India aims to do more in 2014 to battle the bottlenecks in energy supplies which are contributing to the country’s painful economic slowdown.
New Delhi plans to auctions oil, gas and coal blocks, free diesel prices from government controls and promote alternative energy in hopes of invigorating the energy sector in 2014.
The energy-starved nation wants to cut down its dependence on energy imports by half in the next six years by attracting new investments in the sector. India now imports around three-fourths of its energy needs.
“We can’t really afford the imported energy,” said Oil minister M. Veerappa Moily. “So we have to attract more investments in the oil and gas sector and for that the policies have to be investor friendly.”
India plans to sell rights for about 86 oil and gas blocks in auctions expected in January. If all the blocks go under the hammer as expected, it would be the biggest ever bidding round.
It remains to be seen whether big international firms will step forward to bid for the blocks. Many private companies have avoided recent auctions, citing heavy regulations and a lack of clarity on pricing.
The south Asian nation is also planning to free up some fuel prices. Mr. Moily said he expects diesel prices to be completely free of government controls in 2014.
Currently diesel prices are regulated by the government while regular gasoline prices were freed to move with the market in 2010.
“We believe that market forces need to be allowed to have proper inter-play,” said R.S. Butola, chairman of state-run Indian Oil Corp., India’s largest fuel retailer
The coal industry could also get a boost in 2014. India’s government has been unable to approve big coal projects as it has been grappling with the investigation of a multi-billion-dollar scandal in which lucrative coal-mining licenses were allegedly handed out at throw-away prices.
India plans to start issuing new mining rights through auction next year. The scandal forced the Prime Minister Manmohan Singh’s government to clear the way for the auctions, which are expected in March.
Even though India is home to world’s fourth largest coal reserves, it is facing a severe shortage of the fuel, which powers most of its power plants.
India is also expected to push for growth in solar, nuclear and other alternative energy sources in 2014.
It is expected to award contracts for building new solar projects in the coming months. It is also expecting to seal reactor supply deals with companies from Russia and France to boost its nuclear energy program.
To be sure, pessimists warn that the government has repeatedly failed to deliver on past promises for this highly-regulated, highly-political sector. With India headed towards national elections, scheduled to happen before the end of May, it will be particularly difficult to push through unpopular reforms.
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