As India is expected to become world's third largest energy consumer by 2020, getting pricing right for oil and gas is the key to attaining energy security, Oil Secretary Vivek Rae said today.
"In a country like India which imports 75-80% of crude oil and which is importing more gas and more coal despite having its own reserves, you have no option but to link with international prices.
"If you run a regime where the domestic prices are artificially suppressed and get lower than international prices, it's a huge penalty on domestic production and huge burden on fiscal deficit," he said speaking at TERI's Delhi Sustainable Development Summit (DSDS) here.
Rae said businesses cannot lead if environment doesn't facilitate them. "Question is how do you help businesses to lead, how do you make enabling environment where the businesses are able to take up on the signals that emanates from government policy and are able to take investment decisions which enhances the energy security of the country."
India, he said, cannot buy oil at USD 110 from international markets and sell it at USD 50 to consumers and hope to survive. "Sooner or later you will go bankrupt."
Domestically produced natural is currently priced at USD 4.2 per million British thermal unit while the country pays USD 16 for importing the same from abroad.
"So if you are importing this gas, you are paying USD 16, but if you are producing here you get USD 4. So for an Indian entrepreneur (it is prudent) to invest in Africa or Australia or Latin America, and bring that gas in India at USD 16," he said. "It (domestic price) is a huge penalty to invest domestically."
Government, he said, has now taken a decision to link domestic prices with a basket of international prices from April.
From April, all domestically produced natural gas will be priced at an average of international hub price and cost of importing LNG into India. Rates according to this formula are likely to jump to USD 8 from current USD 4.2 per mmBtu.
Indian producer must get on an average what the producer abroad is getting, Rae said, adding that domestic exploration and production should be incentivised.
