MEBE Project Increase in Fuel Consumption And Impact of its Subsidies On Indian Economy Objective 1:- The situation

of oil subsidy before liberalization.

Oil in India :

The early oil fields discovered in India were of modest size. Oil production in India amounted to 200,000 tons in 1950 and 00,000 tons in 19!0. "y the early 19#0s, production had increased to more than $ million tons. In 19# the Oil and %atural &as 'ommission discovered a lar(e field)) called the "om*ay +i(h))offshore from "om*ay. ,roduction of Indian oil from that field was responsi*le for the rapid (rowth of the country-s total crude oil production in the late 19#0s and throu(hout the 19$0s. In ./ 19$9, oil production pea0ed at 1 million tons, of which "om*ay +i(h accounted for 22 million tons. India has thirty)five ma2or fields onshore 3primarily in 4ssam and &u2arat5 and four ma2or offshore oil fields 3near "om*ay, south of ,ondicherry, and in the ,al0 6trait5. Of the ,$2$ wells, in 1990 2,51 were producin( at a rate of !! ,5$2 *arrels per day. The oil field with the (reatest output is "om*ay +i(h, with 02,#9# *arrels per day production in 1990, a*out fifteen times the amount produced *y the ne7t lar(est fields. Total reserves are estimated at !.1 *illion *arrels. The (overnment has sanctioned am*itious e7ploration plans to raise production in line with demand and to e7ploit new discoveries as rapidly as possi*le. In the late 19$0s and early 1990s, there were encoura(in( finds in Tamil %adu, &u2arat, 4ndhra ,radesh, and 4ssam8 many of these discoveries were made offshore. In the early 1990s, the (overnment renewed attempts, which had *e(un in the early 19$0s, to interest forei(n oil companies in purchasin( e7ploration and production leases. These efforts drew only a modest response *ecause the terms offered were difficult, and forei(n companies remained suspicious of India-s investment climate. One response, a(reed on in 9anuary 1995, was an Indian):uwaiti 2oint venture to invest in a new oil refinery to *e *uilt on the east coast of India. 6u*stantial ;uantities of natural (as in India are produced in association with crude oil production. <ntil the 19$0s, most of this (as was flared off *ecause there were no pipelines or processin( facilities to *rin( it to customers. In the early 19$0s, lar(e investments were made to *rin( (ases from "om*ay +i(h and other offshore fields ashore for use as fuel and to supply feedstoc0 to fertilizer and petrochemical plants, which also had to *e constructed or converted to use (as. "y the mid)19$0s, natural (as could *e delivered to facilities near "om*ay and near :andla in &u2arat. In the mid)1990s, a 1,#00)0ilometer trans)India pipeline was *ein( *uilt8 the pipeline will lin0 the facilities near "om*ay and :andla to a series of (as)*ased fertilizer plants and power stations. India-s need for oil and petroleum)*ased products))a*out 0 million tons per year))far e7ceeded its domestic production capa*ilities of 2$ million tons per year in the early 1990s. &iven India-s dependency on ,ersian &ulf resources, proposals were made in the early 1990s to develop natural (as pipelines from Iran, =atar, and Oman that would run under the 4ra*ian 6ea to one or more west coast terminals.

2.5 ,opulation

4nalysis>) There has *een a (radual increase in the population, industries and there*y there has *een an increase in the ener(y production over the years. ?hen we analyse the trend in population we can see that the rate of (rowth of population is decreasin( in the (iven time frame, however in real term the population is risin(. The hi(hest rate of (rowth in population was calculated durin( 19$0)19$5 32.0 @5, and continuously the (rowth trend is decreasin( till 2005. The calculated (rowth rate of the population for the full sample from 19$0)2005 is 1.$ @, which is more than the (rowth rate from 19$0)1990 and less than 1991)2005. Aven the population is (rowin( at a faster rate compared to other developin( countries *ut from 19$0 to 2005 the rate of (rowth of population has came down and so as the per capita consumption of ener(y resources. The real &B, is increasin( from 19$0 to 2005. The &B, (rowth has recorded a positive (rowth from 19$0 till 2005. +owever the (rowth rate was more from 19$0)19$5 30.11@5 it has a decreasin( trend afterwards. The consumption has *een increasin( from 19$0 at a faster rate. 19$0 to 19$5 has recorded the hi(hest (rowth rate in consumin( ener(y in India, and the ne7t hi(hest (rowth rate has calculated for the period 1991 to 199!. The calculated (rowth rate in consumption for the different time period is *ein( positive *ut e7cept the a*ove two periods all other periods the rate of (rowth is not much rapid. The consumption durin( 1991 to 199! was more rapid as that was the period when the new economic policy was at the *e(innin( sta(e. 4fter 199! the total primary ener(y consumption has increased *ut at a decreasin( rate. 'onsiderin( the structural *rea0 in 1990 the (rowth rate was calculated and the result found to *e more faster for 19$0 to 1990 3!.22@5 compared to 1991 to 2005 3 .1$@5 . The overall (rowth rate from 19$0 to 2005 in consumption is calculated to *e 5.2$@ . The consumption was more rapid in the first phase compared to the second as well as compared to the overall (rowth rate.

The consumption has *een increasin( from 19$0 at a faster rate. 19$0 to 19$5 has recorded the hi(hest (rowth rate in consumin( ener(y in India, and the ne7t hi(hest (rowth rate has calculated for the period 1991 to 199!. The calculated (rowth rate in consumption for the different time period is *ein( positive *ut e7cept the a*ove two periods all other periods the rate of (rowth is not much rapid. The consumption durin( 1991 to 199! was more rapid as that was the period when the new economic policy was at the *e(innin( sta(e. 4fter 199! the total primary ener(y consumption has increased *ut at a decreasin( rate. 'onsiderin( the structural *rea0 in 1990 the (rowth rate was calculated and the result found to *e more faster for 19$0 to 1990 3!.22@5 compared to 1991 to 2005 3 .1$@5 . The overall (rowth rate from 19$0 to 2005 in consumption is calculated to *e 5.2$@ . The consumption was more rapid in the first phase compared to the second as well as compared to the overall (rowth rate. +ence is can *e said that in the developin( process from 19$0 to 1990 there has *een more rapid ener(y consumption.

PER CAPITA CONSUMPTION

The (rowth rate of per capita use of ener(y resources was calculated to *e hi(hest durin( 1991) 1995 35. 5@5, compared to 19$0)19$5 . +owever from 19$!)1990 and 199!)200 the rate of (rowth was calculated to *e 1.#1@ and 1.21@ . Burin( 2001)2005 the rate of (rowth in per capita ener(y consumption was at a slow rate of (rowth and calculated to *e 2. 1@. .rom 19$0 to 19$5 *oth total consumption and production (rowth rate was found to *e hi(hest and a(ain durin( 1991)1995 the (rowth rate was found to *e hi(hest. .rom the per capita ener(y consumption we found durin( those years the rate of (rowth was hi(hest. The per capita consumption of ener(y resources is increasin( *ut the rate of (rowth of per capita consumption is followin( a decreasin( trend.

?hat caused IndiaCs &B, (rowth to accelerate in the early 19$0sD 'onventional e7planations>
1. +i(her savin(s rates *ecause of nationalizin( *an0s.

!. Indira &andhi win0ed at the industrialists and (rowth too0 off

In reality, there wasnCt any acceleration. "ut there was an appearance of acceleration ) the whole world had seen a sta(flation downturn in the 19#0s, and India was not much different. Avidence> Eeallocation of la*or from a(riculture to industry F movement from lower to hi(her productivity 6everal instances when Indian &B, (rowth had e7ceeded 5 percent. The most important and disconcertin( fact a*out the Indian economy is that the (ross national product declined in 19#9)$0 *y a*out 1 per cent. 4 fall in a(ricultural production of a*out 10 per cent and a reduction of a*out one per cent in industrial production were responsi*le for this outcome. The set)*ac0 in a(riculture was partly on account of the severe drou(ht which affected lar(e parts of the country.

.indin(s>)

"ud(et findin(s 19$5)19$! 4n allocation of Es.1,100 crores has *een made for the Ginistry of ,etroleum H %atural &as for 19$!)$#. 2. In e7cise ta7ation a ve7atious ;uestion which has *een often encountered is the ta7ation of inputs and the cascadin( effect of this on the value of the final product. The Ion( Term .iscal ,olicy had stated that the *est solution would *e to e7tend the present system of pro)forma credit to all e7cise a*le commodities with the e7ception of a few sectors with special pro*lems li0e petroleum, to*acco and te7tiles. This scheme, which has *een referred as Godified Jalue 4dded Ta7 3GOBJ4T5 scheme ) I shall stress GOBJ4T, not G4BJ4T ) allows the manufacturer to o*tain instant and complete reim*ursement of the e7cise duty paid on the components and raw materials. 4t present there is a concessional rate of duty on the fuel efficient cars which comes to a*out 15 per cent ad valorem or less. 4s I have mentioned earlier, full GOB/4T will *e e7tended to the automo*ile industry and the new GOBJ4T rates for fuel efficient cars would *e 20 per cent ad

