Energy landscape to get lucrative, promises BJP’s Taneja

By Sukalp Sharma and Dhirendra Tripathi

NEW DELHI: A couple of months before Narendra Modi took charge of the corner office at South Block, his namesake Narendra Taneja embarked upon the task of chalking out and crystallizing the Bharatiya Janata Party’s roadmap and vision for the languishing and stunted energy sector.

As the first single-party majority dispensation in three decades begins its second year in office, Taneja, the national convener of BJP’s energy cell, projects a demeanour that is satisfied, proud and hopeful. Right at the onset of our interaction, he declares emphatically, “We are changing the energy landscape of the country…India is now on a definite path to achieve energy security.”

He refers to the fact that the government chose the oil and gas sector to make its first big push for reforms when it deregulated diesel prices and announced the much-delayed pricing formula for domestic natural gas on the same day–Oct 18, 2014. Taneja says the sector needed immediate attention and the government did just what the doctor ordered.

“The petroleum and natural gas sector was suffering from policy paralysis. So our first priority was to fix all problems that the sector faced. The BJP and the government want to rid the sector of all bottlenecks and remove hurdles so that it becomes more lucrative for investors,” adds Taneja, who regularly advises government on energy issues.

Taneja unequivocally endorses the idea that Indian oil and gas sector needs to be flush with cash: rupees, dollars, euros, all are welcome. He says the thinking in the party and the government is to engage with potential investors at every level possible to get them to come here and invest.

“Every major oil and gas company has put India back on its radar. They have visited India and engaged with the highest levels of government. We expect them to venture into the Indian petroleum and natural gas sector in terms of technology and investment over the next few months,” Taneja says.

Having been a journalist himself, Taneja chooses his words carefully, edits out the jargon and technicalities that can entangle a conversation, and puts words to his thoughts with relative ease and simplicity. He also seems well-equipped to spin adverse situations in favour of the government.

When probed on the long delay in fixing a formula for premium to be paid to operators of ultra-deepwater and deepwater gas blocks, Taneja calls it a work in progress that will soon see the light of the day. He tries to work the delay in government’s favour by calling it an indication of the importance of the matter and proof of the dispensation’s desire to be thorough and sound.

“See, we want to deliver a formula that is transparent, dynamic and ensures investment. It if takes time, then our request to the investors is to be a little more patient. We want its economics to be win-win for all three stakeholders–companies, government and the consumers. We also need to understand that deep water exploration in some parts of India is a little more challenging than in many other geographies and geologies,” he says.

In October, when the government announced the new gas price formula, it added that a special premium would be payable for deep water and ultra-deep water blocks. Then oil secretary Saurabh Chandra had said the premium formula would be decided by January.

Similarly, the government has not been able to zero in on a contractual regime for exploration and production, without which any new auction of oil and gas fields in India cannot be conducted. There is enough evidence that the current model–profit sharing after cost recovery under the production sharing contractual regime–has not really worked well in India.

Even as a move to a revenue-share model was hinted by the previous government and also by the BJP when it came to power, a decision is yet to be taken. “It is important to put in place a system that is dynamic and in sync with international trends and best global practices. The government has worked extensively on it and work is still on. Feedback has been collected from both domestic and global companies. The government will be announcing the new contractual regime very soon,” Taneja says.

How soon is very soon, we ask. Taneja refuses to put a date to it and adds, “Many models have been looked at…what may be good for shallow water exploration may not be suitable for deep water, or for that matter what may suit conventional gas exploration and production may not work well for unconventional gas. So these challenges are being worked around.”

As the government presses for more foreign and private capital to flow into the Indian exploration and production sector, Taneja says it does not have to be at the cost of the public sector oil and gas companies that have driven the sector for decades and are among the most valuable state-owned companies in India.

“The BJP and the government are very clear that national oil companies need to be strengthened and made world class, at par with other admired NOCs (national oil companies) like Petronas. At the same time, we want to engage and incentivise a much bigger role for the private sector and international players than what it is today. It’s clear to us that public sector or private sector alone cannot deliver all the goods,” he says.

