Apr Jun12 Petrofed

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From the Chairman

The global economic situation continues to be precariously balanced with some growth but not without attendant risks. The World Bank projects a weak base line forecast expansion of 2.5% of the global economy this year before picking up to 3 and 3.3% in 2013 & 2014. The annual growth in the United States is projected to accelerate from 1.7% in 2011 to 2.10% in 2012.

The developing countries GDP is expected to expand by 6% in each of 2013 and 2014 which is slower than the 6.3% average pace during the first seven years of this century. In South Asia, growth is anticipated to remain subdued, as growth in India settles around 7% over the 2012-14 period.

The Asia Pacific region is also beginning to emerge as one of the world's largest energy markets. It is endeavouring to move from an agrarian economy to an i n d u s t r i a l i s e d e c o n o m y. D o m e s t i c m a t e r i a l consumption in the region grew at a compounding annual rate of 4.9% over the three decades from 1975 to 2005. The corresponding growth rate for the rest of the world was around 0.5%. During the same period the share of the region in the total primary energy supply of the world grew from19% to over 35%, and will reach 50% by 2028, according to UNEP.

The need for natural gas, which will overtake coal as the second most widely used source of energy by 2025, will be the greatest in regions like the Asia Pacific according to a forecast by ExxonMobil. According to Statoil also global gas demand is projected to increase by 60% by 2040 against a total energy demand increase by 40% during the period. The oil demand is expected to

R. S. Butola Chairman

plateau at just about 100 million barrels a day around 2030.

Asia Pacific today has become the world's dynamo of economic growth and a vast consumer market. It is also a very unequal market. Almost a quarter of the people in the region live in extreme poverty, on PPP of USD 1.25 or less a day. The region is also home to a major share of the world's population lacking electricity and modern fuels for cooking. It has a substantial middle class that aspires to life style changes. Between the decades 1990-99 and 2000-09, global per capita household expenditure increased by 18%, while in a number of Asian countries it increased far more rapidly - by 48% in Cambodia, for example, 92% in China and 45% in India. At the same time there has been rise in inequality where the rich are getting richer faster, while the poor are missing out on most of this rising prosperity, according to a UNDP report.

At the recent UN Conference on Sustainable Development, the Prime Minister made it clear that for developing countries, inclusive growth and a rapid increase in per capita income levels are development imperatives. He called for an approach to the problem globally which should be guided by equitable burden sharing.

India's emissions to GDP intensity, excluding agriculture, has declined nearly 25% over the period 1994 to 2007 as a result of our efforts over the last two decades. A target has been set to further reduce the emissions intensity of GDP by 20 to 25% between 2005 and 2020. Let us all strive and work for achieving this goal and conserve energy and fuels. A rationalisation of fuel pricing, which has been talked about for quite some time, is expected to aid in this effort and also reduce subsidy burden of the Government.

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The United Nations Conference on Sustainable Development has re-affirmed 'the principle of common but differentiated responsibilities'. The UN has also designated 2012 as the International Year of Sustainable Energy for All and intends to galvanise actions that catalyse the attainment of this goal. According to UNEP's Global Renewables Status Report 2012 investments in clean energy hit 257 billion US dollars by December 2011. Renewable energy markets and policy frameworks have evolved rapidly in recent years. Renewable energy sources have grown to supply an estimated 16-17% of global energy consumption in 2010. In the power sector, renewables accounted for almost half of the estimated 208 gigawatts (GW) of electric capacity added globally in 2011. Wind energy & solar power accounted for almost 40% & 30% of new renewable capacity respectively. They were followed by hydropower at 25%. India can be justifiably proud of the fact that it is among the top seven countries that have attained threshold in renewable energy transition, namely China, USA, Germany, Spain, Italy, India & Japan.

Even the International Energy Agency (IEA), which was created to monitor and manage global oil markets in the wake of the 1973 oil crisis, has stated that on our current investment path, global carbon dioxide emissions are likely to nearly double by 2050. If the world has any hope of keeping the average rise in global temperatures to below 2 degrees centigrade, it needs to double its rate of spending on clean energy infrastructure between now and 2020. It goes on to say that if controlling carbon emissions is truly a priority, the world

DG's Report

A. K. Arora Director General needs to spend 36 trillion US$ between now and 2050 on low carbon technologies, on top of the 100 trillion US$ needed under a business-as-usual scenario. This is the equivalent of USD 130 per person every year, according to IEA. It adds that every additional dollar invested can generate 3 dollars in future fuel savings by 2050. The clean energy technologies we require already exist and we are not using them. According to another UNEP report, the shift to a greener economy can translate into upto 60 million additional jobs across a range of sectors. Greening the economy also offers the opportunity to improve social inclusion by addressing the challenges of energy poverty and of lack of access to energy.

It is prudent that we increase investment in clean energy and put in place green policies to switch to a low carbon economy. This was also stressed during

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PetroFed's 3 International Symposium on Biofuels and Bioenergy held at New Delhi during April 2012. It is covered in the events section of the Journal.

Another significant event was the presentation by a PetroFed delegation led by Mr. B.C. Tripathi, CMD, GAIL (India) Ltd. to the Parliamentary Standing Committee on Finance who offered us an opportunity to present our views on the 'The Constitution (One Hundred and Fifteenth Amendment) Bill, 2011' pertaining to the Goods & Services Tax. PetroFed also coordinated an Oil Industry Technical Team led by Sh. P. Kalyanasundaram, Director (IC& CA), MoP&NG to Islamabad to discuss trade with Pakistan. A representation has been made to the Ministry of Shipping on their draft policy for award of ports waterfront and associated land on captive user basis. We continue to proactively take up issues of the Industry with concerned authorities and are in the process of preparing a paper for the recently constituted Rangarajan Committee on Production Sharing Contracts in hydrocarbon exploration.

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Globalization is presenting industries with myriad challenges to growth, sustainability and profitability. Oil and gas, no less than any other industry, is also confronted daily with these challenges, while competing in an increasingly rigorous environment marked by tighter regulation, growing margin pressures and an aging workforce, among other issues.

