Why India stayed resilient through Hormuz crisis
When the Strait of Hormuz closed in February-end, GoI made it a priority that Indian citizens, especially the most vulnerable, be protected from unprecedented supply
When the Strait of Hormuz closed in February-end, GoI made it a priority that Indian citizens, especially the most vulnerable, be protected from unprecedented supply and price disruptions. That move has held through almost 4 mths later.A country importing more than 85% of its crude, the argument ran, could not survive closure of Hormuz through which more than 20-30% of the world's hydrocarbons move. Today, stocks are full, pumps are open, and the Indian consumer has paid less for energy through this crisis than any other consumer in the world.Nearly 60% of India's LPG consumption used to be supplied from West Asia. Much of that supply, almost overnight, dropped to zero. On the supply side, LPG Control Order was passed on March 8, which mandated all refineries to divert all their C3-C4 carbon streams to maximise LPG production. Refineries that had never made cooking gas were reconfigured within a few days, and production was raised from 35 TMT a day to 54 TMT a day.At the peak of war, when no vessel was moving out of Hormuz, over 12 Indian LPG vessels were quietly moved out of the strait without any toll payment, the largest number for any country.
Cargoes were secured and ship-to-ship transfers were done from Yanbu and Fujairah ports down the Red Sea route. Vessels were sent inside Hormuz to get new cargoes, and fresh supply lines were opened with several countries like Algeria, Japan and Canada. Every producer India had ever dealt with, within the Gulf and outside it, stood with it.But demand also had to be prioritised. Digital authentication code was made mandatory to prevent diversion of cooking gas by black marketers. A 25-day and 45-day limit was imposed, so that every citizen got cylinders without anyone able to hoard them.As commercial cylinders are not regulated and any one buyer could have bought entire supplies available at once, it was routed through industry associations and state civil supplies departments. Industry was moved onto piped natural gas, large kitchens and establishments encouraged to fall back on other fuels wherever possible, and household piped gas and CNG were kept in the 'no-cut' category.GoI came together to enable a shift to piped gas connections through faster municipal permissions. Between February and June, international benchmark for cooking gas, Saudi CP, rose by nearly 50%.
But a cylinder that would cost more than ₹1,600 at import-linked rate still reaches an Ujjwala home at ₹642. GoI absorbs roughly ₹900 loss on each Ujjwala cylinder, and close to ₹600 on every cylinder going to every other household. So, every Indian family today pays much less for their cooking gas than households in other countries.A bold central excise cut of ₹10 a litre in March absorbed substantial part of the price shock, as crude had nearly doubled and PSU oil companies absorbed daily losses running to over ₹500-1,000 cr through this quarter. Across those same months, petrol at US pumps rose by more than 40%, and in Britain by close to 20%, with double-digit increases across much of Europe. The rise in Indian pumps was held to around 7%.India's foreign reserves stand at near $690 bn, down only modestly from the all-time high of $728.49 bn recorded in the very week the conflict began, with the economy growing at 7.8% last quarter.As for oil reserves, energy locked underground earns nothing and costs a great deal to hold.
The BriefWire