valorem. I feel that such cars and their purchasers can *ear an increase in the rate of duty *y 5 per cent. . The current rate of duty for non)fuel efficient cars is around 25 per cent. The GOBJ4T rate of such cars would *e 10 per cent. It is proposed to increase the e7cise duty on non)fuel efficient cars also *y 5 per cent so that the final duty would *e 15 per cent. 4 concession of e7cise duty was (iven for non)fuel efficient cars used as ta7is. It is proposed to fi7 this rate at 10 per cent. MINISTER OF FINANCE, INTRODUCING THE BUDGET FOR THE YEAR 1980-81
1. The most important and disconcertin( fact a*out the Indian economy is that the (ross national product declined in 19#9)$0 *y a*out 1 per cent. 4 fall in a(ricultural production of a*out 10 per cent and a reduction of a*out one per cent in industrial production were responsi*le for this outcome. The set)*ac0 in a(riculture was partly on account of the severe drou(ht which affected lar(e parts of the country. The decline in industrial production was mainly the result of a serious deterioration in the infrastructure.

2. The direct and indirect effects ofthe increases in the prices of crude oil and oil products also contri*uted to the inflationary pressures in the economy as also the lon( delayed, ad2ustments in administered prices of commodities li0e coal and steel. 1. A7port (rowth in value terms has only *een $ per cent or so which means there was hardly any (rowth in terms of volume as world inflation has proceeded at a*out 10 per cent in 19#9)$0. On the other hand imports have increased *y a*out 25 per cent principally on account of increased oil *ill *ecause of steep rise in the prices of oil and oil products and the conse;uential impact on other imports such as fertilizer. . .irstly, the ma7imum ;uantities of diesel and 0erosene were imported *etween 9anuary and 4pril, 19$0, !.2 la0h tonnes of 0erosene and 1.1 million tonnes of diesel oil were imported as compared with . # la0h tonnes and .$ la0h tonnes respectively in 9anuary)4pril 19#9. 6econdly, the movement of these commodities was speeded pp *y all availa*le means. The result has *een an increase in the level of supplies amountin( to 10 per cent compared with the correspondin( months in 19#9 and avoidance of a possi*le adverse effect on ra*i production due to a diesel shorta(e. 5. .orests can play an important part in providin(one such fuel. 46 forests in India have suffered fast destruction *y people in theirsearch for fuel, it is essential that peopleCs participation in the development of forestsis secured on an ur(ent *asis. 6ocial forestry in villa(es will *esides meetin( the ener(y re;uirements of the people also provide additional employment. The raisin( of fuel and fodder is proposed to *e made a part of Ginimum %eeds ,ro(ramme and it will receive hi(h priority in the %ational Eural Amployment ,ro(ramme.

!. ,ressure coo0ers which ta0e the drud(ery out of the house wifeCs daily tas0s and save fuel now attract duty at 15 per cent. SPEECH OF SHRI R.VENKATARAMAN MINISTER OF FINANCE INTRODUCING THE BUDGET FOR THE YEAR 1981-82 1. 4 new policy has *een enunciated to permit investment funds from oil e7portin( developin( countries to flow into new units in selected industries in the form of portfolio investment. The (uidelines for issue of de*entures were revised to permit more effective use of this instrument for mo*ilisation of funds.
!. The economy remains su*2ect to continuin( cost push pressures, includin( especially the transmission of international inflation throu(h risin( prices of oil and other essential imports. 6ince these cost push pressures are li0ely to persist, continued vi(ilance is re;uired in the comin( year.

