The Indian Economy
India, enjoys a Goldilocks moment as it sees its economic activity gaining momentum
amid continuing global uncertainties. The last quarters GDP data was pleasantly
surprising but not completely unexpected. The GDP growth in the fourth quarter has pushed
up the full-year GDP growth of FY2022–23 to 7.2%, 200 basis points (bps) higher than
the earlier estimate. The recently released Annual Economic Review for the month of
May 2023 highlighted that the post pandemic quarterly trajectories of consumption and
investment have crossed pre-pandemic levels.
Evidently, economists and analysts are bullish about the Indian economy. Higher than
expected growth in FY 2022-23 has raised the base for comparison but treading cautiously,
Indian economy is expected to grow between 6% and 6.7% in FY2023–24.
Industry Structure and Development :
According to Shri Pankaj Jain, Secretary, MoP&NG (Ministry of Petroleum &
Natural Gas), in his keynote address on IEA (International Energy Agency) event held in
Delhi on 17th July, 2023 "Indias demand for energy is growing faster than
any other major economy and the same trend is expected to continue. Growth will come in
all sectors due to favorable demographics supported by urbanization and
industrialization."
Talking about the consumption of petroleum products in FY 2022-23, the Petroleum
Secretary said, "Last year the overall consumption of petroleum products was at 223
MMT, with a growth of about 12% over the previous year. This growth in the petroleum
products has been driven by growth in HSD at 12.1%, the largest contributor with 85.9 MMT
and MS with 34.9 MMT consumption during 2022-23 at a growth rate of 13.4% over the
previous year."
Speaking further, Shri Jain said, in both cases, volumes not only crossed pre-covid
consumption by a margin but are also highest consumption in history, till date. The growth
momentum continues in current year too. Secretary Petroleum also mentioned that India is
the Worlds 4th largest refiner, has the 4th largest LNG terminal
capacity, 4th largest Auto market and also 3rd largest bio fuels
producer. "Indias focus is on decarbonization and it has already achieved 12%
ethanol blending in Petrol and has targeted for 20% blending by 2025", he added.
The launch report of IEA finds that growth of global oil demand is set to slow down,
almost coming to a halt by 2028. This is due to hastened shift towards cleaner energy
technologies for energy security concerns. Despite robust demand from the petchem and
aviation, annual demand growth is expected to decline from 2.4 mb/d in 2023 to just 0.4
mb/d in 2028, putting a peak in demand in sight.In particular, the use of oil for
transport is set to decline after 2026 as the expansion of electric vehicles, the growth
of biofuels and improving fuel economy reduce consumption. However, some economies,
notably China and India, will continue to register growth throughout the forecast.
Commenting on Indias growth forecast on oil, Toril Bosoni, head of the oil industry
and markets division at the IEA said, "Around three-quarters of the 2022-28 increase
will come from Asia, with India surpassing China as the main source of growth by
2027".
MARKET SIZE:
The India Oil And Gas Market size is expected to grow from 36.24 billion cubic meter in
2023 to 46.69 billion Cubic Meter by 2028, at a CAGR of 5.20% during the forecast period
(2023-2028).
India third-biggest oil consumer
? India — the worlds third biggest oil-consuming and importing nation — is
looking to raise domestic output to help cut down reliance on costly imports
? India imports 85% of its crude oil, which is converted into petrol and diesel, and
roughly half of its natural gas is converted to CNG and used in industries
Refinery:
? India‘s refining capacity stands at ~251 MMTPA as of October 2022, comprising 23
refineries.
? Refinery capacity utilization is about 96% for the year 2021-22. Indian Oil
Corporation (IOC) is the largest domestic refiner with a capacity of 70.1 MMTPA.
? Crude oil processing increased by 9% from 221.77 MMT in 2020-21 to 241.7 MMT in
2021-22.
? Petroleum product production saw an increase of 8.9% in FY 2021-22 vis-?-vis FY
2020-21. The production of petroleum products stood at 254.3 MMT in FY 2021-22.
? India aims to increase its refining capacity to 450 MMTPA by 2030.
