We believe much can be done to attend to these factors through decisive, strong and intelligent action. We explain how:
Take CAD. This is caused by runaway increase in imports without a corresponding increase in exports. In regard to imports, major items include crude oil and other petroleum products including gas, followed by gold. Surprisingly, there is also substantial outgo on import of several things which, with some focus, can be avoided eg. import of edible oils, pulses, power plant equipment and the like. A firm policy can certainly help reduce substantially the outgo on these imports. We will explain some of these areas.
How US reduces crude imports...
Crude and other petroleum product imports have been ballooning. With nearly 80 per cent of demand met through imports at
present, India has little option in this area and secondly, with crude prices shooting up, the outgo on petroleum product imports has also been increasing rapidly. The United States provides a shining example of tackling this with firm policy initiatives. Hardly a decade ago, the US was heavily dependant on the Gulf countries, notably Saudi Arabia, for the import of crude oil. A conscious decision was made to reduce this and also march towards self-sufficiency. US, being the largest consumer of petroleum products, naturally had to tackle this on an urgent basis. How effectively the country has done this !
Firstly, the country decided to focus on the manufacture of ethanol from corn. Today, nearly half of US corn production is diverted for producing ethanol and this has a twin advantage: apart from ensuring a degree of import substitution, this also helped revive the agriculture sector languishing for long. This has given a big boost to corn growers in mid-west US. Several states have also made it mandatory to use ethanol as part of fuel bought at the petrol pumps.
Simultaneously, US also looked at the prospects for tapping shale gas, ie. natural gas imprisoned in shales in huge quantities. Tapping this earlier was not found economical when crude prices were low. But with crude prices shooting up, investment on this technology was found attractive. Today, shale gas production has shot up to dizzy levels and this helps US accelerate its march towards self sufficiency. In fact, there are optimistic estimates that over the next 5-7 years, US’ dependence on imports of energy in the form of crude and other petroleum products would almost grind to zero. This makes tremendous sense for a country so heavily dependant on such imports for so long. Remember, hardly four decades ago, crude was available for as low as a dollar per barrel and it has experienced a more than 100’ fold increase since!
Simultaneously, US has also been mandating improved fuel efficiency in automobiles. Since the first oil crisis in 1973, such efficiency improvements have been huge. In the aftermath of the first oil shock in the 1970s, US mandated its auto manufacturers to work on 25 miles per gallon(3.8 litres); it was achieved in quick time. Now it is driving towards 55 miles per gallon(over 20 km/litre). Contrast this with the abysmal 7km/litre by even highly branded cars in city roads. Plus the work done on hybrid engines that run on batteries plus petrol. Already Toyota’s Prius car, for instance, gives as much as 50 miles plus per gallon (3.8 litres in US), 24km/litre-much more than thrice the fuel consumption by petrol-driven compact cars in urban India.
India has a strong lesson in these successes. There was a big spurt in crude production after the discovery of oil in the Bombay High in the 1970s. For over three decades now, there has been little growth in the domestic production of crude oil. The country did experience a good deal of progress in regard to the discovery of natural gas, especially over the last 5-6 years. The policy of providing suitable incentives in the early part of this century did attract investors to explore and exploit the gas reserves.