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Three key challenges are affecting players along the oil and gas value chain in a big way:

1. Turning data into meaningful information& faster decision making: A common theme we hear from our customers is that they are struggling under the sheer volume of data their operations generate. As they strive to make better decisions, there is a need to integrate many more systems and applications together, but the complexities of trying to integrate data silos can be extremely overwhelming. Further, leveraging automated decision making systems for the integrated databases is the next level of challenge

2. Working in remote environments: Oil and gas exploration today is based in some of the most remote places that make them difficult to access. Multiple production facilities are often spread over vast geographical distances and, in some cases, in hazardous environments, making it difficult to ensure the safety of plant personnel

CEO Speak

Enabling the Digital Plant

Anant Maheshwari Managing Director

Honeywell Automation India Limited

and production assets, or share valuable information and best practices. Plus, remote facilities often operate independently from one another, making it even harder to share learnings and to achieve optimal productivity levels across the whole network.

The challenges are many and no single solution will encompass them all. However,we believe that companies that have the following will differentiate themselves from their peers and build a sustainable competitive advantage.

i) Work process consistency and an integrated view of their operations

ii) The ability to communicate and collaborate in real time

Work process consistency implies understanding comprehensively how people interact with the object of their work and ensuring this is properly documented. This enables to decouple the operator from the process and move from people driven operations to process driven operations which is critical whether you consider operating oil fields in remote locations and harsh environments or addressing the staffing and competency requirements in downstream.

The critical next step is the ability to use an underlying IT platform application that will help implement and enforce those best practices. An illustration of such an

TM

application is Honeywell Intuition Executive launched in May 2012. Such a solution allows industrial companies to anticipate, collaborate and act with confidence on data. With its sophisticated data processing and analytics capabilities, Intuition Executive anticipates problems and identifies

3. Lack of skilled resource: Oil and Gas is a

specialized domain, as energy demand grows and more and more capacity comes online there will be a shortage of skilled and specialized resources. India is already seeing a shortage and therefore this is one of the key challenges any CEO faces today.

So what is the solution to manage these challenges?

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opportunities. It delivers enterprise-wide information management, decision support, and collaboration software to help companies make better sense of the vast amounts of data being collected and achieve operational excellence.

The ability to communicate and collaborate has many advantages as well. For example, Honeywell's Remote Collaboration solution helps customers share their expertise across remote facilities, improving safety in hazardous environments, as well as optimizing production and improving recovery. Remote collaboration allows oil and gas companies to monitor and manage operational activities across multiple facilities from anywhere within a network of sites, leading to better collaboration between staff and process optimization across locations. Sites can be connected to each other, either through a central facility

or via a network of interconnected collaboration centers, supporting real-time collaboration, resolving challenges quickly and improving production/yield over the full lifecycle.

data integration, visualization and collaboration are integral to the current business environment. The ability to see, understand and act on the relationships within critical data is key to creating competitive advantage, and this can only be achieved when all applications and underlying data are amalgamated. Additionally, the increasingly sophisticated and powerful capability to monitor and manage operational activities in real time, regardless of location and personnel, offers O&G Upstream and Downstream operators the opportunity to create multiple value streams to their organizations while achieving transformational results.

In conclusion,

Courtesy: Business India Estimated lifetime consumption expenditure of an Indian born in 2009, in US dollars: 1,84,556

Estimated lifetime consumption expenditure of an Indian born in 1960, in US dollars: 14,645

Percentage of total consumption expenditure spent on food and housing: 31 & 14

Percentage of total consumption expenditure spent on education/leisure and health: 7 & 5

Number of times printing of `500 and `1,000 denomination notes has gone up since 2000: 17 & 9

Average size of one-time withdrawal from ATMs in India presently, compared to `5, 000 three years ago, in `: 7,000

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Obituary

It is difficult to come to terms with the fact that Dr. Abid Hussain is no more. He passed away at London on June 21, 2012 after a massive heart attack. He was 85 years old and is survived by his wife, two sons and a daughter.

His ever smiling, zestful and vivacious presence was noticeable at the PetroFed Awards ceremony on June 8, 2012 at New Delhi. Nattily dressed as always, brimming with ideas and spreading hope and good cheer, he was a member of the Jury for the annual PetroFed Awards since their inception in 2007. Dr. Abid Hussain was honoured with the Padma Bhushan in 1988. Born in December 1926, he was a member of the Indian Administrative Service and served in various capacities at the centre including Secretary, Ministry of Heavy Industries, Secretary, Commerce and Chairman, IIFT. He was appointed as Member, Planning Commission in 1985 and was Ambassador to the United States between 1990-1992.

Dr. Abid Hussain has been described as a 'born diplomat' and an excellent communicator. He was a soft-spoken person seeped in the best of Hyderabadi secular and cosmopolitan traditions. He is said to be one of the key persons who set the ball rolling for India's economic liberalisation. He chaired six committees of which the one's on trade and small scale industries are still important reference markers. Dr. Abid Hussain was Chairman of a large number of organizations including the Ghalib Academy, the Lovraj Kumar Memorial Trust and Professor Emeritus at several institutes including Indian Institute of Foreign Trade and Foreign Service Institute of the Ministry of External Affairs. He was the trustee of several educational, cultural and charitable institutions in India and abroad.

A liberal in every sense of the term, he would be missed by one and all.

Abid Hussain

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Petroleum Pricing Muddle – Way Forward

P K Agarwal

Senior Fellow & Director (HR), TERI

After independence, for over 25 years the prices of petroleum products were based on import parity. This was followed by the Administered Pricing Mechanism (APM), essentially cost plus, for over 25 years. And now for nearly a decade we have an era of ad-hocism. If the past is any indication, this may continue for more time. Ad-hocism began no sooner the dismantling of APM was over by the end of 2001-02. While prices of Petrol and Diesel were de-regulated effective April 1, 2002 and oil marketing companies started revising them on fortnightly basis, domestic LPG and PDS Kerosene carried specific subsidies to be phased out over three years in an equated manner. As per the scheme announced by the government, for subsidies to stay specific per cylinder of LPG or per litre of kerosene, the changes in international prices, ocean freight etc. were to be passed on to the consumers on monthly basis. However, in practice, the Govt. did not permit public sector oil marketing companies to pass on any increase in price of domestic LPG and PDS kerosene and compelled them to bear the under-recoveries over and above the specific subsidies. Interestingly, the Govt. did not go back completely on the announced scheme and implemented reduction of specific subsidy by one third after one year and by two thirds after two years, whereafter these have remained unchanged. With increasing international prices of Petrol and Diesel, the Govt. introduced informal control of prices of these products in the later part of 2003.