Investments:
According to Oil Minister Shri Hardeep Puri, India will likely see an investment of $58
billion in finding and producing oil and gas resources by 2023, adding global energy
majors Chevron Corp, ExxonMobil and Total Energies are keen to invest.
India — the worlds third biggest oil-consuming and importing nation — is
looking to raise domestic output to help cut down reliance on costly imports. India
imports 85% of its crude oil, which is converted into petrol and diesel, and roughly half
of its natural gas is converted to CNG and used in industries.
Speaking at the Voice of Global South Summit, Puri said the government has targeted to
increase the geographical area under exploration and production to 0.5 million sq km or
15% by 2025 from the current 0.25 million sq km.
"We are expecting an investment of around $58 billion in exploration and
production (of oil and gas) by 2023," he said. "Several multinational
corporations such as Chevron, ExxonMobil and TotalEnergies are showing keen interest to
invest in Indian E&P sector." India, he said, is ready to "explore
opportunities for joint development and production of oil and gas assets for mutual
benefit and also invite investment in our domestic E&P sector".
Puri said the world is facing an unprecedented crisis of 3Fs - ‘food, fuel and
fertiliser. "We are witnessing extreme price volatility in energy molecules. The
most acute impact of this is felt in the global south." Despite these challenging
circumstances, the government has taken several measures to maintain energy security for
its citizens.
These include diversification of supplies, an increase of alternate energy sources like
bio-fuels, ethanol, and compressed biogas and increasing E&P footprint among others.
India third-biggest oil consumer
? India — the worlds third biggest oil-consuming and importing nation — is
looking to raise domestic output to help cut down reliance on costly imports
? India imports 85% of its crude oil, which is converted into petrol and diesel, and
roughly half of its natural gas is converted to CNG and used in industries
The Indian Oil Corporation Limited (IOCL), Chennai, has committed to invest Rs 54,000
crore in various projects in Tamil Nadu in the next few years, including a 9 MMTPA
(million metric tonnes per annum) grass-root refinery at an estimated cost of Rs 35,580
crore, according to its executive director and state head (TN & Puducherry) V C
Asokan.
This new refinery, which will come up on about 1,300 acres of land in Nagapattinam,
will produce petrol and diesel for BS-VI specifications and also polypropylene.
The worlds second-largest integrated lubes complex at Ammullaivoyal village for Rs
1,398 crore apart, the IOCL has planned to lay product pipelines (Rs 2,600 crore), gas
pipelines including LPG (Rs 2,225 crore), CGD projects (Rs 7,570 crore), open new retail
outlets and launch a modernisation programme (Rs 2,500 crore), build a captive POL/LPG
jetty at Kamrajar port (Rs 921 crore), establish a terminal at Vallur (for Rs 724 crore)
and set up a new terminal at Asanur (for Rs 466 crore), he said.
Haldia Petrochemicals Cuddalore Complex, T.N.
Haldia Petrochemicals Cuddalore Complex is an upcoming petrochemical complex located in
Tamil Nadu, India. According to GlobalData, who tracks more than 13,000 active and
developing petrochemical plants worldwide, the complex is expected to commence commercial
operations in 2028. The complex will use naphtha as its key feedstock. The plants in this
complex are operated by Haldia Petrochemicals
The complex is set to add capacity with some of the key upcoming plants including
Haldia Petrochemicals Cuddalore Benzene Plant, Haldia Petrochemicals Cuddalore Ethylene
Glycol Plant, Haldia Petrochemicals Cuddalore Ethylene Plant, Haldia Petrochemicals
Cuddalore Purified Terephthalic Acid (PTA) Plant, and Haldia Petrochemicals Cuddalore
Xylene Plant.
The complex also includes Haldia Petrochemicals Cuddalore Butene-1 Plant, Haldia
Petrochemicals Cuddalore Ethylene Oxide Plant, Haldia Petrochemicals Cuddalore Hexene
Plant, and Haldia Petrochemicals Cuddalore Propylene.
