How to Tackle Oil Deficit in India

8/11/2019 How to Tackle Oil Deficit in India

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How to tackle oil deficit in India?

Policy Makers perspective


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Current Foreign Exchange Reserve

position

$250.483 billion US dollar (weekly data at theend of 23rdAugust 2013, Source: RBI

Exchange Rate: Rs 68, had raised to Rs 66.7 in

last two days Oil imports require $152billion in a year -

$13billion a month (Source: RBI)

Steps taken by RBI through Direct selling offoreign exchange reserves to Oil companies onswap basis for a period of two months


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New RBI governors statement on Monetary Policy Rupee internationalization and Capital Inflows

This might be a strange time to talk about rupee internationalization, but we have to think

beyond the next few months. As our trade expands, we will push for more settlement in

rupees. This will also mean that we will have to open up our financial markets more for thosewho receive rupees to invest it back in. We intend to continue the path of steady

liberalisation.

The RBI wants to help our banks bring in safe money to fund our current account deficit.The

Reserve Bank of India has been receiving requests from banks to consider a special

concessional window for swapping FCNR deposits that will be mobilised following the recent

relaxations permitted by the Reserve Bank of India. We will offer such a window to the banksto swap the fresh FCNR (B) dollar funds, mobilised for a minimum tenor of three years and

over, at a fixed rate of 3.5 per cent per annum for the tenor of the deposit.

Further, based again on requests received from banks, we have decided that the current

overseas borrowing limit of 50 per cent of the unimpaired Tier I capital will be raised to 100

per cent and that the borrowings mobilised under this provision can be swapped with

Reserve Bank of India at the option of the bank at a concessional rate of 100 basis points

below the ongoing swap rate prevailing in the market.

The above schemes will be open up to November 30, 2013, which coincides with when the

relaxations on NRI deposits expire. The Reserve Bank reserves the right to close the scheme

earlier with due notice.


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Subsidies of the government in the last

fiscal yearSome Highlights

As against a provision of ` 23,640 crore in2011-12 for oil subsidies, the Budget for 2012-13 provisioned an amount of ` 43,580 crore

(Economic Survey, 2013) under-recoveries of OMCs surged and were

estimated at ` 1,24,854 crore during April-December 2012-13.

Increase in Fertilizer Subsidies

A huge increase in food subsidy to come


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What are the ways out to reduce

deficits

Reduce Consumption expenditure by the government

Deregulate diesel prices (Kelkar Committeerecommendation of 2009, Ref: Infralineplus.com,October 2012, Dr. Kaushik Basusrecommendation asEconomic Advisor to PM)Implication on OMCs?

Remove subsidies but reduce taxesImplication onPublic Finance

Reduction in Consumption of fuel- Any quotarestriction?

Oil Imports from Iran using RupeeA debate inPetroleum Ministry in near future? Implication onIndias position in International Polity

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How to Tackle Oil Deficit in India