Will the current manufacturing boom meet a sudden death in the near future?
Dependence of the demand in the manufacturing industry on OIL
RISE OF LIGHTER AUTOMOBILES --> LOSS OF MANUFACTURING JOBS AS LIGHTER AUTOMOBILES ARE EASIER AND QUICKER TO MANUFACTURE AND EASIER TO AUTOMATE. THOUGH IT WILL BE EFFECTIVE ONLY IF ALL MANUFACTURERS START MANUFACTURING LIGHT
Fuel Price Hike Almost Inevitable: CII
No Softening of International Oil Prices Visible
Country Must Set Target For 10% Consumption Cut by 2010
Fuel Price Revision Must Be Moderate In Impact: CII
The International situation gives a grim outlook on Oil prices, where no significant softening seems to be in the offing. Current prevailing prices of International Crude at around USD 94 combined with India’s 70% import dependence is leading to an unsustainable situation on the pricing front, said a CII Press Release issued here today.
CII pointed out that historically there has never been a direct pass through of international prices into the Indian retail market for good reasons. However, given the current prices in the international market, this extent of insulation may no longer be possible for a variety of reasons. The two most compelling ones are that the burden of insulation for the government is becoming unsustainable, and the second is that eventually a play of market dynamics would be the best trigger for prompting conservation.
The CII press release said that India has to, over time, look at reducing its import dependency. For that, the Press Release, stressed on the need for comprehensive conservation measures being adopted by all sections of society including industry. CII has advocated pro-active conservation measures so that the country can look at a tangible target of reducing oil consumption. CII has suggested that the government set a target of curtailing domestic consumption by 10% by 2010.
The release went on to say that the current situation makes a revision in oil prices in India, almost inevitable. CII said that further delay in oil price revision is inadvisable, as it would only make the impact that much worse. However, CII has suggested that any such revision has to be in a manner such that no sector gets into any undue disadvantage, and that the industry and the economy has time to absorb and adapt to the effects of such a price revision
While recommending this, CII has also suggested that the duties and levies on petroleum products need to be carefully examined such that the impact of the potential price revision is shared between the government, the oil marketing companies and the consumers. From that point of view, the decision should be a mix of fiscal and price measures, such that the ultimate impact on retail price is moderate. CII has also asked for rationalization of taxes and levies on petroleum products.
In this context, the release added that current levels of low inflation and sufficiently high growth make it possible for the government to take a bold decision. However, it must not create a dent on the Indian growth story. CII said that this was also a good time to take a hard look at the subsidy imbalance and start taking steps towards correcting those over a period of time.
CII has come forward with calibrated suggestions spanning short, medium and long term time frame. For the short term, the CII recommendations include: (1) correcting distorted Petroleum Product Pricing in line with the recommendations of the Rangarajan Committee (2) Better traffic management, (3) switch over to piped Natural Gas in Metros, (4) Upgradation and revamping of refining operations, and (5) Organization of people awareness programmes on petroleum conservation, among others.
For the Medium term the 5 key recommendations include: (1) Technology upgradation at the future refinery augmentation, (2) Intensification of domestic Exploration and Production efforts, (3) Use of bio-fuels like ethanol doping of petrol and bio diesel; (4) Usage of CNG for public transportation, (5) Acceleration of the rural electrification programme.
The 5 key long term suggestions include: (1) strategic storage initiatives, (2) greater thrust for the coal sector; (3) Comprehensive Combined Heat & Power (CHP) Policy; (4) Further development and electrification of the railway network and systems, particularly in the freight corridors; (5) continuing R&D and commercialization strategy for pursuing technologies like coal-to-liquid, gas-to-liquid, underground coal gasification and hydrogen, etc.
The release said that CII will engage in pro-active measures to suggest and facilitate implementation of various conservation measures in the user segments, in order to bring about significant demand side management, which would include measures like: (a) policy on alternate fuel usages (like bio-mass, bio-fuel); (b) energy efficient furnaces and boilers; (c) energy labeling for oil fired systems and gas stoves; (d) extensive awareness campaigns to promote oil conservation in small and medium industries and domestic sector; (e) Cogeneration and other energy conservation measures; (f) Use of solar water heating systems, wherever possible; (g) 100% switchover of captive steam generators from fuel oil to alternate sources; etc.
