?
There will be a realignment of companies. The issue is not who will acquire whom, but what will help increase the country’s power. There will be financial realignment. We are going to bring a model, which will be more significant than a merger. This is in a very advanced stage, and will be unveiled in a few months.
In order to encourage the supply of environment-friendly electric vehicles, the government has been working on a plan to stop the sale of all cars run on petrol and diesel by 2030…
That’s an observation by (Stanford economist) Tony Seba. The government hasn’t taken a final decision on this.
Will adding refinery capacity lead to claims of rising pollution in the country?
Don’t worry about that. Our refineries follow very high environmental standards. I felt proud about our public and private refineries when the Saudi oil minister recently told me that one of their refineries in Korea was able to match the high standards of Indian refineries. It was a compliment.
Some market analysts have been critical of the way the government directed oil PSUs to pay dividend this time?
Our companies are independent. They have their investment plans, which they are able to fund. Ultimately, these are government-owned firms, and the government also has welfare commitments. State companies have different priorities than those of MNCs. And, what’s the harm if state firms are able to contribute more to the exchequer helping undertake more public welfare activities. Stephon Gilmore Womens Jersey