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India resorts to oil diplomacy

India is beginning to institutionalise oil diplomacy. In order to counter the towering presence of China National Petroleum Corporation and Japan National Petroleum Corporation, it has decided to use the expertise of the ministry of external affairs.

Beaten at the post in Sudan and Angola by CNPC and Chinese diplomatic skills, petroleum minister Mani Shankar Aiyar is resorting to this stratagem. Both times ONGC Videsh, which has invested $3.5 billion in acquiring a global oil equity footprint, lost out.

In a bid to cut dependence on imported oil, Aiyar has mooted the role of former diplomats to secure stakes in oil and gas fields abroad. He has asked the Ministry of External Affairs to depute an Indian Foreign Service officer in the rank of additional secretary to help the oil ministry and public sector oil firms to acquire oil and gas projects abroad. Aiyar has also appointed a Standing Committee on Oil Diplomacy For Energy Security with former diplomats Arjun Sengupta and M Hamid Ansari as chairman and convener respectively.

Meanwhile, the government is committed to protecting consumer interests even though public sector oil firms will lose Rs 20,000 crore this fiscal due to non-revision in auto and domestic fuel prices, impacting their investment capabilities, Aiyar said.

“This is a fact that non-revision in (petrol, diesel, LPG and kerosene) prices in the first six months have led to Rs 10,000 crore of under-recoveries. Nothing has changed now and if prices are not increased, the oil companies may suffer another Rs 10,000 crore (in revenue loss),” Aiyar said.

Petrol is currently being sold at Rs 2.20 per litre below the imported cost while diesel is priced Rs 4.15 a litre less than imported cost. LPG is underpriced by Rs 158 per cylinder and kerosene, whose prices have not changed in past 30 months, is being sold at Rs 11 per litre less than the import cost.

The minister said cutting import and excise duties on crude oil and petroleum products was the only way to cushion domestic consumers against the spike in crude oil prices and cut revenue loss of oil companies. The petroleum ministry had favoured halving import duty on crude to 5 per cent slashing customs duty on petrol and diesel from 15 to 10 per cent besides exempting kerosene and LPG from excise levy.

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