During April and until May 4, when the Assembly election votes were counted, care was taken to refrain from letting the aam aadmi know what the government knew only too well—that doomsday was looming. And to keep the illusion going, the public sector oil marketing companies (OMCs) were ordered to bear losses “in the national interest” by purveying petroleum products—such as cooking gas for domestic kitchens, petrol and diesel for the transport of people and goods, and chemical fertilizer for farmers—at virtually pre-Iran war prices.

No matter that, for our 90 per cent oil-dependent economy, the virtual doubling of international crude prices and the plunge of the exchange rate of the rupee towards 100 to the US dollar has meant that during just two months of the election campaign, the OMCs’ losses amounted to over Rs.1,000 crore a day. Cumulatively, the OMCs’ first-quarter losses have been of the order of Rs.90,000 crore, wiping out their entire profits of the previous year.

The magnitude of this loss has not only all but bankrupted the OMCs, it is threatening to deprive Central and State government budgets of annual revenues of around Rs. 7 lakh crore. To the establishment, this has been a minor price to pay for “poriborton” (change in Bengali).

Rising prices

However much the government thought the oncoming economic tsunami could be hidden from public concern, it is now clear that the wholesale price index has leaped from a modest 3 per cent last year to well over 8 per cent in the immediate past and touching 9 per cent, that is, almost triple last year’s level. Such wholesale price acceleration will inch its way inexorably into retail consumer prices. And it is the poorest who are the most vulnerable, for they have the least to fall back on.

We are seeing migrant labour increasingly unable to eat at dhabas and tiny eateries because even these centres of survival are closing shop in the face of liquefied petroleum gas (LPG) cylinder shortages and the high prices of commercial LPG. God forbid we see a COVID-like exodus of labourers to their home villages and the woes that will ensue from such forced exit from gainful employment.

Every parameter of economic performance is sending danger signals. The MSME sector is in doldrums. Private investment has dried up. Foreign institutional investment is fleeing India. Foreign direct investment is at net zero. The monomaniacal concentration of investible global funds on AI has rendered India, which is on the lower rungs of the AI ladder, among the least attractive of foreign capital destinations.

Ruchir Sharma, an international financial genius, holds the Indian stock market to be so overpriced as to arguably be the “most expensive” stock market in the world, waiting for the bubble to burst. No wonder the cumulative impact on our foreign exchange reserves has been a reduction of the order of $25 billion—and counting.

Private investment is just not picking up the slack. The government’s empty boast of having greatly improved the “ease of doing business” finds little reflection in fresh investment. No wonder then that unemployment rates have soared towards 5 per cent. Former Finance Minister P. Chidambaram has described the economy as “scalded” and “scarred”. The government, on the other hand, says, in the dulcet words of the Petroleum Secretary, that ours is an “oasis of comfort” on fuel supplies.

Brave words, but can they hide our grim prospects? If we had built our strategic reserves beyond a mere nine days, we might have breathed easier. But since the crisis came on the very eve of State elections, our public sector refineries were compelled to ramp up production to over 100 per cent of capacity, potentially damaging their equipment and altering patterns of production of different petroleum products, just so the government could prioritise electoral politics. But by doing so, we are, in effect, killing the goose that is laying the golden egg.

We cannot escape from this trap without designing an energy security strategy. That, and not pandering to short-term electoral gains, should be the principal priority of the petroleum policy. Instead, the current politically-driven priorities are only bringing to a head the basic crisis caused by the neglect of energy security over the past two decades.

Energy security strategy

At least 20 years ago, the Ministry spelt out a serious energy security strategy. The starting point is ramping up domestic production. The output from our main source of domestic crude for half a century, Bombay (Mumbai) High, has plummeted from its peak of 47,000 barrels per day (bpd) to around 13,500 bpd at present.

It requires serious international research and development (R&D) networking to find innovative ways, in partnership with key foreign players, in which AI would play a key role, to drill deep into the volcanic rock-and-lava-laden Deccan Trap, below which lurk fossil fuels to rival the Empty Quarter of Saudi Arabia. However, as the Deccan Trap has no known parallel in the world, except Colorado in the US, albeit on a much smaller scale, we need strong R&D partnerships to find our own treasure. We also need to work on exploration projects with Nepal to discover fossil riches trapped in the Terai region, whose geological integrity has been fractured by national boundaries.

Advanced offshore R&D would be indispensable also to find more Mumbai Highs in India’s Exclusive Economic Zone in the Arabian Sea. These remain hidden from human eyes because they require drilling beyond even the depths known to Exxon in the Gulf of Mexico.

Also waiting to be exploited is underground coal gasification, a process the Soviet Union devised more than a century ago and passed on to us some decades ago, besides gas hydrates in the Andaman Sea and viable biofuels. Also waiting to be explored sincerely (and not just to boost stock market offerings) are several basins in the Bay of Bengal, such as the Krishna-Godavari and Mahanadi, and off the Sundarbans.

We thought in the late 1990s that the New Exploration Licensing Policy (NELP), and later the Open Licensing and Acreage Policy (OLAP), would bring us partners of exceptional experience and ability. But after drumming up, through intense roadshows and lobbying, a record 55 bids in the NELP 2005 auction, international interest has all but vanished, with 227 of the 254 exploration blocks awarded having been returned.

Moreover, ONGC Videsh Ltd has virtually stopped securing overseas exploration blocks. Envisaged pipelines from our near and proximate neighbourhood, such as Iran, Myanmar, and Turkmenistan, have been neglected. I cannot think of anything more likely to ensure our energy security than engagement with our South Asian and Central Asian neighbours, especially those clustered around the Caspian Sea.

Unfortunately, I would say tragically, none of this has captured the imagination of successive Petroleum Ministers in the past 20 years. So, it is no surprise to find that no greenfield projects and no new public sector refineries have come up in the Modi regime. The current Minister has only to riffle through the old files in his office to find a smart way out of this quagmire of his own making.

Mani Shankar Aiyar served 26 years in the Indian Foreign Service, is a four-time MP with over two decades in Parliament, and was Minister of Petroleum and Natural Gas from 2004 to 2006.

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