Eco Survey: Urgent need to address fuel supply bottlenecks

New Delhi: Fuel supply, restructuring debt of the power distribution companies and oil and gas exploration policies need to be addressed immediately to remove hurdles in the energy sector, Economic Survey said.

“The short-run action needed to remove impediments to implementation of projects in infrastructure, especially in the area of energy, includes ensuring fuel supply to power stations, financial restructuring of discoms, and clarity in terms of the NELP (New Exploration Licensing Policy),” the survey said.

[caption id=“attachment_642941” align=“alignleft” width=“380”] FDI inflows in the power and petroleum sectors (April-November 2012) plummeted to $456 million. Reuters[/caption]

Problems like delays in obtaining environmental clearances, land acquisitions and rehabilitation need to be suitably addressed in fast-track mode to achieve the 12th Plan (2012-17) targets for coal production. Aligning domestic energy prices with the global prices, especially when large imports are involved, may be ideal option as misalignment could pose both micro and macro economic problems.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

Underpricing of energy to the consumer not only reduces the incentive for being energy efficient, it also creates fiscal imbalances. Leakages and inappropriate use may be the other implications, the survey said. The government has taken several initiatives for rationalising the energy prices in different sectors. The pricing of coal is done now on gross calorific value (GCV).

In case of petroleum products pricing, government on 25 June 2010 had announced that the price of petrol was fully deregulated and the oil companies were free to fix it periodically. In January 2013, the government announced the new road map providing for a gradual price increase for reducing diesel

under-recoveries.

Admissibility of subsidised number of liquefied petroleum gas (LPG) cylinders and prices of LPG have also recently been revised. Import dependence on crude oil is projected at 78 percent while that in coal will be 22.4 percent by 2016-17.

Foreign Direct Investment or FDI inflows in the power and petroleum sectors (April-November 2012) plummeted to $456 million and $210.73 million, respectively. These sectors witnessed FDI inflows to the tune of $1436.75 in the power sector and $1971.97 in the oil sector were reported in the same period in 2011.

It is important to ensure that domestic production of coal increases from 540 million tonnes (MT) in 2011-12 to the target of 795 million tonnes at the end of the Plan Period. A GDP growth rate of about 8 percent requires a growth rate of about 6 per cent in total energy use from all sources, the survey noted.

PTI