Increasing under-recoveries suffered by oil marketing companies, placed the Govt. under pressure to take

various decisions, though ad-hoc, such as issuing of Oil Bonds, sharing of burden by upstream national oil companies, permitting non commensurate increases in prices. When the situation became increasingly difficult, the Govt. appointed a committee on “Pricing and Taxation of Petroleum Products”, under the chairmanship of Dr. C Rangarajan. Its report, submitted in February, 2006, urged implementation of sets of recommendations as packages. The Govt. selectively implemented those recommendations which neither adversely impacted Govt. revenues nor resulted in an increase in consumer prices. With ballooning under recoveries the Govt., in June, 2008, again constituted a “High Powered Committee on Financial Position of Oil Companies”, under the chairmanship of Mr. B K Chaturvedi, which submitted its report in August, 2008. T h e G o v t . d i d n o t i m p l e m e n t a l m o s t a n y recommendation of the Chaturvedi Committee. In August, 2009, the Govt. yet again appointed an Expert Group on “A Viable and Sustainable System of Pricing of Petroleum Products”, under the chairmanship of Dr. Kirit S Parikh. It submitted its report in February, 2010.

It was only in June, 2010, after vacillating for over four years, that the Govt. announced deregulation of Petrol prices in addition to an increase in prices of diesel, PDS kerosene and domestic LPG. The Govt. also announced its intention to deregulate prices of diesel from which it later retracted. With mounting pressure of increasing under recoveries, the Govt., in June, 2011, took the bold decision of reducing customs duties on petrol and diesel from 7.5% to 2.5%. In addition, reduction in excise duty and increase in retail selling price of diesel was announced. This had a salutary impact on bringing down under-recoveries on diesel sales which account for about 45% of the total sale of petroleum products in the country. The relief was, however, short lived with international product prices going north.

During 2011-12, the total under recoveries are placed at about `. 1,38,000 crore, an all time high for any one year. While the Govt. deregulated prices of Petrol in June, 2010 it did not permit public sector oil companies to raise prices in line with international prices. Thus, oil

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marketing companies could neither raise prices as required nor their under-recoveries were recognized in selling petrol. With mounting pressure from oil companies on the Govt. to either once again declare petrol as a regulated product or deregulate it in the real sense, the Govt. finally permitted them to increase

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petrol prices effective 24 May, the steepest so far at any one time. This resulted in widespread dissatisfaction amongst petrol users. Small price changes periodically would have caused lesser dissatisfaction. It is, thus, evident that the Govt. has not followed a well thought out road map to deal with prices of key petroleum products.

The myriad ill effects of under-pricing of petroleum products and hence growing subsidies include not only inefficient usage, substitution of low value products, adulteration, and a mounting fiscal deficit but also deteriorating financial health of oil companies. It is appreciated that certain sections of the society need protection against the increasing international prices. Among the solutions suggested from several quarters are deregulation of diesel prices and targeted direct

subsidy to identified persons for domestic LPG and PDS kerosene. All that is required is strong political will. There is no dearth of people in the Govt. who can provide innovative solutions. It is the Govt. that needs to take the bull by the horns and not allow the problem to drift. The Govt. then needs to create an environment of appreciation, understanding and cooperation in the country. Short term and long term measures need to be agreed upon. Some of the short term measures could be ensuring surrender of multiple domestic LPG connections, no subsidized LPG to tax payers and users of PNG, removal of bogus ration cards, limiting subsidy for diesel beyond which it should be passed on to consumers, rationalizing duties for Petrol & Diesel, persuading states to rationalize VAT/ sales tax on petroleum products etc. Among the long term measures, the supply of piped gas should be expanded to replace LPG, PDS kerosene used as illuminant should be substituted by solar lighting, and all subsidies should be directly targeted to individuals who deserve them.

(Views Expressed in this article are personal)

Courtesy: Business India Percentage of students studying at various Indian Institute of Technology (IITs) who were women in 2011: 11

Percentage of students studying at various Indian Institute of Technology who were women five years ago, in 2006: 6

Average percentage of food served in social gatherings in India that is wasted: 15-20

Rank of marriages, seminars and conferences in terms of food wastage: 1/2/3

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Why Emerging Markets Really Matter for LNG

Nikos Tsafos Senior Manager

PFC Energy

The proliferation of LNG importers marks the most important structural change in the LNG market today. But the importance of having more importers lies beyond merely creating demand. These markets are changing the structure of the LNG market; as a result, grasping the importance of new markets rests not with merely estimating their LNG import needs but with understanding how their participation in the LNG marketplace may alter the structure, composition and value of the LNG market.

The emergence of new LNG importers marks the biggest structural change that has taken place over the past few years and one that will define the market over the coming decade. In 2003, there were as many countries importing LNG as there were exporting LNG (12). By 2011, there were 18 exporters and 27 importers, and by 2020, PFC Energy estimates that 36 countries will be importing LNG and 23 will be exporting it. The gap between the numbers of importers and that of exporters will widen further. Europe has been, and will remain, the region with the most importers. The Americas has seen much growth due to the entry of Mexico, Canada, Chile, Brazil and Argentina and will see little growth out to 2020. The Middle East (from 0 to 5) and SE Asia are among the most rapidly growing regions for LNG.

The Emergence of Emerging Markets

These new markets are having a big impact. One way to assess the relative importance of new markets is to examine LNG imports by vintage: when markets start to import LNG? Classifying LNG imports that way shows that importers who started to buy LNG after 2000 had a 19% market share in 2011. In fact, this market segment was the second largest in 2011 and the one growing the fastest. We classify the United Kingdom as a country that started to import LNG in the 1960s. If this country were marked as a “2000s” country, when imports restarted, the market share of this grouping would go from 19% to 27%.

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Is this Demand Sustainable?

PFC Energy has identified five main structural drivers underpinning this LNG surge (we have focused on new LNG markets but have excluded bigger players such as China, India, Canada, etc):

Supply Drop.

Geography.

Displace Oil.

Diversification.

Resilience.

LNG imports can either supplement or replace domestic production. In countries where domestic production is mature, the LNG import wedge is driven not just by growth in demand but also by the decline in domestic production. Argentina, Chile, Israel (short term), Malaysia (Peninsular Malaysia) and Thailand belong in this category.

Larger countries tend to have disconnected sub-markets. In those cases, LNG terminals can serve markets that are disconnected or not sufficiently connected via pipeline. Brazil and Chile, for example, have disparate markets, although Brazil has made more progress in creating a national grid. In Malaysia and Indonesia, LNG is meant to connect demand centers that are not served well because they are far from domestic supply sources.

Countries with insufficient gas supply tend to burn (often imported) oil to meet their needs. LNG in those countries serves as a cheaper power generation source than oil. Argentina, Chile, Israel, Indonesia, Kuwait, Singapore and the United Arab Emirates (Dubai) had or still have significant oil use in the power sector and where LNG imports are geared to displacing oil. These countries may also have a higher ability to pay for LNG given that their alternative is oil.

