In case of oil and gas, it is neither possible nor desirable to completely stop imports as we have long term supply agreements on hand. But, what can be done that needs to be put into immediate effect? Some measures that the government can take.
According to various financial experts, the efforts taken by Reserve Bank of
India, however laudable, have not produced the desired impact and the rupee continues its slide downward, to go beyond Rs65 to a US dollar!
Obviously, the government is trying to tackle the issue as the rupee battled and closed at Rs64.63 against the US dollar. The US plans to taper down its bond buying programme in September are in the minds of the operators, but in the meantime, it is imperative that some more steps are taken in the country to stem this rot. The assurances from RBI are encouraging but fear lurks in the minds of one and all. Will it go beyond Rs65 today, the last working day of the week?
As we have said before, one school of thought strongly recommends the disposal of gold in the international market to meet the current account deficit challenge. And yet taking into account the fact that festival and wedding seasons are close at hand, the government may not decide on this option, though it would ease the situation a bit.
The other major contributor for the crisis is our continuing dependence on the import of energy/ fuel requirements. In case of oil and gas, it is neither possible nor desirable to completely stop imports as we have long term supply agreements on hand. But, what steps can be put into immediate effect are:
a) Permit Cairn India to increase its production capacity by waiving any clearance obstacles that are preventing the output to 250,000 bpd and beyond.
b) Authorize them (Cairn) to repossess the surrendered areas for them to intensify exploration, instead of going through the mill.
c) Remove the pin-pricks associated with the 11 km pipeline that has so far prevented Gujarat State Petroleum awaiting environmental clearance for more than 5 years now.
d) Direct Reliance to expeditiously handle the issues relating to increasing the production of both oil and gas.
e) If ONGC has any pending clearance issues, then, these should be handled also on a war footing.
f) Like Iran has agreed to a barter in supply of oil, why not try to secure similar opportunities elsewhere?
g) In the case of Coal India's imports, it has been reported in the press, that the offtake of production by power generators has been lower and in the case of NTPC, they have also stated that they have no takers (poor consumption!) - and here again, we have long standing coal contracts to import coal - all these need to be seriously audited and immediate steps need to be taken to rectify the situation.
h) Domestic output of edible oils and pulses has increased, thanks to heavy monsoon. Besides, international prices have begun to drop. This will help India save some $4 billion in imports by relying on indigenous production. It is to be noted that international prices of pulses have also come down by 20% so far, coming from Canada, Myanmar and Australia. Since palm oil supplies have began to increase, edible oil prices will also fall. We reiterate that foodgrain exports must now get a further push and efforts be made to stop wastage and damage to stocks lying in the FCI godowns.
All these measures, if attempted seriously, can definitely bring in some much needed relief from the troubles that CAD has caused. Efforts to woo the NRIs to remit more funds back home needs by assuring them a guaranteed rupee exchange rate may also bring in favourable response, as most of them now may be holding up their regular remittances in the hope of a further fall and the uncertainty associated with it. No one wants to accept a lower exchange value for his hard earned foreign currency today, if he thinks that he can have a better return a few days from now!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam