Through the looking Glass

“Alice: Would you tell me, please, which way I ought to go from here?

The Cheshire Cat: That depends a good deal on where you want to get to.

Alice: I don't much care where.

The Cheshire Cat: Then it doesn't much matter which way you go.

Alice: ...So long as I get somewhere.

Why is India’s economic growth slowing? Why has India stalled? Where are we heading? Much like Alice, the destination is blurred.

The government reported year-over-year growth in the last quarter of only 4.4 percent. From a euphoric 9 percent in 2008 the promise of high growth has not panned out over the past four years.

The causes for this slowdown are varied. There is an attitudinal shift toward foreign business and investment. Domestic private capital is rapacious. The imperial foreigners are out to colonize us. So who needs them? Change laws withn retrospective effect, rethink all exemptions, and get back to taxing them to Kingdome come. After all the only object of the Government, as any CAG will tell you is to make as much money as it possibly can!

Stature, Contracts and policy declarations be hanged. Business deals can be taxed retroactively after incomes are earned and reported. WE don’t believe in responsible legislation or contracts. Te onkly rule of law known to this country is that the law can be changed any time. And what cant be changed by law can always be taken care of by ordinances, rules, and even simple office memos and guidelines. 

SO impose  controls on natural gas. Every minister and bureaucrat loves a good allocation and rationing policy. We love quotas and the power these give to not just petty officialdom but even Groups of Minsiters. 

What does it matter if the country is voted as the “biggest disappointment” amongst a group of anyway crumbling BRIC nations .

SO further liberalization and market-oriented reforms are out. What is in is : a relentlessly falling rupee and stock market .The current economic malaise reflected in double digit inflation while the Indian credit rating diving to the bottom of the investment grade range .

It was not so four years ago .The growth story was stoked by energy demand and supply. During the last five years, India's gas consumption had grown by 14 per cent. Supplies were assured .The Indian economy seemed to be basking in the golden age of gas , solely on the back- to -back discoveries by RIL , ONGC and GSPC in the East coast of India , hitherto unexplored deep waters. 

Then the KG D6 devil brought on a climate of distrust and scepticism .Today while India’s’ demand for energy is soaring providers of energy are seen as adversaries , which strains the confidence of India ever meeting its energy security mandate. 

The devil then seems to be on the side of he energy importers impacting GDP, Balance of payments and growth.

While the domestic discovery of Gas assured India of an energy source that can help meet the demand , subsequent decisions and the risk/reward imbalance has discouraged exploration and development of discovered gas in deep waters of India.

Uncertainty on pricing and fluctuating decisions on gas allocation make it impossible to evaluate techno commercial decisions on investments .The lack of consumer confidence in gas, both its supply and its price impact the development of the sector. 

Whatever policy the government adopts, it needs to first to undertake confidence building measures before it announces the next NELP rounds . Poor and reduced participation is an indication of how oil majors view the rounds.

The response to NELP has slowed over the years. The first five rounds of NELP attracted total investments of $7 billion, which by end of three more rounds went up to just $11 billion. In the nine rounds of NELP till date (since 1999), out of the 268 blocks offered, more than 50 per cent are now with state-owned companies.  companies .

SO what is the answer to the exploration challenges in India. In an estimated area of 3.14 million sq. km, comprising 26 sedimentary basins, there are limitations to hydrocarbon reserves. The worst dampener is the lack of confidence in the role of the DGH in developing these reserves. Planning Commission estimates that by 2015, 100 per cent of the Indian sedimentary basin area is likely to be under exploration. The DGH’s obduracy on all accounts will not help that. 

If the government is keen to realize the objective of NELP as conceived in the 1990s, which is to address the increasing demand-supply gap in energy, it has to remove the red tape on tax and pricing. No risk no gain is the principle on which exploration of oil and gas works. If the Government wants to shun all the risks it can be sure there will be no one left to explore Indian basins.