India can produce crude oil at one-fourth of the import price, if the government allows more private sector participation in exploration and production, Anil Agarwal, chairman, Vedanta Ltd said in a statement.
The billionaire, who heads the metals and energy conglomerate, has been making a case for higher private sector participation to optimally utilise the country’s natural resources. On Monday, the Indian rupee hit a fresh low of 79.98 against the US dollar, a day after the country’s trade deficit hit an all-time high as crude oil and coal imports, among other things, rose.
“India can produce oil at 1/4th of import price similar to Cairn providing Oil at $26 to the government,” Agarwal said.
“Our economic growth is powered by a combination of legacy industries and start-ups. Encouraging our start-ups and entrepreneurs to put their energy on the work without fear and hurdles will create massive jobs and massive revenue for the government.”
He said that these entrepreneurs should be encouraged to do exploration with latest technologies like artificial intelligence, automation, and data analytics, backed by funds from private equity and may later sell their licenses post discovery.
“It is becoming critical for India to liberalize its exploration and production policy for wide range of metals, rare metals, minerals, and hydrocarbons. India is gifted with significant reserves of metals and minerals but its ironical that we continue to pay a hefty import bill year after year. All these metals have a crucial role to play in the coming decades because of their widespread application in building cutting edge technologies,” Agarwal said.
This is not the first time Agarwal has made a case for the urgent need for India to work on energy security, by providing a level playing field to domestic oil and gas companies and opening up coal mining to accelerate production. In an interview to Moneycontrol in April, he had expressed the need for a government’s push to encourage the private sector and get startups into the fold.
“Robust domestic production will also insulate us from any global crisis, encourage entrepreneurship, create a large number of jobs and create a vibrant ecosystem,” Agarwal said in the latest statement.
Agarwal said that the government should make the mine leases for a minimum of 50 years so that Indian and foreign companies can plan and execute well. He also suggested that existing mines, which were explored by the private sector but where work has been stopped, should be given back to them.
“If the government wants more revenue, it can increase duties and royalties, if justifiable but we cannot afford to stop production. A well-functioning mines and minerals sector will have a big role to play if we want to realize our dream of not just $5 trillion but a $15-20 trillion economy in the next two decades. Further, we must move to a system of self-certification and that alone has the potential to raise production by 2-3 times,” he said.
In June, the Vedanta group surprised the street with the announcement in newspapers seeking initial bids for sale of its troubled Tuticorin-based smelter, which has been shut since mid-2018. While the company said the likely sale of the asset is at an “exploratory stage,” it is a deviation from its strategy. In the April interview to Moneycontrol, Agarwal had said that the Tuticorin matter had gone to court and he hoped that the judiciary would move fast.
The company is also facing challenges in its mining operations in Goa, which have been stopped for over four years, after a Supreme Court judgement.
Agarwal reiterated that the valuation of the government-run listed companies can be increased by 10 times by both privatising some companies and corporatising the others.
“While 20% companies can be privatized, the rest, including defense factories, should be corporatized with the condition that there will be no job loss, and no one will be allowed to hold more than 5% share. This will broad base holding and usher in professionalism while running the company,” he said.
Vedanta was one of the few in the race for privatisation of state-run oil marketing company Bharat Petroleum Corporation Ltd (BPCL) but the government decided not to go ahead with the privatisation plan.
Source: Money Control
