P Chidamabaram, Union Minister of Finance not only dubbed M Veerappa Moily, Union Minister of Petroleum & Natural Gas’ fuel conservation initiatives ‘ambitious’ but also suggested more oil imports to be financed through external commercial borrowings (ECBs) to contain Current Account Deficit (CAD).
Chidambaram’s remarks came just a day before the launch of Moily’s 6-week mega fuel conservation drive that’s aimed at reducing oil imports by 3 per cent or $2.5 billion in value terms.
Oil is the biggest commodity contributing to the country’s total import bill followed by gold. As per estimates, India forked out nearly $144.29 billion last fiscal importing oil and is projected to spend approximately $160 billion during the current fiscal.
Owing to high imports, CAD touched a record high of 3.7 per cent level during the current financial year.
Moily’s conservation campaign — to limit oil consumption growth to last year’s 4.1 per cent level — is projected to save $2.5 billion and prop up the rupee that has slid sharply against the US dollar this fiscal.
He also outlined the drive as well as other measures in a letter to the Prime Minister and Chidambaram on August 30 saying such initiatives would help save $20 billion in foreign exchange outgo.
Responding to Moily’s letter, Chidambaram wrote back last week saying that the projected savings of foreign exchange on account of various measures proposed are optimistic, official sources said.
“While it is recognised that a conservation campaign might result in some reduction in petro-product consumption, the estimates of savings projected at 3 per cent, over and above the proposed crude imports cut, appear to be ambitious,” Chidambaram wrote.
Stating that only $3.75 billion out of the total crude oil import bill of over $160 billion is proposed to finance through ECBs, Chidambaram said the possibility of increasing the ECB mode should be explored.
He also wanted oil companies to be ‘encouraged to import more crude oil from Iran and their imports from Iran be reviewed regularly.’