India’s leaking oil and gas sector expected to improve with new reforms in FY13

BEVERLY, Mass. - May 20, 2013 - PRLog -- Indian oil and gas sector is highly regulated by the Ministry of Petroleum and Natural Gas. The ministry influences exploration, production, distribution, and marketing of companies in the sector.  It also has a hand in the pricing of oil, natural gas and petroleum products to some extent. Despite the tight regulation, however, the private sector plays a major role, particularly in the downstream business.

India was the fourth largest consumer of oil and petroleum products in 2011, after the United States, China and Japan. To satisfy demand, Indian upstream oil companies have acquired stakes in overseas assets.  Existing domestic oil reserves and production is insufficient to meet the demand in India. More than 80% of India’s crude oil demand was met through imports as of FY12.

The sector also acts as a major source of tax revenue generation for India’s central and state governments. Prices of oil namely natural gas and petroleum products are controlled by the central government.  This occasionally forces downstream companies to sell finished products at unprofitable prices. Government subsidies partially cover the shortfall, but this puts a strain on central government finances and bloats the fiscal deficit. In FY13, the government instituted a slew of reforms geared toward reducing the subsidies, such as limiting the number of subsidized cylinders and incremental decontrol of diesel prices. These moves are expected to improve the earnings of industry operators in coming quarters.

Read more from our analyst>> http://www.emergingmarketsdirect.com/asia/india/india-oil-gas-industry-2h12/