'India must cut Rs 9,000 cr on oil consumption'

New Delhi, May 8: India should set a target of cutting its oil consumption by 7 per cent which is around Rs 9,000 crore of savings, to reduce its excessive dependence on huge imports of oil, Confederation of Indian Industry (CII) President R Seshasayee said today.

''India is deeply and excessively dependent on the imports of oil with more than 70 per cent of our total consumption being imported, and it has to, over time, look at reducing this dependency, which can be done by large scale accelerated conservation measures being adopted by all sections of society including industry,'' he said.

Currently, India imports about 95 million tons of oil per year,'' he added.

However, he said, that historically, there has never been a direct pass-through of international prices into the Indian retail market, and we have been insulated from the international price movements to a large extent, and for good reasons.

Given the current prices in the international market, this insulation may no longer be possible because the burden of insulation for the government is becoming unsustainable, and the eventually, a play of market dynamics would be the best trigger for prompting conservation, he said.

The present situation of oil prices creeping to 74 dollars per barrel makes a revision in oil prices in India, inevitable.

He said, clearly, further delay in oil price revision was inadvisable, as it would only make the impact worse.

However, the Chamber has suggested that any such revision has to be in a manner in which no sector gets into any undue disadvantage, and that the industry and the economy has time to absorb and adapt to the effects of such a price revision.

CII which represents the interest of the oil producers/marketing companies as well as the users and therefore, advocates pro-active conservation measures so that the country can look at a tangible target of reducing oil consumption.

The Chamber has also suggested that the duties and levies on petroleum products need to be carefully looked at, such that the impact of the potential price revision is shared between the government, the oil marketing companies and the consumers.

''From that point of view, the forthcoming decision should be a mix of fiscal and price measures, such that the ultimate impact on retail price is moderate,'' the Chamber said.

With the daily loss by the oil marketing companies touching almost Rs 90 crore per day, CII commended the government for the restraint that has been shown in taking a considered decision in this matter, but also mentioned that we must look at ways and means to now deal with the inevitable price revision.

The Chamber has come up with calibrated suggestions spanning the short, medium and long term time period.

For the short term, the Chamber recommends correcting distorted Petroleum Product Pricing in line with the recommendations of the Rangarajan Committee, better traffic management, phased removal of subsidies on LPG to Metros, upgradation and revamping of refining operations, and organisation of people awareness programmes on petroleum conservation, among others.

For the medium term, it is technology upgradation at the future refinery augmentation, intensification of domestic exploration and Production efforts, Use of bio-fuels like ethanol doping of petrol and bio diesel, usage of cost efficient transportation, acceleration of the rural electrification programme.

Long-term suggestions include strategic storage initiatives, greater thrust for the coal sector, Comprehensive Combined Heat&Power (CHP) Policy, further development of our railway network and systems, particularly in the freight corridors, continuing R&D and commercialisation strategy for pursuing technologies like coal-to-liquid, gas-to-liquid, underground coal gasification and hydrogen, etc.

The Chamber, however, recognised that these suggestions were only illustrative.

Looking ahead, the Chamber mentioned that the suggestion of the Petroleum Ministry to set up a regulatory mechanism for this sector needs to be implemented immediately.

This would enable monitoring and also review fuel prices, at regular intervals, in order to bring the Indian market in sync with the international market for petroleum.

This would pave the way for India to, in a measured and phased manner, move closer to the realities of the international oil market, and eventually enable bringing this sector under VAT.

UNI