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CASELET–II India’s growth strategy for energy has shifted from being led by the private sector to a public sectorled approach. The public sector companies which were considered laggards till a few years ago—as the private sector implemented aggressive targets with vigour—are now in the driving seat.
State-run oil marketing companies are slated to set up the country’s largest refiner and they continue to dominate the fuel retail business despite the sector opening up. Even in the power sector, chronically sick electricity boards are on the revival path and NTPC continues to expand even as privately owned generation companies are limping. “This is a heavily capital intensive space and not many companies have the financial strength to expand. Only public sector enterprises with deep pockets have the wherewithal to invest on expansion,” said senior vice-president and co-head, corporate ratings, ICRA. “The private sector may take another three-four years to repair their balance sheets to be back in the reckoning.” While PSUs’ performance picking up is a big positive, critics feel that for long-term growth, steps need to be taken to get the private sector back in the ring. “We still have a strong case for private sector participation, but for that to happen, the problems on the ground need to be resolved. It would be an unfortunate mistake to break the momentum of the private sector. There are ongoing arbitration cases worth thousands and so many other issues. The government needs to solve these issues and facilitate investment by private firms instead of only focusing on public sector investment,” said CEO of the Mohali Campus and deputy dean of the Indian School of Business. Oil and gas minister has been talking about how the fall in crude prices presents an opportunity for domestic energy companies as service providers are cutting costs. Indian state-run oil companies have bucked the trend by going ahead with their expansion plans at a time when most energy companies have cut capex. Anil Agarwal-led Cairn India has cut down its capex, Essar Energy is holding back capex plans and is also believed to be exploring cost-saving measures. Reliance Industries continues with its capex plans, but the company’s key focus is on expanding its broadband network. RIL and Cairn are also entangled in battles with the government, a situation that doesn’t augur well for their expansion plans. “The fall in crude prices has created more fiscal headroom for investment, and investment by the public sector will help kickstart the slowed down economy. The Indian economy on the whole is operating at 65% utilization, and unless this rises to 80%, the private sector is unlikely to restart investment,” said senior director consulting at Deloitte Touche Tohmatsu India.
State-run oil marketing companies are slated to set up the country’s largest refiner and they continue to dominate the fuel retail business despite the sector opening up. Even in the power sector, chronically sick electricity boards are on the revival path and NTPC continues to expand even as privately owned generation companies are limping. “This is a heavily capital intensive space and not many companies have the financial strength to expand. Only public sector enterprises with deep pockets have the wherewithal to invest on expansion,” said senior vice-president and co-head, corporate ratings, ICRA. “The private sector may take another three-four years to repair their balance sheets to be back in the reckoning.” While PSUs’ performance picking up is a big positive, critics feel that for long-term growth, steps need to be taken to get the private sector back in the ring. “We still have a strong case for private sector participation, but for that to happen, the problems on the ground need to be resolved. It would be an unfortunate mistake to break the momentum of the private sector. There are ongoing arbitration cases worth thousands and so many other issues. The government needs to solve these issues and facilitate investment by private firms instead of only focusing on public sector investment,” said CEO of the Mohali Campus and deputy dean of the Indian School of Business. Oil and gas minister has been talking about how the fall in crude prices presents an opportunity for domestic energy companies as service providers are cutting costs. Indian state-run oil companies have bucked the trend by going ahead with their expansion plans at a time when most energy companies have cut capex. Anil Agarwal-led Cairn India has cut down its capex, Essar Energy is holding back capex plans and is also believed to be exploring cost-saving measures. Reliance Industries continues with its capex plans, but the company’s key focus is on expanding its broadband network. RIL and Cairn are also entangled in battles with the government, a situation that doesn’t augur well for their expansion plans. “The fall in crude prices has created more fiscal headroom for investment, and investment by the public sector will help kickstart the slowed down economy. The Indian economy on the whole is operating at 65% utilization, and unless this rises to 80%, the private sector is unlikely to restart investment,” said senior director consulting at Deloitte Touche Tohmatsu India.
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