Predictions and projections may not turn out to be accurate. While promises of politicians mostly are found to falter, this may not be the same in the case of professional economists who predict something based on scientific calculations. In this connection, the West Asian crisis has complicated the situation in most countries of the Third World, including India, which is heavily dependent on oil and gas imports.
It is a well-known fact that the world remains dependent on reliable oil and gas supplies, even though two-thirds of global spending in the energy sector now goes to cleaner alternatives. While oil now meets a smaller share of global energy needs than it used to – less than 30 per cent, according to the International Energy Agency – the world uses almost twice as much of the fuel as it did in the early 1970s. Natural gas used to heat homes and generate electricity underpins much more of the economy than it used to. According to experts, the post-oil world is still a future proposition.
Meanwhile, a sustained rise in crude oil prices could widen India’s current account deficit, push up inflation and affect growth, pointed out most economists. However, Finance Minister Nirmala Sitharaman informed the Lok Sabha that the government does not expect inflation to rise substantially due to the recent spike in global crude prices. Crude hovers below $100 per barrel presently from just below $70 per barrel at the end February. However, analysts believe that the price may eventually stabilise at around $85 per barrel compared to last year’s average of $69 per barrel, though Fitch projected a few days back that the global crude oil would average $70 per barrel in 2026.
According to SBI Research and many other studies, if oil prices reach the $120 mark, which at present appears quite unlikely, GDP growth may fall to around 6%.
India may face serious disruptions in the supply of fertilisers and raw materials in the next Kharif season, starting in June, if the blockade of the Strait of Hormuz continues. Any reduction in the supply of LNG to urea manufacturers in the coming weeks could impact production of the key soil nutrient ahead of the Kharif season. As is well known, Kharif crops account for more than half of India’s foodgrain production as major crops such as rice, pulses, oilseeds, cotton and sugarcane are sown during the season. If LNG supplies are not normalised, production could be affected, industry experts pointed out, highlighting that production of fertilisers usually begins at the end of March. At present, 60% of LNG used in urea manufacture is imported from Qatar. The blockade of shipping routes in the Gulf would obviously push up prices of DAP and urea and impact the government’s food subsidy expenses. Regarding LPG, India imports 60% from West Asia, and the longer the conflict lasts, households as well as commercial users are expected to suffer, though indications point to an early settlement.
Right now, it is important for the country to tap other sources like Australia and Canada. In the long-term, there is a need to scale up biogas production in India. Simultaneously, India has enough compostable biomass to meet at least 75 to 80% of its gas needs. And compost can easily replace fertilisers, whereby valuable foreign exchange would be saved.
An interesting plan that would be of great help in the availability of gas is through coal gasification, which converts coal to synthetic gas, consisting of carbon monoxide and hydrogen. Through this process, it would be possible to harness the vast coal reserves efficiently and sustainably.
It would be prudent to evolve a long-term plan that needs to be evolved immediately, especially in the gas sector, and how much dependence can be eased not just on West Asia but also by reducing imports as a whole.
