Billionaire Anil Agarwal has cautioned that global commodity prices may see more upside and it is high time that India prioritizes energy security.
Agarwal, chairman of energy and metals conglomerate Vedanta Group, recommends that the government corporatize state-run companies and encourage private sector participation to boost domestic production of oil, gas and coal.
“I see more upside (in global commodity prices). But for India, it is high time and this is an alarming situation. Our energy security has to become a priority,” Agarwal said in an interview to Moneycontrol.
Global commodity prices have been soaring as global demand picks up amid supply constraints for some commodities. Geopolitical tension, particularly relating to Russia’s attack on Ukraine, has added fuel to the fire.
India is facing a severe coal shortage that has tripped some power generation units and forced states to cut power supply. For oil and gas too the country is highly dependent on imports making it vulnerable to global commodity price and supply risks.
Over 80 percent of India's crude oil and petroleum demand is met through imports. Benchmark Brent prices hit 14-year peak of $139 per barrel in March, and have since then come off high and moved in the range of $105 and $115 a barrel but experts expect the upward pressure to continue.
India has struggled to ram up production; its crude oil production fell 2.67% in the fiscal year ending March 31 as state-run ONGC Ltd missed its production target, according to the data released by the petroleum ministry.
“The government should give blocks to private players for 50 years or till the mine life. Going to the government for renewal every five or ten years will not attract foreigners. We need to stop calling these companies contractors, and see them as owners as they go to deserts and put their money and effort,” Agarwal said.
He reiterated the industry’s long standing demand for cess on domestic production to be reduced, if not removed.
“We have the highest levies in India which needs to be reduced. Our prime minister has also said that we are not revenue minded, we are production minded,” he argued.
Crude oil and natural gas produced from the field are subject to a 20 percent ad valorem oil industry development cess. Typically, the applicable cess rate differs depending on whether the contract is based on revenue sharing or production sharing.
Vedanta Group’s Indian listed company Vedanta Ltd’s energy arm is India’s largest private sector oil and gas producer, accounting for 26 percent of India’s crude oil production.
“If we really want oil and gas energy security in this country, we need at least 20-30 companies to come in. I have always said Barmer can be another Houston, there is so much potential. India has enough resources available. It only needs simple policies, which our Prime Minister also wants. Let people make money; making money should not be a sin,” he said.
Commenting on the coal crisis in India, Agarwal says, “By the time we come out with the alternative fuel, it may take 10 years. So let’s open up coal. Every country is producing coal but they are pushing only India not to open up. Can you believe that India has only one coal company? Exploration is lowest in the world in India.”
He recommends opening up more mines to the private sector.
“We have the largest coal deposit, we should be allowed as quickly as possible to have a large number of mines to be opened. Not just small mines, but large mines which Coal India is not developing.”
“We should have hundreds and thousands of people doing explorations, they will find enough funding. If they discover oil, gas or coal, they should be allowed to sell their rights. The government does not allow it right now,” he said.
He also suggests that the government taps into the thriving start-up ecosystem by allowing new players and simplifying entry into the mining sector to boat exploration.
“I want startup people to own one drilling machine and with technology work on exploration. Don’t give licenses only to big people. But allow the start-ups to trade it, because he may not find the money to develop it into a big mine. They can explore, discover, trade the block and start on new projects. India ki tijori ke andar paisa pada hai,usko kholo na. (India has resources, it needs to be opened up.),” Agarwal said.
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