OPEC and rising oil prices
India is working to persuade oil exporting countries to moderate surging oil prices and warned that high prices would push the country to tap alternative import sources such as Iran.
The Organization of Petroleum Exporting Countries and its allies (OPEC+) are expected to discuss a possible easing of supply cuts, amid a rebound in global demand, on July 1.
Current Challenges being faced by India:
With retail prices for petrol crossing ₹100 a litre in several States, ‘today’s price is very challenging’.
International oil prices have risen past USD 75 per barrel in recent days — highest since April 2019 — on consumption recovery as well as supplies being short of demand.
High oil prices are adding to inflationary pressures.
Exhausting the strategic petroleum reserves it had built up last year by taking advantage of lower oil prices.
Increasing central and state taxes on petrol and diesel are also the key reason for the prices of petrol and diesel being at record highs.
India’s oil demand has also risen by 25% in the last seven years – more than any other major buyer.
Impact of OPEC:
OPEC nations such as Saudi Arabia have traditionally been its principal oil source. But OPEC and its allies, called OPEC+, ignoring its call for ease supply curbs had led to the world’s third-biggest oil importer tap newer sources to diversify its crude oil imports.
As a result, OPEC’s share in India’s oil imports has dropped to about 60 per cent in May from 74 per cent in the previous month.
India’s oil imports:
India is the world’s third-largest consumer of crude.
Saudi Arabia is India’s second-largest supplier after Iraq.
India’s Plan on strategic Petroleum reserve:
Indian Strategic Petroleum Reserves Ltd (ISPRL), has constructed three strategic petroleum reserves in huge underground rock caverns at Visakhapatnam (1.33 MMT) on the East Coast, and at Mangaluru (1.5MMT) and Padur (2.5 MMT) on the West Coast.
ISPRL is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
The new facilities approved recently can provide additional supply for about 12 days.
The government of India is planning to set up two more such caverns at Chandikhol (Odisha) and Udupi (Karnataka) as per phase II through Public-Private Partnership.
Thus, a total of 22 days (10+12) of oil consumption will be made available by ISPR.
One Nation One Ration Card (ONORC)
The Supreme Court has directed all states and UTs to implement the One Nation, One Ration Card system.
What is One Nation One Ration Card (ONORC)?
The ONORC scheme is aimed at enabling migrant workers and their family members to buy subsidised ration from any fair price shop anywhere in the country under the National Food Security Act, 2013.
ONORC was launched in August, 2019.
Till date, 32 states and Union Territories have joined the ONORC, covering about 69 crore NFSA beneficiaries. Four states are yet to join the scheme — Assam, Chhattisgarh, Delhi and West Bengal.
To promote this reform in the archaic Public Distribution System (PDS), the government has provided incentives to states.
The Centre had even set the implementation of ONORC as a precondition for additional borrowing by states during the Covid-19 pandemic last year.
At least 17 states, which implemented the ONORC reform, were allowed to borrow an additional Rs 37,600 crores in 2020-21.
How does ONORC work?
ONORC is based on technology that involves details of beneficiaries’ ration card, Aadhaar number, and electronic Points of Sale (ePoS).
The system identifies a beneficiary through biometric authentication on ePos devices at fair price shops.
The system runs with the support of two portals —Integrated Management of Public Distribution System (IM-PDS) and Annavitran, which host all the relevant data.
National Food Security Act, 2013:
The National Food Security Act, 2013 (NFSA 2013) converts into legal entitlements for existing food security programmes of the Government of India.
It includes the Midday Meal Scheme, Integrated Child Development Services scheme and the Public Distribution System.
It recognizes maternity entitlements.
Lanka ‘banking on’ $1 bn India swap deal
Sri Lanka is “banking on” a $1 billion currency swap from India to meet its debt repayment obligations this year and tide over the current economic crisis.
Sri Lanka is a $400 million swap from the Reserve Bank of India in a couple of months through the SAARC facility.
Sri Lanka is facing a foreign currency crisis in the midst of its debt service obligations.
What is this Currency Swap Arrangement (CSA)?
It is an arrangement between two friendly countries to involve in trading in their own local currencies.
As per the arrangements, both countries pay for import and export trade at the predetermined rates of exchange, without bringing in third country currency like the US Dollar.
RBI’s Framework for Swap Facilities for SAARC:
The SAARC currency swap facility came into operation on 15th November, 2012.
The RBI can offer a swap arrangement within the overall corpus of USD 2 billion.
The swap drawals can be made in US dollar, euro or Indian rupee. The framework provides certain concessions for swap drawals in Indian rupee.
The facility will be available to all SAARC member countries, subject to their signing the bilateral swap agreements.