Countries often turn to LNG to diversify from a heavy reliance on a few suppliers or to protect from suppliers whose reliability the importer has reasons to question. Brazil's LNG push aims to diversify from Bolivia, Chile from Argentina, Israel from Egypt, Poland from Russia, Singapore from Malaysia and Indonesia and Thailand from Myanmar. In each of these cases, the need for imports goes above and beyond a mere “balances” question.

Besides overall diversification, countries are often drawn to LNG to be able to withstand seasonal, cyclical or other shortages. Argentina faces a winter gas shortage as the swing in seasonal demand far exceeds the swing in seasonal supply. Brazil is interested in LNG to compensate for occasional drops in hydro-electric output, while Israel has been keen to ensure that the market can withstand interruptions to Egyptian supply (which now appears permanent). Poland, Singapore and Thailand are similarly interested in creating more resilience in their system

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networks given their heavy depend on just a few sources of supply.

More markets mean more demand for LNG. But the importance of emerging markets rests beyond a mere numbers game. These new LNG players are changing the LNG market in at least three deep structural ways.

More buyers mean more opportunities for sellers. When demand for LNG fell in 2009 after the economic crisis, sellers were looking for markets to place LNG. Turkey, for example, benefited throughout 2010 and 2011 by a “push” of Qatari LNG. As more countries enter the LNG market, the more opportunities there will be for sellers to push LNG. This means that when demand is sagging, there are more players that can take in LNG at the right price. Perhaps the biggest impact of these new LNG markets is to create a wider floor beneath LNG prices – if the price falls, there will be more and more prospective buyers that will be drawn into the market to keep prices from falling too much.

In OECD Europe and North America, the competition between oil and gas is almost obsolete, which is one reason that oil indexation is seen as an increasingly archaic pricing system. But in non-OECD markets, oil remains an important fuel for stationary use. When examining the countries that PFC Energy expects will be importing LNG by 2020, the non-OECD countries among them relied on oil for an average 25% of their power generation needs; by contrast, the share for OECD countries is just 5% (2009 data for consistency). The entry of these newer players thus expands the sphere where gas and oil compete directly – and thus provides further support for LNG prices to track the price of oil, not just contractually but also substantively. It is no accident that in 2011 Thailand, Brazil, Argentina Chile paid prices comparable to Japan, Korea and Taiwan.

With few exceptions, these markets are approaching the LNG market from a different angle. Some have no long-term contracts to provide them with a steady supply of LNG. When they do have contracts, these tend to be with portfolio aggregators (chiefly BG, Shell or GDF SUEZ) rather than LNG projects (Poland and Malaysia are What Do These New Entrants Mean for the Market?

A wider floor beneath LNG prices.

Enlarge the market where gas competes directly with oil.

Greater demand for flexible services.

exceptions). Many of these countries are also importing LNG seasonally or using floating regasification vessels. The growth in emerging markets, therefore, is creating “demand” for an LNG value chain that is more flexible and more adaptive.

New markets are therefore altering the way that LNG is traded – they can act as a support system to prevent prices from going very low; they are boosting the sphere where gas competes directly with oil; and they are creating demand for a different value chain and different seller strategies. Together, these forces compound the importance of new players – not only will these countries import more LNG, but they will import LNG differently than the established markets.

The historical symmetry between the number of countries exporting LNG and those importing has been shaken – by 2020, PFC Energy estimates that 36 countries will be importing LNG while only 23 will be exporting it.

By 2011, countries that imported no LNG before 2000 accounted for a 19% market share. These new LNG markets are also the market's fastest growing segment.

This import demand is strong and is underpinned by five structural drivers: a drop in indigenous supply, a geographic need to connect remote demand centers to supply, a desire to displace oil use, a quest for diversification and a desire to increase the ability of a market to withstand supply shocks.

New markets are altering the way that LNG is traded – they can act as a support system to prevent prices from going very low; they are boosting the sphere where gas competes directly with oil; and they are creating demand for a different value chain and different seller strategies.

Together, these forces compound the importance of new players – not only will these countries import more LNG, but they will import LNG differently than the established markets.

Conclusions ? ? ? ? ?

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Oil is not only an important source of energy but is the main transportation fuel for the whole world, including India. At present the only available forms of liquid fuels are derived from crude oil which is largely imported and as the Indian economy grows the demand for liquid fuels will grow disproportionately in comparison to other forms of energy. The long term objective must be to meet almost 100% of the demand for liquid fuels permanently from indigenous resources; adding 5% ethanol to diesel and petrol as is being planned now will only be a drop in the ocean.

Biofuels are fuels obtained from a variety of biological sources commonly referred to as biomass such as wood, vegetable oils sugarcane juice, aquatic plants including algae, waste plant residues such as bagasse,

straw, etc. Different categories of liquid biofuels are biodiesel, bioethanol and biomethanol and can be used in any internal or external combustion engines, with minor modification. Most of the ongoing national level discussion on this subject revolves around technology and cost, but hardly any thought has been given to the resource base and this is the issue being addressed in this paper. It should also be noted that biofuels are by and large carbon neutral and should India be required to introduce carbon tax, the benefits would be significant.

Chudamani Ratnam Former Chairman, Oil India Ltd.

Biofuels: The Indian Resource Position

Land Availability

India Land Use: Million Hectares

Total 328.65

Net Sown Area 138.22

Plantation 6.77 Forest 67.00 Grassland, Grazing 8.03 Waste Land/desert 31.54 Scrub land 20.99 Water bodies 8.90 Shifting cultivation 0.26

Snow cover, etc. 4.3

Built up Land 2.06

Rann of Kutch 1.99

The crucial “raw materials” for production of biofuels are land and water especially the former. It is therefore necessary to examine land availability. The table below gives a break up of India's land usage pattern.

While the total land area of India is large, because of the population size, the amount that can be diverted to growing fuel crops is limited; possibly no more than 30 million hectares. This will yield about 30 mtpa of biodiesel, which in future decades will be only a very small part of India's requirement of liquid fuels. Some radical approaches may be required. For example, It is estimated that about half the area under forest is highly degraded and instead of trying to regenerate the forest, the land could be used for oil seed cultivation. It should be noted that a large part of the waste land shown above is covered by the Thar desert which is truly barren and cannot support any cultivation. Even the much touted Jatropha requires a minimum of soil fertility and adequate rainfall to give an acceptable yield.

