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Oil shortage likely to start

pinching after elections

f oil is the lifeblood of the Indian econ- time that India has completely stopped
omy, the country may get anaemic procuring oil from the country.
The most worrisome part is how India
The LasT very soon. If reports are to be believed, will deal with the existing contracts and
India has completely stopped import-
Word I ing oil from Iran under pressure from orders that were already placed with Iran.
the United States. New Delhi is, however,
The country is scheduled to get two very
Abdul WAsey negotiating with Washington to allow it large crude carriers carrying 4 million bar-
to procure pending shipments for which rels of Iranian oil this month - one each at
contracts have already been signed with Paradip in the east and Kochi in the west.
Iran. India’s decision is in adherence with The two vessels were loaded in April. Will
a directive from the Trump administration, Washington allow it to unload them at Indi-
which called for New Delhi to end to all its an ports? The bigger question is: What next?
import of crude and petroleum products The government faces the immediate
from Tehran. challenge of having to find alternative sup-
The general public may start feeling the pliers to meet its huge energy needs. Even
pinch once the Lok Sabha elections are more worrying is the likely negative impact
over. After all, India is the second biggest higher oil prices will have on India’s current
buyer of Iranian oil after China. The coun- account deficit, fiscal deficit and inflation in
try had shipped in about 277,600
barrels per day (bpd) of oil from Opening up the
Tehran in April alone. The figure
was about 31.5 percent higher in renewable energy
the previous month. Finding an
alternate supplier will not only sector for more
take time but also impact the investments will
cost of imports, which will ulti-
mately hurt the pocket of com- cut over-dependence
mon people. on imported oil
The United States, which in-
troduced sanctions in Novem-
ber, had given a six-month waiv- the wider economy.
er to eight nations, including The current account deficit, which nar-
India. It allowed them to import rowed to 2.5 per cent of GDP in the Decem-
some Iranian oil. India was al- ber quarter thanks to lower oil prices, may
lowed to buy an average 300,000 get worse. The fiscal deficit, which has been
bpd of oil during November-April, but ac- widening in advance of the elections, is
tual volumes varied from month to month also likely to get increasingly out of control.
due to lack of ships after foreign shipping While inflation is relatively benign at the
lines backed out of Iranian deals under moment, any further acceleration in price
pressure from US sanctions. In April, Wash- gains will tie the hands of the Reserve Bank
ington asked buyers of Iranian oil, mostly in of India.
Asia, to halt purchases or face sanctions. If the country is to protect its interests
The approach was rude. India had never in the ever-volatile global oil market, the
bowed to such pressure. This had been true government will need to take steps to
even in case of Iran, which continues to rely diversify its supplier base and also work
on oil sales to run its economy. Tehran has towards increasing domestic sources of
been under sanctions for several years, but energy supplies.
India had always found a way to manoeu-
vre around them. This, however, is the first letters@tehelka.com

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