Make in India: Emerging Opportunities

As world economies restart their engines in a bid to regain lost ground due to the Covid-19 pandemic, India too shows signs of economic buoyancy and promise. India’s Make in India initiative holds a key to the global economic revival, something that should interest Australian government ministries, corporate sector, entrepreneurs, institutions seeking R&D collaborations and Australia Inc in general, among others. India assumes greater importance as several major world economies, including American, Japanese, German, British and South Korean look to move out and diversify their businesses from China. India has jumped to 63rd rank in the World Bank’s Ease of Development 2020 report, and has also been ranked as the 9th largest recipient of Foreign Direct Investment destination in 2019 by the World Investment Report 2020 of the United Nations Conference on Trade and Development (UNCTAD).

OIL and GAS

World’s fastest-growing energy market

India is the 3rd largest energy and oil consumer in the world after China and the US and also the 4th largest importer of liquefied natural gas (LNG). India consumed 213.2 MMT petroleum products and 60,747 MMSCM natural gas. The import dependency of crude oil and LNG during 2018 was 82.59% and 45.89%, respectively. During 2018, petroleum import bill was $ 112 billion, a growth of 27% over $ 88 bn during 2017 - 18, and 23.42% of total gross import of the nation. India’s projected oil demand is going to grow at CAGR of 4% during 2016 - 2030 against the world average of 1%, though the projected oil demand will be much lower as compared to the US and China.

• 230 billion-barrel O+OEG conventional hydrocarbons in over 3 million sq.km area, spread over 26 sedimentary basins, is available for investors

• India aims to reduce oil and gas imports dependence by 10% by 2022

• The demand for petroleum products is estimated to reach 244.960 MT by 2021-22 at a CAGR of 10%

• The total number of fuel retail outlets increased from 18,848 (2002) to 64,624 (2019) at a CAGR of 7.5%. State-owned marketing companies are planning to add 78,000 new fuel retail outlets.

• Present share of natural gas in the energy mix of the country is 6%. The aim is to increase it to 15% by 2030

• 12 Biofuel refineries are planned to be opened with an investment of $1.5 billion

• India is the 2nd largest consumer of Biogas with 5000 CBG plants to be opened by 2023 under the SATAT scheme

• Ethanol blending in petrol will grow from 5% to 20% by 2030 in India

100% FDI allowed in exploration activities of oil and natural gas fields under automatic route

49% FDI allowed in petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing

Industry Scenario

India has emerged as a refinery hub.

India’s current refining capacity stands at 249 MMTPA, comprising 23 refineries—18 under public sector, 3 under private sector and 2 in a joint venture. Indian Oil Corporation (IOC) is the largest domestic refiner with a capacity of 80.7 MMTPA. Top three companies – IOC, Bharat Petroleum Corporation (BPCL) and Reliance Industries (RIL) - contribute around 66.7% of India’s total refining production from FY 2018 - 19.

At present about 16,788 km natural gas pipeline is operational and about 12,672 km gas pipelines are under development.

India has witnessed a steady increase in production as well as consumption of petroleum products over the years. The production of petroleum products stood at 243.5 MMT during 2016-17 to 262.3 MMT in 2018-19.

Cumulative crude oil production during April-August, 2020 was 12,886.26 TMT. Natural Gas production for the month of April 2020 was 2155 MMSCM as against production target of 2551 MMSCM, showing an achievement of 84.48%.

Liquefied Natural Gas (LNG) supply is forging ahead on both coasts, with 8 new R-LNG terminals (4 on the west and 4 on the east coast) coming up. Together with the six existing terminals, overall capacity will reach 74 MMTPA.

THERMAL POWER

Stepping up to endless opportunities

The government has electrified all unelectrified villages on April 28, 2018 ahead of the deadline

May 1, 2018. A total of 25 states have achieved 100% household electrification. The ministry of power in 2018-19 had setup an electricity generation target of 1,265 Billion Units (BU). The actual generation (1,249.337 BU) represented an achievement of 98.76% and a growth of about 3.57% from 2017.

India jumps 115 positions to 22nd (2019) from 137th (2014) on World Bank’s Ease of doing business - ‘Getting Electricity’ ranking. Moreover, India’s power sector is forecasted to attract investments worth $128.24-135.37 billion between FY19-23.

As per the latest key world energy statistics published by the IEA in 2019, India is the 3rd largest producer of electricity in the world and it ranks 106th in terms of per capita consumption in 2017.

Under the scheme Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), with a total Scheme Outlay of $10.21 billion (DDUGJY: $5.79 billion and RE Component: $4.42 billion), projects with total cost of $5.85 billion have been sanctioned in 32 States/UTs.

Besides above, additional amount of $1.92 billion has been sanctioned for creation of additional infrastructure to support 100% household electrification.

100% FDI is allowed in the Power sector for generation from all sources (except atomic energy), transmission and distribution of electric energy and Power Trading under the automatic route

49% FDI allowed in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 under automatic route.

Industry Scenario

Highest ever conventional power capacity addition in last three years

As of July 2020, India has a total Thermal installed capacity of 231.45 GW. Almost 86% of the thermal power is obtained from coal and the rest from lignite, diesel and gas.

The private sector generates 46.9% of India’s thermal power whereas states and Centre generate 27.9% and 25.3%, respectively. The electricity generation target of conventional sources for the year 2020-21 has been fixed as 1330 Billion Unit (BU). i.e. growth of around 6.33% over actual conventional generation of 1250.784 BU for the previous year (2019-20). This target comprises 1138.533 BU thermal; 140.357 BU hydro; 43.880 nuclear; and 7.230 BU import from Bhutan.

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. Under the One Nation One Grid

• The Transmission Line Capacity has increased to 4,25,071 cKm during FY 2019-20 as compared to 4,13,407 cKm during FY 2018-19

• The addition of Transformation Capacity was 9,67,893 MVA during FY 2019-20 as compared to 8,99,663 MVA during FY 2018-19

• The Inter-Regional Transmission Capacity Addition was 1,02,050 MW during FY 2019- 20 as compared to 99,050 MW during FY 2018-19

Source: INVEST INDIA, Department of Promotion of Industry and Internal Trade, Government of India