The above statistics are official in nature but a more pragmatic assessment could be as follows. In the last 60 years, India has denuded or severely degraded half of the 76 m Ha of forest inherited at Independence. Of this 12.6 m. Ha has been totally denuded and another 25 million Ha. has lost more than 60 per cent of its forest Oil Seeds

It is estimated that about half the area under forest is highly degraded and instead of trying to regenerate the forest, the land could be used for oil seed cultivation.

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cover. India has approximately 50 million hectares of degraded wasteland that lie outside the areas demarcated as national forests, and another 34 million hectares of protected forest area, in much of which tree cover is severely degraded. A massive programme is needed to develop energy plantations consisting of oil seed species for biodiesel production and fast-growing tree crops which can be converted to alcohol.

Keeping the above stated approach in view a detailed state/district wise reassessment of land availability is required.

Ethanol, in India is primarily a byproduct of the sugar industry, but a small quantity is produced from grains for potable purposes. A point to be aware of is that sometimes industry quotes “alcohol” production figures, which contains only about 8% ethanol, the balance being water. To be used as a fuel it is necessary to extract anhydrous ethanol. At present in India about 5 million hectares of irrigated land are under sugar cane cultivation and about 2300 million litres of ethanol are produced. Roughly 1/3 of this is used industrially, 1/3 is consumed as liquor and the balance is available for m i s c e l l a n e o u s u s e s i n c l u d i n g b l e n d i n g i n transportation fuels. These quantities pale into insignificance in the national scenario.

Ethanol can also be produced from non-food plant cellulose (e.g. wood, leaves, bagasse or straw),but the technology has still to be developed and proved economically. Research on this topic, which doesn't call for much capital or revenue expenditure, must be put on a war footing and every laboratory in the country should devote some effort towards this project.

Methanol appears be a silver lining to an otherwise cloudy outlook. Methanol is the simplest form of alcohol and is somewhat underrated as a transportation fuel. It has in the past been used in racing cars. The earlier turboprop aircraft such as the Fokker Friendship which were comparatively low in power used a mixture of methanol and water for take off as this gives greater short term power than conventional aviation turbine fuel. Though the calorific value of anhydrous alcohols Ethanol

Methanol

tend to be between half and 2/3 that of petrol and diesel, because of their superior flammability characteristics they are equivalent on a volume basis. The main problem to be overcome is that of corrosion. However methanol fuel cells may eventually provide the solution. Methanol is typically produced from biomass though where natural gas is available, methanol is made from methane, a major component of natural gas Biomass is converted to syn-gas(synthetic gas), by partial oxidation, and the syn-gas is then converted to methanol by a Fischer-Tropsch process. India is expected to generate annually in the years to come nearly 900 million tonnes of agricultural residue such as straw and bagasse, much of which probably just goes waste or is put to insignificant uses. In addition India uses about 50 million tonnes of forest biomass and about 300 million tonnes of fuelwood per annum. Details are given below.

With present technology one tonne of dry biomass can produce about 700 litres (550 kg) of methanol. It would seem therefore that without any disruption of current land use practices nearly 700 mtpa of methanol can be produced replacing roughly the same amount of petrol and diesel.

The main resource that is not available is time. The worlds resources of crude oil are under severe strain and there will be a severe shortfall in supplies in about two or three decades. India must change over to biofuels well within this time frame. India imported about 170 MT( million tonnes) of crude oil in the financial year 2011-2012 and it is anticipated that there will be a demand for 500 MT per annum within a couple of decades. The target for biofuels production must be to restrict future imports of crude to say about 200 MTPA.

Million tonnes

Rice straw 285

Wheat straw 160

Sugar cane tops 118

Sugarcane bagasse 114 Other 213 Total Agri 890 Forest Biomass 50 Fuelwood 300 Total Forest 350 Total Biomass 1240

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Globalisation and Challenges of India's Development

Pranab Banerji Professor of Economics

Indian Institute of Public Administration

Globalisation is one of the leading issues that have captured the imagination of thinkers belonging to various academic disciplines. It has been recognized as a process of easier and accelerated trans-national movement of commodities, persons, capital and knowledge, which includes ideas, techniques and culture. With technological advances facilitating transport and communications, the processes of production, consumption and even waste disposal have taken global dimensions. Thus, as in the case of many electronic goods, a technology may be developed in Europe and put to manufacture by an American firm in China and exported to various countries and the waste dumped in Africa!

The growth and inevitability of globalisation was commented upon by perceptive thinkers, as diverse as Marx and Vivekananda, even during the previous centuries. But it is also necessary to note that while trans-national interactions are inevitable, and most would agree that it is also desirable, the nature of the transactions critically depend on institutions and on ideas and beliefs, which influence national and global policies.

The current phase of globalisation, which may be traced for its origins to the 1980s, is therefore distinct from the previous phases as it is characterized by a distinctive set of features and influences. Section I delineates these characteristics with a reference to India. The consequences of the new global order and ideas are presented in Section II, while Section III examines the responses of leading players in dealing

with these consequences. This is followed by an examination of policy imperatives for India and the lessons that are emerging from the faltering global order.

Human history has had many episodes of movement of people, ideas and commodities across national borders. The colonial period, as has been extensively documented, witnessed large movements of persons and capitaland production processes became trans-national with increased emphasis on extraction and foreign trade. The current phase of globalisation can be traced to the contemporaneous occurrences of the following events, roughly around the decade of the 1980s.

The early 1980s saw a major setback to the autonomous path of development embarked upon by many Latin countries. These countries, after a period of respectable growth and industrialization of two decades, ran into a debt-crisis, which made it virtually impossible to continue with the strategy of self-reliant development. The capital flows that had occurred in the decade of 1970s allowed many developing countries to continue on their path of independent development but also made them more vulnerable to external events. The increase in interest rates in the United States precipitated the Latin American debt crisis.

The impact of external financial crisis can be evaluated not only by examining the effects of the crises but also by taking into consideration the effects of the policy response. The international financial institutions — principally the IMF and the World Bank—provided credit lines to countries in crisis based on a set of conditionality that went under the broad names of `stabilization' and `structural adjustment'. In the decade of the 1980s, scores of developing countries were provided structural adjustment loans. The effect of these policies were to reduce the economic role of governments, expand the space available to the organized private sector and diminish barriers to entry of foreign private capital and goods. Thus what began as the globalisation of bank loans in the 1970s, crystallized in the 1980s into the globalisation of direct Section I

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and portfolio investment and the consolidation of global commodity markets.

