The energy sector globally is going through a transition. Oil prices have rallied to a four-year-high, on the back of increasing demand and production cuts by both Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members. Now it has reached a point where India and other oil importing countries are starting to feel the heat. The Petroleum Planning & Analysis Cell (PPAC) estimates that even at an average crude price of $65 a barrel, India’s import bill could reach almost $110 billion in FY18-19, a jump of almost 25% over $88 billion in FY17-18.
This would imply a significant deterioration in the current account deficit, increase in inflation and adverse effect on the overall growth prospects of the economy. India continues to be the fastest growing large economy in the world. The Jan-March quarter of 2018, saw a 7.7% GDP growth rate, with more than 7% growth in electricity consumption, and more than 5% growth in consumption of petroleum products.
And this trend in energy consumption will continue in the medium- to long-term. International agencies including International Energy Agency (IEA), OPEC and BP etc. are projecting India’s energy demand to grow in excess of 5% over the next two decades, fastest among major economies in the world.