In a recent lecture at the Pune International Centre (PIC), the Union Minister for Petroleum and Natural Gas addressed important topics. The lecture was titled “Strategy & Measures for Enhancing India’s Energy Security in the Coming Decade.” During this session, the minister discussed significant challenges related to India’s energy security. He emphasized the importance of building a consensus on bringing petrol and diesel under the Goods and Services Tax (GST). This idea is not new; it has been a long-standing advocacy for the minister. He believes that integrating fuel prices into the GST could streamline the tax structure and potentially lower consumer costs. However, he acknowledged the difficulties in achieving this, as states rely heavily on the revenue generated from petrol and diesel sales.
The Need for Energy Independence
India, with its population of approximately 1.4 billion people, is poised to become a crucial player in the global energy market. Energy consumption in India is expected to triple compared to the global average in the coming years. To manage this growing demand and enhance energy security, the country must focus on strategic petroleum reserves and increase its exploration and production capabilities. The minister pointed out that currently, India relies significantly on imported fuel, making it vulnerable to fluctuations in global oil markets.
To reduce this dependency, the government is working on various initiatives. One key strategy is to enhance the exploration of India’s sedimentary basins, which could unlock vast reserves of oil and gas. The minister highlighted that India has about 35 million square kilometers of sedimentary land, but only 0.5 million square kilometers have been explored so far. Recently, the government has approved exploration in an additional one million square kilometers, sending a positive signal to investors and stakeholders in the energy sector.
Focus on Green Hydrogen and Challenges in Energy Security
In addition to traditional fuel sources, India is also focusing on developing green hydrogen as a sustainable energy alternative. Currently, about 50 hydrogen-powered buses are running on a trial basis in New Delhi. This initiative reflects the government’s commitment to exploring eco-friendly transportation options and reducing carbon emissions. The United States has expressed interest in seeing India emerge as a new producer of green hydrogen, recognizing the potential for collaboration and innovation in this area.
Despite the opportunities for growth, the minister recognized three primary challenges to achieving energy security: availability, affordability, and the transition to renewable energy sources. With rising geopolitical tensions globally, there is concern that oil prices may increase, which can further complicate India’s energy landscape. The significant revenues that states earn from fuel sales make the situation more complex, causing them to hesitate in agreeing to changes that could affect their income.
Barriers to Consensus on GST for Fuel
The call for integrating petrol and diesel into the GST framework faces opposition from various states. This opposition is particularly strong among states not governed by the ruling party. The minister noted that non-BJP states are reluctant to give up the additional Value Added Tax (VAT). This VAT contributes significantly to their revenues. These states rely on the income generated from taxing petrol and diesel. This reliance presents a major obstacle to moving towards a unified GST approach.
A notable point was raised regarding the Kerala High Court’s suggestion to bring this issue before the GST Council. However, discussions around it have not gained momentum, primarily due to differing interests among state governments. The minister pointed out that the council operates on principles of consensus and unanimity, making it challenging to move forward without broad agreement.
Another challenge is the general reluctance of states to forego significant revenue streams from fuel taxation. States have varied fiscal requirements, and many are concerned about the potential loss of income that might result from such a shift. As a result, there remains a significant divide between states controlled by different political parties when it comes to tax reforms related to fuel pricing.
Investments in Renewable Energy and Technology
Despite the challenges, the minister reiterated the government’s commitment to advancing renewable energy initiatives. He mentioned that green hydrogen is viewed as the future of fuel. Its success depends on local demand and production capabilities. The government is focusing on large-scale production of green hydrogen. This includes emphasizing a strategy of “local demand, local production, and local consumption.” Such an approach aims to create a self-sustaining ecosystem for green hydrogen. This ecosystem can support India’s energy needs while promoting economic growth.
The government has also focused on reducing fuel prices over the past few years, aiming to provide relief to consumers. This effort was facilitated by the Prime Minister’s decisions to lower central government CESS on fuel prices in late 2021 and early 2022. Additionally, initiatives such as the Pradhan Mantri Ujjwala Yojana have significantly increased the number of households with access to liquefied petroleum gas (LPG). The initiative has nearly doubled the number of household connections from 14 crore in 2014 to 33 crore today.
Balancing Energy Security and Growth
Overall, the discussion underscored the pressing need for long-term investments in both exploration and renewable energy technologies. Addressing the urgent requirements for consistent energy availability is vital to support India’s economic growth. The minister’s lecture highlighted the intricate balance between achieving energy security, managing state revenues, and transitioning to sustainable energy sources.
The path to enhanced energy security in India is fraught with challenges. However, the commitment to exploring domestic resources remains strong. The government is also investing in renewable energy. It aims to meet India’s growing energy demands effectively. Minimizing reliance on imports is a key focus. This approach paves the way for a sustainable energy future.
Dignitaries, including Raghunath Mashelkar, President of the Pune International Centre, attended this event. Vijay Kelkar, Vice President of the Pune International Centre was also present.