Inheritance of Loss

Walking the talk is not easy when it comes to energy policy. Even withthe change in regime, various arbitrations filed by exploration and production companies still have the government and those companies at loggerheads. Add to it disputes like the recent retrospective tax demand on Cairn India Ltd, and one wonders whether things have changed at all on the ground when it comes to industry-government trust.

Like most in the government, including the finance minister and the oil minister, Taneja dismisses these cases as problems inherited by the BJP-led government from the previous dispensation. Still, he agrees that they do send out a message contrary to the one the government is working hard to send out.

“I will not comment on any specific company but arbitrations and legal disputes in general send out an undesirable message. We want these companies to focus primarily on exploring and producing oil and gas…and that’s why we are committed to give clear, reliable and predictable policies so that the companies can focus on exploration. But there are legacy issues and legacy issues take time to resolve,” he says.

Legacy issues aside, the government had to bow to pressure from states on the Goods and Services Tax, by keeping petroleum products out of the purview of the largest tax structure reform in India in recent history.

Even as Taneja echoes the government’s view that GST will “lead to the emergence of a new economic India”, he is of the opinion that this tax regime will be at its most effective if petroleum products are included in its ambit. But then, once you are in government, realpolitik is bound to take precedence over principled governance.

“States are protesting on petroleum products’ inclusion because some of them fear losing out on sizeable revenue that they get from taxing these products. And we are sensitive to their arguments and reservations…The government is deeply engaged with states on this issue and we would want to get petroleum products into the GST ambit as soon as possible as we do know that the full potential of GST can’t be realised without them,” Taneja says.

As per the current arrangement, petroleum products will be included into the GST regime from a date that will be decided by the GST Council, two-thirds of whose members will be from the states.

Integrated Policy

Even as the government, along with the NITI Aayog, is working to bring out an integrated energy policy, Taneja feels that more than policy, integration should be in action. In his view, the energy ministries of the government are already working in an integrated, seamless manner.

He also takes the opportunity to explain that the government’s objective in having an integrated energy policy is not so much about physical integration per se but about maximum possible synergy between various departments and ministries dealing with energy policies.

“Let’s not forget that these are very different sources of energy. What is common between atomic energy, petroleum and natural gas, solar power, thermal power, and others? So you should take integrated to mean maximum possible synergy. You should not think that these ministries will just melt into one another because they all have very different DNA,” Taneja adds.

Direct Benefit

In order to streamline subsidy on liquefied petroleum gas, a direct subsidy transfer scheme was introduced, by which the subsidy amount is credited directly to the beneficiary’s bank account, while LPG is sold at market prices.

Given that this step is likely to substantially reduce leakage in LPG distribution and black marketing of cylinders, why isn’t the government moving in the direction of withdrawing LPG subsidy from affluent households and make it really targeted?

According to Taneja, for the time being, asking consumers who can afford non-subsidised LPG to surrender their connections voluntarily is the best way forward.

“Who is ‘affluent’? How do you define it? The basis for determining if someone needs subsidy also needs to be worked out before the government can even think of taking somebody’s subsidy right. We definitely don’t want to make someone who deserves the subsidy suffer even by mistake,” he says.

Taneja says that the thinking within the party and the government is that LPG subsidy needs to be withdrawn from the affluent classes, but in a systematic manner and only after a fool proof system for the same is developed.

“If we withdraw subsidy just like that, then you will have to go with dual-pricing, which in turn would be quite prone to black-marketing… We are building tools and instruments to plug subsidy leakage and make it more targeted. Be it the Jan Dhan Yojana or the PaHaL plan, these programmes and the tools we develop with them will help us plug subsidy leakage and create an effective monitoring mechanism,” he says.

And what about subsidy on kerosene? Is the government working to have a direct benefit transfer programme for kerosene subsidy disbursal as well?

Taneja nods, but adds that kerosene subsidy will be revisited by the government only when solar powered lamps and appliances reach most of the households that currently have to depend on kerosene. “Work is on for that (direct cash transfer model for kerosene subsidy) but right now we want to replace kerosene by solar power to the maximum extent possible,” he says.

Almost as a postscript, he adds, “The BJP is committed to providing affordable energy to the poor while developing energy sectors to make India self-sufficient. We are pro-poor and pro-growth at the same time. You know, one doesn’t necessarily have to be at the cost of the other.”

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