I’ve spent the past week in India, visiting with many of India’s refiners and presenting at the Refining & Petrochemicals session of the 7th Oil & Gas World Expo in Mumbai. This was my third trip to India in as many years, and each time the signs become clearer that India is about to take off.
Low oil prices have been a boon for the Indian economy, providing a $100 billion annual savings in imported oil costs – money that instead recirculates within the domestic economy. The government is driving ahead with market-oriented reforms, reducing or eliminating subsidies and funding major infrastructure investments. Sales of new cars are at record levels, having grown 12 percent in 2015-16 and expected to grow the same again in 2016-17. There is a buzz of progress in the air.
When I travel around India, I look for signs of growth and progress: new business openings, slum redevelopments, cranes on the increasingly crowded skyline, traffic jams– not all of the signs are positive!
A new scheme to reform LPG subsidies caught my attention. Rather than selling LPG at below-market prices, everyone pays the market price and receives a one-off monthly rebate from the state through Direct Benefit Transfer (DBT), triggered by their purchase of LPG. But once they’ve had their subsidy, that’s all they get. The new system circumvents abuses.
What’s impressive about this is the scale of the effort needed to make it work. Over 180 million households have been registered and fiscalized, with some kind of banking facility to make this possible. Also impressive is the “Give It Up” scheme to encourage wealthier Indians to forgo the subsidy, which has already collected nearly 8 million pledges.
The Modi government’s latest budget is directing major investment into the agricultural sector. It is seeking sensible taxes on fuels and new car purchases to fund infrastructure growth and environmental improvement. India’s economy is expected to grow by 7.6 percent in 2016, having grown by 7.3 percent in 2015. In the aftermath of the budget, the SENSEX stock market index is up over 7 percent since the beginning of March.
We’ve taken a closer look at India’s oil & gas sector and some of the challenges facing the industry as the country powers ahead. Download our whitepaper: India – Making the Most of Low Oil Prices, and let us know what you think.