Net export of petroleum products has fallen 42% in three years as domestic demand sharply rose for polluting fuel oil and and pet-coke as well as liquefied petroleum gas (LPG), the cleaner cooking gas mostly used by households.
India imports more than 80% of crude oil and, using its large network of refineries, produces petroleum products more than it can consume. It also imports multiple petro products but stays a net exporter. It has also been adding refining capacity regularly, but accelerating demand for oil products in a fast expanding economy has steadily shrunk the import-export gap for the last three years.
The domestic demand for petroleum products has risen 23% while production has increased only 10% in three years since 2013-14 . In 2013-14, the country’s net export of petroleum products reached a peak of 51.2 million tonne (mt). It fell to 29.6 mt in 2016-17, while total exports fell 3.5% to 65 mt and total imports rose 115% to 36 mt. Imports were worth $10.6 billion and exports $28.7 billion in 2016-17.
A 70% jump in net import of LPG, 72% drop in net export of fuel oil and 18% fall in net export of naphtha squeezed India’s net export in three years that also witnessed a fifth jump in net export of jet fuel. Net export of diesel and petrol barely changed. Another key contributor to the trend was a sharp rise in the import of pet-coke, whose domestic consumption just doubled between 2013-14 and 2016-17.
Increasing use of pet-coke and fuel oil by industry has been a major concern for the environment. Pet-coke, a cheaper alternative to coal, is increasingly used by cement and power industry but is expected to face in future deeper policy restrictions due to environmental concerns. Similarly, widespread use of fuel oil, usually available at less than the price of crude oil, by small and big industries is also considered a big health hazard.
There have been demands of restricting the use of both fuels by civil society groups. Increased use of LPG has followed a government programme that aims at rapid adoption of cooking gas by more and more households, especially in rural areas where hazardous firewood is still used in kitchens. LPG consumption has risen by third in last three years.
To boost exports and value addition, oil refiners need to go upmarket into petrochemicals and research-based products. We do need to incentivise a knowledge-intensive speciality chemicals sector here, to foray into new materials and related products. In tandem, there’s the requirement to step-up supply of piped natural gas nationally, so as to reduce pressure on LPG imports.
The way ahead is to put in place a pan-India pipeline network, complete with unbundling of infrastructure for storage, pumping stations and the like. The idea ought to be to invite modular investments with transparency and speed.
Source: economictimes.indiatimes.com