India will have to maintain emergency oil reserves equivalent to at least 90 days of net imports
New Delhi: The International Energy Agency (IEA) is keen that India, the world’s fourth largest energy-consuming nation, becomes a member of the world’s premier energy monitor.
“They want us to join them. In order to do so, we have to meet certain criteria," said a senior Indian oil ministry official, requesting anonymity. “There are certain issues raised by the ministry of external affairs. We are anyway working with IEA for strengthening our emergency response mechanism and are trying to imbibe their best practices."
India’s entry into IEA is likely to boost global energy security and also increase the Paris-based agency’s international leverage in its dealings with the Organization of Petroleum Exporting Countries (OPEC) and comes after China indicated its intention to enter the 28-member IEA grouping.
To become a member, India will have to meet eligibility criteria, including maintaining emergency oil reserves equivalent to at least 90 days of net imports. India plans to seek private sector involvement to meet the fund requirement for this.
“We have around 74 days of reserves, let us see," said petroleum secretary G.C. Chaturvedi. “The question is about the economics of it."
While IEA has made its intentions known to the government, a formal invite hasn’t been extended to India.
“We have been very interested in India joining IEA," said Nobuo Tanaka, IEA’s former executive director. “The impression that I got with my interactions with your government was that there is a huge cost of maintaining 90 days reserve. India is a major consumer and it will be beneficial for IEA due to its purchasing power."
According to IEA’s world energy outlook, “energy and oil demand will increasingly come from non-OECD countries, leading to a shift in geo-political interests and pathways to energy security." “We currently have an observer status. Becoming a member is a big policy decision," said a second petroleum ministry official, requesting anonymity.
Queries emailed to India’s ministry of external affairs on Friday remained unanswered
An IEA spokesperson said in an email response that “Indian membership in the IEA is currently not being discussed as there are two pre-conditions for IEA membership that India currently does not fulfil. First is membership in the OECD (Organisation for Economic Co-operation and Development), and second is maintaining oil stocks equivalent to at least 90 days of net imports. However, the fact that IEA membership is not a short-term option does not prevent India and the IEA from continuously broadening our areas of mutual engagement and deepening our partnership."
Maria van der Hoeven, executive director of IEA, had said in a September interview: “India is very important. We have a number of countries that we work closely with and one of them is India. And why is that? Because India is a huge country, there is a huge growth in energy demand and that is because of growth in population and growth in prosperity."
“We are looking at all scenarios and working with other countries for working out an emergency response mechanism in case of an oil shock," said the first petroleum ministry official cited above. “We had met Maria van der Hoeven on her last visit to India and are working together."
Strategic crude oil reserves allow a country to counter short-term supply disruptions. They are state-funded and meant to tackle emergency situations.
IEA has been trying to get large energy consuming nations, including India, China and Russia, which are not OECD members to act in concert to counter supply disruptions.
“As the world’s third largest energy consumer and the world’s fourth largest oil consumer, India has been a key player in the global energy dialogue. It is expected to remain a key player, as fast energy demand growth is expected to continue in line with India’s strong economic growth and its objective to provide reliable and sufficient energy to all its citizens," the IEA spokesperson said.
Experts said an IEA membership will help India present its point of view in international forums.
“India’s participation at several international think tanks and forums such as the IEA is important, and to an extent imperative, as the energy ecosystem is global in reach and influence," said Gokul Chaudhri, a partner at audit and consulting firm BMR Advisors Pvt. Ltd. “India, however, will need to be aware that participation would also carry expectations from the global energy industry that India will move forward on the path of much-needed reforms in the energy industry in India."
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