The role of the state in economic development was to be further circumscribed, in addition to the effects of the financial crisis, by the ideological formulations that now go under the name of 'neo-liberalism'. Whereas the earlier free-market Economics grudgingly accepted the role of the state in rectifying 'market failures' arising out of externalities etc., the new ideas postulated the idea of 'government failures' following from the self-seeking behavior of politicians and bureaucrats. The spectacular collapse of the Soviet Union seemed to re-enforce the impression that governments may not have the necessary virtues to deal with the problems of 'market failure'. The neo-liberals therefore went on to s u g g e s t m e c h a n i s m s w h i c h m i m i c k e d , o r approximated, markets and set limits to the economic role of the state. A major consequence of these influences was the relegation of the idea of economic equality to the background. Efficiency became the central objective of policy and it became `glorious to the rich'.

India entered the present phase of globalisation with the financial crisis and subsequent structural adjustment loans in 1991. India's policy adjustments have been slow and partial. But the fundamental premises have been the same: namely, reduced role of the state, de-emphasis on independent or autonomous development and amnesia of the earlier policy goal of relative economic equality.

The developed countries may have believed that globalisation would open up markets for goods and services and lead to job-creation. In fact, contrary to expectations, globalisation began to bring greater benefits to the developing countries from the late 1990s. The erstwhile CIS countries, which underwent a painful decade of adjustment and decline in incomes, began to register positive rates of growth in the late nineties. Latin America and much of Africa, which had witnessed a lost decade of growth in the eighties, also started to recover in the late nineties. The East Asian countries however experienced a major financial crisis in 1997, but the growth rates for most of the decade was high.

Section II

But the most spectacular success has been witnessed by China and India in the last ten years, after a sustained period of growth of nearly two decades. Between 2007 and 2011, the developing countries accounted for 77 percent of the incremental global GDP (in PPP terms), compared to 23 percent accounted for by the advanced countries. China's share in the incremental GDP was 32 percent and India's 11 percent, which was higher than the contribution of large economies like the USA (8 percent) and the European Union (7.8 percent). Chinese and Indian companies, many of them state owned, have grown in size and are counted amongst the large global players. Both the countries have now a significant number of persons figuring in a list of world's billionaires. A robust indicator of the growing importance of the 'south' is the increase in south—south trade and the emergence of groupings like the BRIC(S).

In contrast, the developed countries have fallen into a deep and prolonged economic mess. The growth rates of most are minimal, unemployment rates are high (estimated 40 percent for the youth in Greece), external indebtedness is high, the size of government debt is at crisis levels and the stability of the financial systems are under threat.

The developing countries success story is not based on weak foundations. Both China and India have sustained one of the highest rates of domestic saving and investment over the previous decade. External indebtedness is low and well within manageable levels. Investment in infrastructure and education are rising, though not adequate in India, which shall allow the large working force in these countries to remain competitive. Wage rates are also low by international standards. Finally, the budgetary position is far more comfortable than in most advanced countries.

The developments over the previous decade raise the interesting question as to the reasons for the reversal of economic fortunes of developed and developing countries. One anticipated contributory factor, of course, has been the movement of capital to take advantage of cost differentials. The decade of 1990s, as stated earlier, was undoubtedly marked by the flow of foreign direct investment (FDI) to developing countries, sometimes to take advantage of Section III

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privatisations and mergers and acquisitions. These capital flows may have helped the processes of fiscal consolidation, eased the balance of payments difficulties, created jobs and demand and, thereby, contributed to higher growth rates. But this does not explain the reasons for the difficulties faced by the advanced nations and the overall robustness of growth in developing countries marked by high savings rates and good economic fundamentals.

It may appear paradoxical that the problem of the developed countries and the success of the developing ones may both be due to the value system dominating policy in the west, which sees progress as increased consumption by individuals, without regard to social goals like equality. In fact, the central theme of the current phase of globalisation has been higher consumption in an era of higher inequalities.

Inequalities increased in USA to reach levels equal to levels prevailing just prior to the great depression. Between 1940 and 1970, the USA registered steady and inclusive growth with the median income doubling in the three decades. Since then, the income of the bottom 90 percent increased by a mere 5 percent. On the other hand, the income of the top 1 percent of the population is reported to have increased by 281 percent between 1999 and 2007. It is therefore not surprising that the rallying call of the 'Occupy Wall Street' movement has been 'we are the 99 percent!'

One of the effects of rising inequalities, in conjunction with other causes like longevity and rising health costs, has been the political pressure on the state to spend more on social sectors. Social sector spending as proportion of GDP increased, between 1980 and 2007, from 10 to 21 percent in Greece, from 18 to 25 percent in Italy and from 13 to 16 percent in USA. These increases in social sector spending, and other increases in expenditures, were not accompanied by commensurate increases in tax revenues. In fact, if press reports are to be believed, the two wars fought by America, in Iraq and Afghanistan, were not accompanied by increased taxes. As mentioned earlier, neo-liberalism seeks to put a limit to the size of the state, which practically has meant that raising taxes is against the current orthodoxy. Also the nature of politics in most countries has made it extremely difficult to tax the rich who wield enormous power over the

formulation of public policy. The result has been that most developed countries have been forced to run large fiscal deficits. The USA, for example, has an outstanding public debt of over $ 14 trillion. With government spending at 24 percent of GDP and taxes at only 15 percent, the problem is likely to exacerbate. In many cases, the public debt is not only internal but also is significantly financed by capital inflows from abroad. Thus countries like Greece, Italy and Spain face severe external pressures due to their external indebtedness arising principally out of public indebtedness. A large part of the US public debt is financed by China and other East Asian economies. The ability of China and other developing countries to lend to the USA is the also the result of reckless consumption by US citizens. As the majority of the population in the US found its income to be nearly stagnant, consumption was allowed to increase with the help of easy consumer finance, which included housing finance. The case of the sub-prime crisis has been well documented. The crisis only brought to fore the fact that expenditure financed by debt has severe limits. As the American financial system, encouraged by government policy that could not frontally deal with the problem of rising inequalities, provided easy credit to both credit and non-credit worthy Americans, US household debt as a percentage of annual disposable income rose from 77 percent in 1990 to 127 percent in 2007. The average American household possessed seventeen credit cards! The rate of savings became negligible and occasionally even fell into negative territory. The financial system also benefitted from the lending to USA by the export surplus countries. The current phase of globalisation has therefore been marked by a reversal of capital flows to the advanced countries from the developing ones.