The complex is expected to produce key products such as ethylene, xylenes,
polyethylene, purified terephthalic acid (PTA), ethylene glycol (EG) etc.
Other major on-going /upcoming projects are as under:
? M/s. Nayara Energy Limited (NEL) – VGOMHC (Vacuum Gas Oil - Mild Hydrocracker)
Revamp Project located at Vadinar, Gujarat Refinery, India. ? GNFC – Weak Nitric Acid
(WNA) and Ammonium Nitrate (AN) Projects located at Bharuch, Gujarat, India. ? Brahmaputra
Cracker and Polymer Limited. ? 1MMTPA capacity Green PVC Project of M/s.Mundra
Petrochemical Limited., ? Carbon Capture Hi-Gas Demo Unit for HPCL, Vizag Refinery.
Threats:
While the overall unpredictable geo-political scenario world-wide like prolonged
Russia-Ukraine confrontation, a belligerent neighbor China are a concern, the Company
needs to pay attention to the following continued challenges, in order to remain in doing
business in Oil, Gas and Petroleum Sector:
1. Reducing costs to remain competitive.
2. Improving performance
3. Improving the environmental footprint.
The rapid expansion of green technologies like electrical energy sources and biofuel
has decreased the use of Oil and Gas Industry. However, it is still difficult to replace
liquid fuels and it will take time to phase out completely. Even though, the Oil and Gas
industry is facing many challenges, that will continue to be the most dynamic and
important industries in the world.
Material Developments in Human Resources/ Industrial Relations:
The management has focused on improving its quality systems by bringing in specialized
human resources and strengthening its quality department. In order to sustain the rate of
growth it has achieved in the last 2 years specific emphasis has also been levied on the
marketing set up for the Indian market as well as opportunities in the export markets. In
a growing economy, there is always demand for more skilled and able workforce. The ability
to recruit and retain talent is a challenge for managements of all growing companies. Your
management is aware of the same and taking necessary steps to not only recruit new
manpower, but train and retain the existing one. The Company also recruits trainee
engineers and prepares them for more responsibilities in the times to come.
Industrial relations were cordial in all division throughout the year under review.
Quality/ Safety Certifications :
Your Company has obtained the prestigious OHSAS 45001:2018 certification. Your Company
is also ISO 9001& 14001 certified by URS.
Internal Control System :
The Company maintains adequate internal control systems, which provide among other
things, reasonable assurance of recording the transactions of its operations in all
material respects and of providing protection against significant misuse or loss of
company assets. Moreover, the Management team regularly meets to monitor expectations and
budgeted results and scrutinizes reasons for deviations in order to take necessary
corrective steps. The Audit Committee, which meets at regular interval, also reviews the
internal control systems with the Management and the Internal Auditors.
There are clear demarcation of roles and responsibilities at various levels of
operations. The Companys internal control system is further strengthened by continuous
periodical internal audit system and Review at the Board level. The specific appointment
of internal auditor would further strengthen the existing system. The internal audit is
conducted at regular intervals at various locations of the Company and covers all the key
areas. All audit observations and follow up actions are discussed with the Management as
also the Statutory Auditors and the Audit Committee reviews them regularly.
Safety, Health and Environment :
Safety, Health and Environment is a core value for your Company. Simply stated your
Companys goals are: no accidents, no harm to people and no damage to environment. The
Companys success owes to the health, safety & security of everyone who works for
them. The health and medical services are accessible to all employees through well
equipped occupational health centers at all manufacturing facilities. Safety and security
of personnel, assets and environmental protection are also on top of the agenda of the
Company at its manufacturing facilities.
Clean environment and sustainable development integrated with the business objective is
the focus of operations of the Company. The projects and activities are planned and
designed with environment protection as an integral part to ensure a safe and clean
environment for sustainable development.
Cautionary Statement:
The statements in this Managements Discussions & Analysis describing the Companys
objectives, projections, estimates, expectations and predictions which may be
"forward looking statements" within the meaning of the applicable securities
laws and regulations. The annual results can differ materially from those expressed or
implied, depending on the economic conditions, Government Policies and other incidental
factors and developments.
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