Oil Sector Needs New Ideas

The electoral results on 6th March saw a knee-jerk dip in the sensex as the business mood dampened. Though this was mentioned in passing amidst convoluted post mortems of election results by the media, it was a poetic comment on the national mood and an indicator of times to come. The subsidy factor is the bane of the oil and gas sector in India and this is an open secret. However, it obviously still does not buy votes. The silver lining in this election for the ruling combine must be that they can now go in for aggressive reforms as soft pedaling has not helped it in the hustings anyway. Poll victors Akhilesh Singh and Prakash Singh Badal, both at opposite ends of the age spectrum, have one commonality in that they are grass root leaders in touch with masses and working amongst them without media spotlights. Contrast this with the Gandhi family cocooned by ‘yes’ men and sycophants and one can see the reason for the shrinking house of the Congress. The goodness and judicious thinking by the Gandhi’s has been unfortunately, eclipsed by the kind of people they are surrounded by. Imagine, a senior leader telling that he is responsible for the Congress electoral defeat.

The UPA government has been riddled with a misplaced arrogance which has made the Congress party score a series of self goals. The handling of the Anna agitation and the crackdown on Baba Ramdev were some indicators of this malaise and the introduction of an anti terror umbrella without consulting the states is another. The overambitious projection of Rahul as UP’s savior , the crackdown on E&P companies like RIL and the silent witch hunting of corporate houses that apparently favour opposition political parties has contributed to the descent of UPA II in no small measure. Policy paralysis threatens to go into policy rigor mortis after these election results unless the PM and the UPA dispensation as a whole, wake up and smell the coffee.

RIL has been penalized for discovering gas in KG basin with the government and the auditing bodies breathing down its neck. ONGC remained headless for a long period and now and after that has been rectified, it is saddled with subsidy dues to bail out the government. Fuel retailers are asking for more price hikes as world crude goes through the roof.

Speaking for the oil and gas sector, I would like to offer some unsolicited advice for all it is worth. Firstly, I would advocate a freer hand to E&P companies to encourage new discoveries like the tax holiday idea which was a good one. I would suggest aggressive marketing of India’s acreage and offering better terms to foreign players with lesser red tape. I would also suggest greater emphasis on technology inflows and encouragement for R&D in areas of conventional energy, power and alternate energy segments.