India will discuss the issue of ‘responsible’ pricing that balances the interests of both producers and consumers at a meeting of the Organization of Petroleum Exporting Countries in Vienna on June 22.
“Whenever we have met OPEC members these days, we have emphasised on the issue that global crude oil prices should be rational and should be able to meet global demand,” Petroleum and Natural Gas Minister Dharmendra Pradhan said on the sidelines of an event in New Delhi today.
India relies on imports to meet 80 percent of its oil needs and eight of its top suppliers are from the OPEC. International crude prices have hit $80 a barrel, the most in over four years, on production cuts by the oil producers’ cartel agreed to in November 2016 as well as renewed U.S. sanctions against Iran. Rising Brent prices put pressure on state-owned oil retailers in India to hike prices of petrol and diesel.
The oil minister in a recent meeting with the ambassadors from OPEC raised concerns about rising crude prices and its negative impact on consumers.
“We want crude prices in control for all sectors who consume oil like transportation and agriculture, among others, Pradhan said. “High oil prices are pinching consumers. I had discussed this with OPEC members earlier and will reiterate at the Vienna meeting.”
The rally in oil prices, however, stalled late last month after OPEC, Russia and their allies discussed a plan to boost production for the first time since 2016, prompting retailers back home to cut fuel prices. The OPEC at its seventh international seminar in Vienna will discuss whether to end its production freeze.
India and China are also in talks for an alliance between the state-run oil companies of both the countries to take on the OPEC. Last week, Chairman of Indian Oil Corporation Sanjiv Singh met with the head of China National Petroleum Corporation on joint crude sourcing. IOC is considering buying CNPC’s equity oil from overseas projects.
India, China, Japan and Korea are the top four oil consumers in the world, besides the U.S. The oil minister had earlier called for cooperation among these four major Asian economies against a premium charged by the OPEC. The cartel charges Asian nations a premium on every barrel of crude over the price paid by western buyers.
On a query on Union Minister Arun Jaitley’s recent blog mentioning spiralling fuel prices, Pradhan said, “India is third-largest energy consumer in the world. Our per capita energy consumption is less, and it will increase in the coming days. The UPA [United Progressive Alliance] government left a bad legacy of unpaid interests and principal on oil bonds. The government is dealing with its ill impacts.”
Rating agency Moody’s Investors Service has cautioned that any reduction in excise duty on petrol and diesel would adversely affect the fiscal deficit unless it is matched by a commensurate cut in expenditure.
“The Indian government can responsibly say that petroleum products will not be out of the reach of the poor or middle class. We will keep a mechanism where poor and middle-class Indians can afford petroleum products,” Pradhan said. “We will do whatever it takes to do that.”