The current crisis of globalisation has been sought to be addressed with a mindset that remains rooted in old ideas that are becoming increasingly irrelevant in a globalised world. Problems have grown and taken on international dimensions and they cannot be solved effectively from perspectives of 'national interests'. To take an example, the Greek economic crisis cannot be addressed by imposing greater hardships on the Greek people alone. The beneficiaries of the single European Section IV

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currency also need to share the benefits with disadvantaged countries of the Euro zone. The inequalities,which perpetuate due to lack of movement of labour and the absence of cross-national fiscal transfers,do not allow an effective resolution of the crisis faced by a number of Euro zone countries. Similarly, it is not possible to sustain debt-driven high consumption in one part of the world by running export surpluses and capital outflows in other parts of the globe for a substantial period of time.

A second lesson that is emerging is that increasing income and wealth inequalities can no longer be brushed under the carpet of growth fundamentalism. The world today produces enough, on a per capita GDP basis, to meet even an extended basic needs list of every global citizen. Yet, in country after country, inequalities are on the rise. Many developing countries, including China and India, have high growth rates and worsening Gini-coefficients. We seem to be repeating the mistakes of the post 1970s western economies. This could be sustained by exporting to the Western economies. But with those economies faltering, the need to address the problem of inequality is not only an

ideal but a practical necessity even to sustain the growth momentum.

Finally, the 'invisible hand' has not been able to resolve many of the problems arising out of unbridled pursuit of self-interest. Devising systems of incentives and disincentives does not seem to adequately address the mismatch between personal and social ends.

The financial crisis and the subsequent response have only highlighted the problems of free-markets and incentive systems within organizations. There is once again a call for regulation. But in a globalised world, the effectiveness of regulation by individual countries is extremely limited. The problem may be addressed by agreeing to regulatory measures and systems that are adopted and effectively implemented by all countries. But this is extremely difficult to put in place, besides having doubtful utility. Perhaps we need an alternative world-view based on equality, justice and cooperation. Can India contribute towards the building of a new global vision that more effectively deals with the inevitable process of globalization?

Courtesy: Business India Percentage of Chinese millionaires who have considered emigrating or have already emigrated, mainly to USA: 60

Estimated capital flight out of Russian due to stagnation, corruption and political uncertainty, in billion dollars: 80

Rank of “Technicians' and 'Sales Representatives' among top 10 Jobs employers globally had difficulty filling due to lack of available talent: 1 & 2

Rank of 'Production Operators' and 'Secretaries, Personal Assistants and Office Support Staff' on talent shortage index: 9 & 10

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India is witnessing increasing challenges in meeting its energy requirements. The Oil & Gas sector plays an important role by contributing approx 45% of total energy requirements. Net oil imports have grown from 102 million metric tonnes (MMT) in 2006-07 to approx 130 MMT in 2010-11, whereas the value of imports, over the same period, has grown from US$ 40 bn in 2006-07 to US$ 70 bn in 2010-11. This has led to steep increase in the import burden of the country including infrastructure & pricing challenges for the Oil & Gas industry. To enhance the Energy Security of the country and to appraise the hydrocarbon potential of the sedimentary basin in the shortest possible time, the Government of India (GoI) has been making focused efforts to accelerate and expand exploration of oil and gas in the country. GoI also acknowledges the importance of the role of private sector in development of domestic resources. This has led to opening up of the sector and introduction of an investor friendly policy regime over the years.

Until the beginning of 1990's, wherein National Oil Companies used to receive the Petroleum Exploration License (PEL) on nomination basis, GoI started opening up E&P acreage award process to private and joint venture companies through various exploration bidding rounds for exploration and development of discovered fields.

The New Exploration Licensing Policy (NELP), formulated with the approval of the cabinet, provided a level playing field to the private investors by giving the same fiscal and contract terms as applicable to National Oil Companies (NOCs) for offered exploration acreages.

On the Anvil - India Oil & Gas Upstream Licensing Regime

Manish Baghla Neetu Vinayek

While approving NELP in February 1997, GoI through the Cabinet Committee of Economic Affairs (CCEA) had authorized Ministry of Petroleum & Natural Gas (MoPNG) to prepare a Model Production Sharing Contract (MPSC) in consultation with relevant Ministries. MoPNG subsequently finalized the MPSC with the approval of the Empowered Committee of Secretaries (ECS) which had also been constituted with the approval of CCEA, comprising Secretaries in MoPNG, Finance and Law.

The GoI has awarded more than 200 blocks in nine rounds of bidding under NELP. Before conducting new bidding round, MoPNG & Directorate General of Hydrocarbons (DGH) undertake consultation process to seek industry inputs on the issues faced during bid process and implementation of the PSCs. Based on the recommendations, there have been improvements in bidding framework in terms of parameters, weightage, standardization and transparency in bid award process. On some of the issues which were common to all the players, the need was felt to adopt a streamlined procedure of examination of each proposal before obtaining the approval/decision of MoPNG. Accordingly, DGH had developed and issued policy guidelines. These policies provide a transparent basis for deciding similar issues under various PSCs. Following are the select policies issued by DGH:

Extension of exploration phases under NELP and pre-NELP PSCs.

Extension of exploration phases under Coal Bed Methane Policy (CBM).

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Policy for Merger of Exploration Phases of offshore Blocks under NELP-III & NELP-IV PSCs. Policy for substitution of Additional Metreage Drilled against Total Metreage Commitment as a part of Minimum Work Programme (MWP).

Determination of Cost of Unfinished Minimum Work Programme (MWP)

These policies provide safeguards which are kept in view before amending the terms of the contracts. The ECS has also approved provisions for imposition of liquidated damages (LD) on the contractors where necessary to ensure that such dispensations are sought only by those contractors who are serious about their exploratory commitments.

