Investment by state-owned enterprises (SOEs) in fossil fuel production represented a large portion of overall government support, says a research study from IISD
A research study by International Institute for Sustainable Development (IISD) on fossil fuels reveals that on an average over the years 2013 and 2014, India provided $103 million per year in national subsidies to oil, gas and coal producers. In particular, capital outlay targeting the extraction and production of crude oil, natural gas, coal and the development of fossil-fuelled power projects constituted the largest share of India’s national subsidies to fossil fuel production, averaging $64 million per year across 2013 and 2014. Other support in the form of tax breaks for coal excise duties and fossil fuel transport infrastructure also contributed to this total with average of $40 million each in 2013 and 2014.
India has substantial fossil fuel reserves, including 61 billion tonnes of coal, 5.7 billion barrels of oil and 1.4 trillion cubic feet of gas (BP, 2015). The Ministry of Coal (MoC) is responsible for overseeing the management of India’s coal industry through a number of agencies and companies, including Coal India Limited (CIL), a 90% state-owned enterprise (SOE). India’s upstream oil and gas industries are overseen by the Ministry of Petroleum and Natural Gas (MoPNG) and, despite the markets opening up to private investment in the 1990s, upstream and downstream petroleum markets continue to also be dominated by state-owned enterprises (SOEs).
Investment by SOEs in fossil fuel production represented a large portion of overall government support with a number of state-owned companies being involved in the production of coal, oil and gas and also in the transportation and refining of oil and natural gas in India. Annual expenditure by these and other SOEs totalled nearly $15 billion on average in 2013 and 2014, points out the research note.
SOEs dominate India’s midstream and downstream oil and gas sectors. GAIL (India) is mainly concerned with transporting oil and gas while Indian Oil (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) are the dominant refiners in the country. The combined capital expenditure of the midstream and downstream sector was $5 billion and $4.5 billion in 2013-14 and 2014-15 respectively, says the research note.
Indian public finance institutions and state owned banks provided $3 billion in fossil fuel financing domestically over both 2013 and 2014, for an annual average of $1.5 billion per year. The large majority of domestic financing domestically went to coal plants, reveals the research study. Further support occurs through schemes like the National Electricity Fund to encourage investment in electricity distribution projects and the Power System Development Fund to increase utilisation of gas based power generation capacity.
India also provides public finance for production of oil, gas and coal abroad: in both 2013 and 2014 its total value was $4.2 billion averaging $2.1 billion per year, adds the research note.
