Indian Politics

Patrick Crow
Washington, D.C.
[email protected]

India still is under pressure to raise domestic petroleum product prices to international levels.

Due to its subsidy program, the government owes about $5.3 billion to domestic oil companies for selling products below market prices. About 60% of that is owed to state-controlled Indian Oil Corp.

Despite rises in world oil prices, the government has repeatedly postponed action on increasing products prices. Prime Minister Inder Kumar Gujral recently pledged to act soon, but given the fragility of his 14-party coalition, that is doubtful.

A government task force has urged the diesel subsidy be eliminated and kerosine and LPG subsidies be lowered this year. All prices would ramp up to market levels by 2002.

Meanwhile, the Gas Authority of India Ltd. said the natural gas subsidy will be phased out within 5 years. Gas prices have been frozen since 1995, and the government is mulling a 15% increase.

Gas demand is about 50 million cu m/day, but will jump to 147 million cu m/day by 2002. Production capacity is 64 million cu m/day but will increase only to 87 million cu m/day by 2002.

Contracts questioned

Meanwhile, India's Central Bureau of Investigation is inquiring into the award of contracts to develop three offshore oil fields.

Enron Oil & Gas India Ltd. and India's Reliance Industries Ltd. have a contract for Panna and Mukta fields in the Bombay basin off western India.

Videocon Petroleum Ltd., Command Petroleum Ltd. of Australia, and Marubeni Corp. of Japan hold a contract for Ravva field off southwestern India.

It is alleged that India's Oil and Natural Gas Corp. was not paid its exploration expenses, and ONGC officials negotiating the contracts later were given jobs by the companies.

Two public interest groups also have sued to void the Enron-Reliance contract. ONGC holds a 40% stake in the fields, and the other two firms have 30% each.

Enron said it won the concession in a 1994 bidding process that "was conducted fairly and in accordance with Indian law."

Last year, Enron was cleared of bribery and corruption allegations in securing a $2 billion contract to build a power plant at Guhagar. It was the first foreign private investment in power generation in India, but litigation delayed the project for months.

In another snafu involving Indian politics, Unocal Corp. wants to build a gas pipeline from central Asia to Pakistan via Afghanistan with an extension to India, which has the potential of being the biggest consumer of gas in the Asia-Pacific region.

But Unocal's alleged talks with the militant Taliban in Afghanistan apparently have prompted the Indian government to keep it at arm's length.

Prime Minister Gujral is trying to remain neutral on Afghanistan and apparently thinks that if senior bureaucrats and politicians in his government meet with Unocal, that neutrality would be questioned.

Some observers say the pipeline will not be viable unless it extends to India. Neither Afghanistan nor Pakistan are major gas consumers now.