Editorials/Opinions Analysis For UPSC 23 May 2023
- The new policy for petrol pricing
- Indian Biomanufacturing as a Quad-Led Hub
The new policy for petrol pricing
In order to solve pricing concerns in the Indian energy sector, the Kirit Parikh committee on petrol pricing changes presented a number of significant suggestions.
GS Paper-3: Infrastructure: Energy, Ports, Roads
Describe the main suggestions made by the Kirit Parikh committee for changes to petrol pricing and their implications for India’s energy sector. (250 Words).
Oil and Gas Sector in India:
- The oil and gas sector is one of India’s eight key industries and has a significant impact on how all other significant economic sectors make decisions.
- Since India’s economic growth is closely tied to its energy needs, more oil and gas will likely be required, making the industry highly favourable for investment.
- As of 2022, India remained the third-largest oil consumer in the world.
- By 2022, exploration and production investments in the sector are anticipated to total US$25 billion.
- With 23 refineries already in operation, India is a global centre for refining. Expansion is intended to attract foreign capital for export-focused infrastructure, such as product pipelines and export terminals.
- India produced 29.7 MMT of crude oil in FY22.
- The IEA predicts that India’s primary energy demand would nearly double to 1,123 million tonnes of oil equivalent by 2021 as the country’s gross domestic product (GDP) rises to US$8.6 trillion.
- With a capacity of 248.9 MMTPA as of September 2021, India was the second-largest refiner in Asia.
- Approximately 35% of the overall refining capacity was controlled by private enterprises.
The Committee’s main recommendations are as follows:
- The country’s energy system will be significantly impacted by these proposals.
- Pricing for APM Gas: The committee proposed establishing a floor and ceiling price range for the gas known as APM (Administered Price Mechanism), which is generated by government-owned firms like ONGC and OIL.
- The $4/MMBTU floor price ensures that these companies’ marginal costs of production are covered by the petrol price.
- In contrast, the $6.5/MMBTU cap price is set below the price of imported regasified LNG.
- This pricing mechanism provides stability and ensures a fair return for the producers while safeguarding consumers from excessively high prices. o The floor price ensures that the petrol price covers at least the marginal cost of production, while the ceiling price is set below the cost of regasified imported LNG.
- Pricing Regimes for Other Fields: The committee recommended allowing gas producers in fields acquired through competitive bidding to establish pricing as they see fit, as long as they stay within a ceiling price that would be updated every six months.
- This suggestion encourages market competitiveness and permits effective pricing based on market trends.
- Eliminating the price cap as of January 2026 would increase market freedom.
- Tying the price of APM petrol to the price of crude oil: The committee suggested tying the price of APM petrol to the monthly average price of imported Indian crude oil.
- By keeping the price of petrol in line with that of other fuels like LPG and diesel, customers will find it more affordable.
- It also makes sure that petrol prices are competitive and responsive to changes in the world energy market.
- Incentives for Domestic Production: o The committee suggested eliminating the ceiling price and allowing total pricing and marketing freedom by January 2027 in order to increase domestic gas production.
- Incentives for investments in exploration and production (E&P) operations would be created by this action.
- Additionally, offering producers like ONGC and OIL a 20% price premium in exchange for expanding production from their non-APM fields promotes growth in domestic production.Metric Million British Thermal metric, or MMBtu, is a metric that has historically been used to quantify heat content or energy value. It is frequently used to measure natural gas in terms of energy globally.
Relevance in Relation to India’s Energy Sector:
- Better price Mechanism: The suggestions offer a clear and organised price system that strikes a balance between the needs of producers, consumers, and the government.
- This promotes a just and effective natural gas market in India’s energy industry.
- Promoting Domestic output: The suggestions seek to boost domestic gas output by encouraging investments in E&P operations and allowing for flexible pricing.
- This improves energy security and lessens dependency on pricey petrol imports.
- Consumer Benefit: The proposals aim to make petrol more affordable by ensuring that prices are linked to alternative fuels, shielding consumers from disproportionate price swings, and encouraging supplier competition.
- Sectoral Growth: o The proposals are in line with the government’s goal of increasing the gas share to 15% by 2030, given the rising proportion of natural gas in India’s energy mix.
- Promoting the usage of petrol in industries such as transportation, household (PNG), and power (CNG) helps industries as they move to cleaner forms of energy.
The following are only a few of the significant actions the Indian government has taken to advance the oil and gas industry:
- On May 21, 2022, the government announced a decrease in excise duty for petrol and diesel of Rs. 8 (US$ 0.10) and Rs. 6 (US$ 0.077), respectively.
- The government accepted revisions to the biofuel policy in May 2022, moving the goal of mixing 20% ethanol with petrol from 2030 to 2025–2026.
- The customs tariff on some essential chemicals, including methanol, acetic acid, and heavy feedstocks for petroleum refining, was decreased in the Union Budget 2022–23.
- In an effort to lower global crude oil prices, India stated in November 2021 that it will release 5 million barrels of crude oil from its strategic petroleum reserves. This closely corresponds to the nation’s daily consumption.