1. The *alance of payments situation facin( the country (ives cause for concern. Eisin( prices of imported oil have added enormously to the e7ternal payments *urden on the economy. The import *ill for crude oil and petroleum products is li0ely to reach Es.5,!00 crores in 19$0)$1, compared with only Es.1,!## crores two years a(o. Gost of the increase is due to the increase in on prices. The total import *ill in 19$0) $1 is li0ely to *e around Es.11,100 crores whereas e7ports are pro2ected to *e only Es.#.100 crores. . +i(h priority has *een accorded to oil and natural (as e7ploration in order to reduce our dependence on imported supplies as much as possi*le. The Oil and %atural &as 'ommission has found evidence of hydrocar*ons in several structures *oth offshore and onshore and it is essential to pursue the e7ploration and development effort with all the resources at our command. To this end, an am*itious pro(ramme is envisa(ed for the Oil and %atural &as 'ommission and 011 India Itd. 5. I said earlier that I would e7clude some items from the proposed increase in the au7iliary duties of customs imports of essential items li0e)edi*le oil will *e e7empted from the proposed increase. "ul0 petroleum products such as 0erosene and hi(h speed diesel oil and steel imported for *uffer stoc0 operations will also not attract the increased levy. INTRODUCING THE BUDGET FOR THE YEAR 1982-83 1. &ross %ational ,roduct had declined *y as much as .$ per cent in 19#9)$0, the infrastructure was in sham*les, and prices had increased at an annual rate of 21.1 per cent *y the end of 9anuary, 19$0. 2. I am (lad to say that we have (one a lon( way in achievin( these o*2ectives. Our &ross %ational ,roduct in real terms increased *y #.5 per cent in 19$0)$1, and is e7pected to (row further *y .5 per cent in 19$1)$2.

1. I am happy to inform the +ouse that there has *een an all round improvement in revenue receipts durin( 19$1-$2. . This increase is due to hi(herprofits accruin( to Oil and %atural &as 'ommission and Oil India followin( the increase in the prices of crude effected last 9uly. INTRODUCING THE BUDGET FOR THE YEAR 1983-84 1.4 drou(ht year is always a difficult one for the economy. The decline in a(ricultural production that the drou(ht entails has an effect which (oes *eyond the rural sector. The drop in the purchasin( power of our farmers e7erts a deflationary influence on industry.. 2. ?hile we have successfullyweathered the immediate impact of the drou(ht, we must remem*er that its effects areli0ely to *e spread over a lon(er period than one season or one year. The international situation continues to *e full of uncertainty and should there *e a resur(ence of inflation a*road, particularly in respect of commodities that we import, it could easily distur* our domestic price situation. ?e must also remain vi(ilant a(ainst anti)social elements, hoarders and *lac0 mar0eters. 1The 6i7th ,lan has placed considera*le emphasis on acceleratin( investment in the Aner(y sector. The total outlay for this sector coverin( petroleum, power and coal would *e Es.501 crores, accountin( for more than 1! per cent of the total 'entral ,lan outlay. 'rude oil production is e7pected to reach 21 million tonnes this year, and increase further to around 2! million tonnes in 19$1)$ .

INTRODUCING THE BUDGET FOR THE YEAR 198 -8! 1. 6ome of the factors that have wor0ed in our favour in the 6i7th ,lan will not operate with the same vi(our in the 6eventh ,lan. Oil production, which had increased *y a*out 1$ million tonnes durin( the last five years, may not increase at the same rate in the future..

"i*lio(raphy>) http>KKdata*an0.world*an0.or(KddpKhome.doD6tepL2HidL Hh4ctiveBimensionIdL?BIM6eries http>KKwww.imf.or(Ke7ternalKpu*sKftKweoK2012K01KweodataKinde7.asp7 http>KKwww.*ancaditalia.itKstudiricercheKconve(niKattiKpu*lMe7peKiiiK!01) ! 0Mpattnai0M*oseM*hattacharyyaMchander.pdf

http>KKplannin(commission.nic.inKreportsKsereportKserKstdyM*(dsu*s.pdf http>KKwww.commonsenseeconomics.comK4ctivitiesK&overnment6pendin(.pdf http>KKindia*ud(et.nic.inKes19$$)$9K9@20,ro*lems@20and@20,rospects.pdf http>KKindia*ud(et.nic.inK*speechK*s19$#$$.pdf http>KKindia*ud(et.nic.inK*speechK*s19$!$#.pdf http>KKindia*ud(et.nic.inK*speechK*s19$5$!.pdf http>KKindia*ud(et.nic.inK*speechK*s19$ $5.pdf http>KKindia*ud(et.nic.inK*speechK*s19$1$ .pdf http>KKindia*ud(et.nic.inK*speechK*s19$2$1.pdf http>KKindia*ud(et.nic.inK*speechK*s19$1$2.pdf http>KKindia*ud(et.nic.inK*speechK*s19$0$1.pdf http>KKwww.*ancaditalia.itKstudiricercheKconve(niKattiKpu*lMe7peKiiiK!01) ! 0Mpattnai0M*oseM*hattacharyyaMchander.pdf