Need for pro-active ‘energy diplomacy'

Apart from giving more autonomy to the public sector oil companies and creating a Sovereign Energy Fund, India needs to strategically engage energy-rich countries in ‘energy diplomacy' for ensuring continuous availability of commercial energy at competitive prices to support massive economic growth.

Though India has achieved some success on this front, however, it urgently requires a value-added strategic and competitive road map towards acquisition of overseas energy assets, according to a Confederation of Indian Industry (CII) study on “Energy assets acquisition: a comparative analysis of India and China policy,” released here.

In an interesting comparison of the rising profile of China and India's lagging behind, the CII report states that Chinese companies spent a record $32 billion in 2009-10 for acquiring energy assets overseas versus India's single $2.1 billion investment by ONGC Videsh Limited (OVL) in the same period.

While India produced 8.8 million tonnes of oil and gas from its overseas assets in comparison to China's production of 800 million barrels of oil and gas from its overseas assets.

India is also facing an uneven contest to close the gap with China, which is dipping into $2.5 trillion of foreign currency reserves to buy stakes in oil and natural gas fields compared with India's $250 billion.

The CII report feels that the Central Government, in order to enhance the success rate of Indian companies for overseas energy acquisition, should grant greater autonomy to Indian public sector undertakings (PSUs) along with creation of a core team and a well defined strategy for timely decision and fund allocation to acquire energy assets overseas; creation of sovereign energy fund for financial support to Indian companies; domestic joint venture for overseas investments to create financial leverages required to successfully bid for overseas investments; promotion of private companies to enhance energy acquisition to expand India's competitiveness in international arena; capacity building in resource rich countries by creation of a sound oil and gas infrastructure and energy diplomacy through deepening political exchanges as well as economic and commercial linkages with energy surplus countries.