The largest foreign investor in India’s energy sector BP Plc on Thursday said a non-conducive business environment and subsidies have diluted the country’s attractiveness to investors.
BP India head Sashi Mukundan said India will become the third-largest economy by 2030, after the US and China, and demand for energy will triple, presenting huge investment opportunities. “However, these opportunities are accompanied by several challenges. A non-conducive business environment, lack of adequate infrastructure, project bottlenecks, and significant energy-related subsidies -- all have distorted and diluted the overall attractiveness of the sector,” he said at a Petrotech pre-conference here.
While Mukundan did not elaborate, the comments come days ahead of the unveiling of the country’s second-largest auction of oil and gas exploration blocks, which Oil Minister M Veerappa Moily expects will attract foreign investment to revive the country’s almost stagnant oil and gas hunt. Planning Commission Member B K Chaturvedi said unless domestic prices are aligned with international rates, the country will not be able to sustain investments.
While Oil Secretary Vivek Rae said many discoveries are unviable at current artificially suppressed rates, ONGC Chairman Sudhir Vasudeva said right pricing is a prerequisite for raising domestic production. BP, which invested $7.2 billion to buy a 30 per cent stake in several oil and gas blocks of Reliance Industries, faced numerous delays in getting routine regulatory approvals. Its attempts to reverse fortunes at the flagging eastern offshore KG-D6 field were frustrated by these delays.
Also, with gas prices currently one-fourth the cost of importing the fuel, several projects remained economically unviable. “If we are to be the third-largest economy, then we need to start behaving like one. We cannot afford to not do things at scale or not explore all options to satisfy growing energy demand. It will also be more painful to do it all alone,” Mukundan said.