By M K Bhadrakumar
Asia Times
January 8, 2015

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.

The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India’s GDP – no small matter.

However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government’s price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits.

Meanwhile, there is also a larger question involving energy security. Two news items concerning China draw attention to this aspect. One, Reuters reported on Wednesday that China has seized the moment to spring into a “buying spree” leading to record crude imports. China appears to have doubled the oil put aside for strategic reserves in 2014 compared to the previous year. In sum, China appears to have fast-forwarded its plan to fill up its strategic oil reserves. China’s strategic reserves are currently estimated at more than 30 days’ worth of crude imports, but it plans to increase it to ninety days of imports. It stands to reason that China is exploiting the opportunity of low cost crude.

Secondly, Associated Press reported earlier in the week that China has extended a $20 billion lifeline to the beleaguered Venezuelan economy (shaken by the big drop in income from oil exports). Part of the deal is that China’s state-run oil company will expand its activity in Venezuela’s oil-rich Orinoco belt. Now, replace Venezuela with Russia and it is clear India’s lotus eating attitude is self-defeating.

Apart from a brief period when Mani Shankar Aiyar was petroleum minister in the early part of the last decade, India never really cared about evolving a long-term strategy on energy security. Our political masters seem to be relishing the prospect of dealing with the spot market rather than get into long-term arrangements in the national interest.

Ironically, Jim O’Neill who famously coined the acronym BRICS just took note that India’s growth rate has begun accelerating and “With the election of Narendra Modi as prime minister and the large drop in oil prices, India still has an outside chance of meeting my expectations for the full decade. It could even grow more than China in the second half [of the decade].”

According to O’Neill, India is the only BRICS economy other than China’s , which is likely to average a 7.5 percent growth for the full decade ending 2020.