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Analysis: India's energy reforms on firm footing, can withstand political upheaval

New Delhi — The sweeping energy reforms pursued by India in recent years have gained broad acceptance and are here to stay irrespective of which political party or alliance comes to power after the federal elections which will take place later this year.

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That was the common view among delegates, policymakers, chief executive officers and analysts attending the three-day Petrotech conference in New Delhi to discuss the outlook for energy markets in a fast-changing landscape.

At the same time, industry officials urged the Indiangovernment to take further steps to boost investment in order to lift domestic oil and gas production. In addition, there was a need to expedite the production and development of other forms of energy as the country strives to reduce its dependence on imported oil.

"While oil and gas are likely to remain prominent fuels in the global energy basket, we continue to explore a green path for an inclusive tomorrow that will not only benefit the economy but also re-energize the E&P ecosystem," B. Anand, CEO of Nayara Energy, told S&P Global Platts.

"With India's remarkable leap in the World Bank's ease of doing business ranking, this is an opportune time for the Indian economy to strengthen business fundamentals, expedite investments and boost domestic production," he added.

Government officials said that the upstream sector was a focus area for development.

"We have taken several measures to overhaul the hydrocarbon policy framework to ensure energy security for the country, while pursuing the green path to progress," petroleum minister Dharmendra Pradhan said.

"The second bidding round for both Discovered Small Field Policy and Open Acreages Licensing Policy are now underway and we have seen encouraging response from investors. The overwhelming participation from investors is a testimony to their faith and confidence in India's upstream sector potential," he added.

Prime Minister Narendra Modi said that "transparency" and "competitiveness" were the main areas of focus as the government pushes its new upstream policy to bring in a level-playing field.

"This has helped to reduce government intervention," he added.

India, which imports about 80% of its crude oil needs, will be holding federal polls sometime around the middle of the year. Market observers will be closely watching if the ruling National Democratic Alliance government, led by the Bharatiya Janata Party, will get a second term in office.

NOT MUCH ROOM FOR U-TURN

In the past four years, the government has introduced a series of energy policy reforms. It has removed subsidies on diesel prices and aligned retail fuel prices with international crude prices.

While it has aggressively pushed the use of LPG across the country, New Delhi has also given the go-ahead to state-owned refiners to gradually raise the price of kerosene, which once accounted for more than 40% of overall petroleum subsidies.

"There is not much room to reverse initiated reform measures in the oil and gas sector as those are structural in nature. There could be some short term tweaks if crude crosses the $90/b mark. The threat perception to the initiated policy reforms relates to short spikes in crude prices," Sabri Hazarika, senior oil & gas analyst at Emkay Global Financial Services Ltd. said.

Relatively lower crude oil prices have improved the outlook for India's oil demand growth in 2019, but delegates were of the view that implementation of those policies under the energy reforms need to continue for oil demand to keep growing, delegates said.

"Policy is the critical aspect in whole issue of reform. Unless an enabling policy regime is built into the system, reforms will not be successful," M.M. Kutty, India's petroleum secretary, said.

S&P Global Platts Analytics expects India oil products demand growth of around 260,000 b/d in 2019, compared with an estimated growth of 195,000 b/d in 2018.

Delegates said that it's crucial that some key initiatives of the government -- such as building roads, industrial infrastructure, expansion of LPG network, as well as plans to boost the airport network -- continue at the same pace after the polls, for oil demand to maintain the growth momentum.

"There is a broad consensus among all political parties to avoid retreat from the initiated policy reforms in the hydrocarbon sector, both upstream and downstream segments, as the reform measures are aimed at achieving energy security for all," Narendra Taneja, an energy expert said.

"The market-oriented reforms in the oil and gas sector need to continue to boost the overall economy through creation of jobs," he added. -- Sambit Mohanty, newsdesk@spglobal.com

-- Ratnajyoti Dutta, newsdesk@spglobal.com

-- Edited by Elizabeth Thang, newsdesk@spglobal.com