Recently, recommendations related to the Upstream sector were made by the Standing Committee on Petroleum & Natural Gas in December 2011. Select comments/recommendationsare listed below:

The Committee is surprised to note that there are no specific penalty stipulations in PSC in case of shortfall in achieving the production targets envisaged in either the approved Field Development Plan (FDP) or Annual Work Programme and Budget, thereby giving the operators an escape route. The Committee would like to know how this important aspect was overlooked while framing PSC by the Ministry/DGH. Keeping in view the large scale dependence on natural gas as fuel, the unscheduled cut in its production has adversely affected the plans of various important sectors of economy including the priority sector. The C o m m i t t e e , t h e r e f o r e , d e s i r e s t h a t t h e Government/DGH review PSC Contracts entered into with various operators and incorporate stringent provisions therein for any breach in approved plan by the operating companies. While expressing displeasure on unsatisfactory performance of public/private companies in respect of minimum work programme, the Committee had desired “the Government/DGH should take necessary steps to ensure that these upstream companies expedite their exploration

work and make sincere efforts towards at least completing the MWP assigned to them. The Ministry in their Action Taken Reply had stated that the Government/DGH monitor and periodically review the progress of various exploration activities through the Management Committee (MC). If Contractor fails to complete the committed MWP within the stipulated time, they are required to pay the cost of unfinished work programme as per the relevant PSC provisions and the prevailing Policy Guidelines in this regard. The Committee is of the view that the penalty amount that the contractor is required to pay if he/she fails to complete the committed MWP is very less and does not act as a deterrent for not achieving the approved targets. Therefore, the Committee desires that failure to complete MWP should be seriously viewed and higher penalty be imposed in case of shortfall. Moreover, extension of time to the contractor may not be given in normal course, rather it should be granted only in exceptional circumstances.” Expressing dissatisfaction over the very low CBM production since awarding of blocks in 2001, the Committee had desired the Government to make an indepth analysis to find out reasons for the same. Though the Ministry in their reply have informed that by the end of 12th plan period CBM production is projected at 4 mmscmd in 2016-17 from the present level of about 0.23 mmscmd in October 2011, the reply is, however, silent if any analysis has been done on scanty production of C B M t i l l n o w a n d t h e m o n i t o r i n g o f Government/DGH in this regard. In view of the past record the Committee is not convinced that the projected target for 12th Plan can be reached unless effective steps are taken to boost present CBM production including through application and import of new technology. The Committee, therefore, reiterates its recommendation and desires the Government/Oil PSUs to make an in-depth analysis of the reasons for scanty production from CBM reservoirs and take concrete and corrective action including application and import of new advanced exploration technologies and technical knowhow, if necessary.

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?After considering the Action Taken Replies of the Ministry on the recommendations of the Committee on development of gas hydrate, shale gas, UGC and hydrogen as alternate sources of oil and gas, the Committee feels that the various programmes are not progressing at the desired pace. Keeping in view the large potential of these resources in meeting the energy security of the country, the Committee desires the Government to make concerted efforts in a time bound manner to develop these resources.

Recognising the need for comprehensive review of Upstream Licensing Policy, GoI has constituted a committee under the chairmanship of Dr C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council, to review the existing PSC. The review would be in respect to current profit sharing mechanism with the Pre-Tax Investment Multiple and exploring various contract models. The committee will

also look into a suitable mechanism for managing the contract implementation and governmental mechanisms to monitor and audit the Government's share of profit petroleum. It will also structure the guidelines for determining the formula for the price of domestically produced gas, and for monitoring actual price fixation. The Committee will submit its recommendations by August-end.

In the current environment, petroleum licensing is expected to be widely debated and will take place in the full glare of attention from the press and from public opinion. We hope that the GoI will follow adequate consultation process to modernize the licensing regime that will break new grounds in recommending ways in which GoIand the oil companies may devise best practices in licensing to serve the interest of all stakeholders and also an ethical business environment.

Courtesy: Business India Total number of villages in India: 6,38,588

Chances that a village in India is in Uttar Pradesh, Madhya Pradesh and Orissa: 1 in 3

Average time spent by a CEO in meetings in a 55-hour working week, in hours: 18

Average time spent by a CEO on business meals and telephones in a 55-hour working week, in hours: 5 & 3

Average time spent by a CEO working alone in a 55-hour working week, in hours: 6

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India's POL Consumptionin 2011-12:

The Year of King Diesel

Vijay K Sethi

Additional Director (Demand & Economic Studies) Petroleum Planning & Analysis Cell

I can't resist telling you another story as it beautifully explains the POL consumption picture in 2011-12. During my childhood I was very fond of drawing. Around the age of 14 years I grew confident that I could draw an accurate portrait of a person from his photograph. One day I decided to draw a picture of Guru Rabindranath Tagore. I spent three days putting in lot of hard work to finalize the portrait and hid it from all and sundry in the hope of giving a surprise to everyone by showing the final product. On the fourth day my uncle, whom I respected a lot came to our house. I asked him to close his eyes for a surprise. When he opened his eyes he did show surprise, hugged me and said “Cuckoo (my childhood nick name) you have done a great job. The portrait looks exactly like Vinobha Bhave. You have a great future to be a famous artist”. It took me a little while to realize what my uncle had said but I recovered soon to say 'Of course, it was Vinobha Bhave's picture that I had drawn'.

India's petroleum products consumption in fiscal 2012 has a similar surprise as the bottom line consumption figures are perfectly on expected lines. Against the revised demand estimates of 147.05 million metric tonnes (MMT) the actual consumption for 2011-12 as per provisional data is 147.99 MMT indicating that the variation in projections and actual figures is just 0.6%. Any economist could be proud of such accurate projections. However, once we analyze the data one finds that it is not the picture you thought it would be. And the picture was changed mainly by diesel, which became consumer's darling due to price advantage over competing fuels.

Diesel: The King

The variation in estimated figures and actual consumption of HSD is 939 TMT, of which 80% is due to higher consumption of diesel during fiscal 2012. It is diesel, which changed the face of consumption as price of competing fuels remained lopsided during the year putting undue pressure on diesel consumption giving it a dubious distinction of becoming the King of consumption. In the last few years share of diesel in the basket of petroleum products has been increasing. It has grown to 43.7 % in 2011-12 from 35.2% in 2002-03 at the time of deregulation. Figure-1 gives the pattern of diesel consumption in the last 12 years.

The high growth in diesel consumption came mainly from following factors in 2011-12:

Domestic price of FO remained higher than diesel price almost through out the year. This resulted in substitution of FO by diesel, which is not only cheaper for the consumer but also a superior product with higher calorific value

Power situation started deteriorating in the second half of fiscal 2012 leading to use of diesel in gensets. Figure-2 brings this out quite clearly:

Figure-1: Share (%) of Diesel in POL Consumption

Figure-2: Monthly All India Power Deficits (%) during 2011-12

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Contents

From the Chairman

DG's Report

CEO Speak

Enabling the Digital Plant

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Obituary

Abid Hussain

Petroleum Pricing Muddle – Way Forward

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Why Emerging Markets Really Matter for LNG

Biofuels: The Indian Resource Position

Globalisation and Challenges of India's Development

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On the Anvil - India Oil & Gas Upstream Licensing Regime

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India's POL Consumptionin 2011-12:

The Year of King Diesel