- India and the US decided to increase their energy cooperation by concentrating on new fuels in September 2021. The Strategic Clean Energy Partnership (SCEP) between the United States and India had a ministerial summit after that.
- A ruling authorising 100% foreign direct investments (FDIs) through the automatic route for oil and gas PSUs was authorised by the Department for Promotion of Industry and Internal Trade (DPIIT) in July 2021.
The floor and ceiling prices for APM gas, along with the pricing formula and market-based pricing for other fields, contribute to the stability, competitiveness, and sustainability of the gas market. These reforms also support domestic gas production, encourage the use of cleaner fuels, and make it easier for the government to implement its energy policies.
Indian Biomanufacturing as a Quad-Led Hub
The potential creation of an Indian biomanufacturing cluster under the leadership of the Quad to improve collaboration and eliminate supply chain vulnerabilities in the biotechnology industry.
GS Paper-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests, India and its neighborhood- relations
Consider the advantages and drawbacks of building a biomanufacturing hub led by the Quad in India, as well as the implications for enhancing collaboration between the Quad countries in the field of biotechnology. (150 words)
- In order to promote collaboration and explore potential in critical and emerging technologies, including biotechnology, the Quad—Australia, India, Japan, and the United States—created a Working Group on Critical and Emerging Technologies in March 2021.
- The potential for Quad cooperation in biotechnology, however, is yet largely unrealized.
- It has been suggested that a Quad-led biomanufacturing hub be established in India, which would give the essential boost to better cooperation in this area.
- Researchers at the Australian National University have carefully researched the concept, which has a lot of promise for the Quad nations.
The Transformative Power of Biomanufacturing:
- In order to make chemicals and materials on a large scale, biomanufacturing uses living systems like cell cultures and microbes.
- Up to 60% of the physical inputs to the global economy could potentially be produced using biomanufacturing, according to projections. o Several nations, including the United States and China, recognise the significance of optimising this ecosystem and have put in place specific policies to shape their bio-economies.
Strengths of the Quadrilateral Cooperation:
- India’s National Biotechnology Development Strategy envisions the nation as a “Global Biomanufacturing Hub” by 2025, with a target investment of $100 billion. • It is important to recognise that India’s aspirations require outside assistance, particularly from its Quad partners, to launch the country’s initial development.
- To take advantage of India’s economic potential and alleviate supply chain weaknesses, the Quad should develop a biomanufacturing hub there. Each Quad nation has complementary assets that can be used to build this hub.
- Japan, Australia, and the U.S. all have established biotechnology innovation ecosystems and intellectual property, and the U.S. has large financial capacities.
- India, on the other hand, has the capacity to offer economical scalability and a competent labour force.
India’s Eligibility to Serve as a Biomanufacturing Centre
- India is the perfect location for the biomanufacturing hub because of its ready infrastructure, knowledge of pharmaceutical manufacturing, and labour pool.
- India also holds significant potential in low-cost biomanufacturing, particularly in the production of enzymes, reagents, research materials, and equipment, according to the Australian Strategic Policy Institute, which recognises India as a top performer in the field.India is thought to have manufacturing costs that are 33% less than those in the US. To become a global leader, India must yet significantly improve its capabilities.
Building Up Physical Infrastructure
- Within the next three to five years, India wants to double its fermentation capacity to 10 million litres in order to establish itself as a major biomanufacturing hub.
- Like its hegemony over small-molecule active pharmaceutical ingredients (APIs), China has likewise declared its goal to dominate this sector.
- India has introduced a production-linked incentive programme that distributes $2 billion to the pharmaceutical industry for the manufacture of biopharmaceuticals, APIs, important starting materials, and associated items in response to worries about China’s hegemony.
- The proposed hub can facilitate technology transfer, connect investors, and establish a biomanufacturing fund administered through the Quad to support India’s efforts in reducing dependency on China. o However, dependence on China in the biomanufacturing sector would be detrimental to both India and the Quad.
- Commercialising research and development should also be a priority of training, as this is a problem shared by non-US nations in the Quad.
Promoting Inter-Quad Collaboration
The biomanufacturing hub can act as the focal point for all ongoing bilateral government initiatives and set up an office for research collaboration to promote cross-Quad cooperation.Additionally, the centre can harmonise biomanufacturing-related language, rules, and data-sharing to guarantee safe supply chains for the Quad states and promote international cooperation.Such attempts at streamlining will improve cooperation among the Quad nations and open doors for partnerships with other countries.
- The development of an Indian biomanufacturing hub under the leadership of the Quad nations has enormous potential to revolutionise the world’s industrial system and to advance the position of the Quad nations in the biotechnology industry.
- By utilising the complementary strengths of the Quad nations and addressing supply chain vulnerabilities, the hub can accelerate technology transfer, boost workforce quality, and harmonise regulations, ultimately establishing India as a global leader in biomanufacturing. o The Quad-led biomanufacturing hub will not only benefit India but also enhance co-operation between the nations.