The situation in the Gulf is worsening, and the ceasefire can break at any time. The US and Iran can launch fresh attacks. US President Donald Trump has outrightly rejected Iran’s peace proposals.
Trump has threatened that the US will not wait any longer and take action against Iran. Israel has also said that the war has not ended and attacks may resume.
If war resumes, it will have huge adverse effects on the rest of the world.
Prime Minister Narendra Modi has described this crisis as one of the biggest global challenges of this decade. He has said that India cannot remain unaffected by the repercussions. He appealed to people to cooperate as they did during the COVID pandemic.
International crude prices have crossed USD 100 a barrel, and the stock exchanges are reeling under the impact. Concerns are being raised about oil, gas and other supply chains. More than 20 pc of the world’s energy requirements are supplied through the Strait of Hormuz.
Crude, LNG, diesel and fertilisers are exported to the rest of the world from Gulf nations. The Strait of Hormuz has been closed for the last two months, and crude prices have jumped by nearly 50 pc.
LNG supplies to India and other countries have stopped after Iran attacked Qatar’s LNG facilities. Exports of fertilisers and other petrochemical products have come to a standstill. The result: prices of most of the products are rising across the world.
India imports 85 to 90 pc of its energy requirements from other countries. These also include fertilisers, petrochemical goods, gas, edible oil and other products and we have to pay in dollars.
Our foreign exchange reserve is now under pressure, and the import bill is rising. Till now, the Centre has not put much of this burden on the people. Prices of petrol and diesel were not raised, but now that the situation can worsen, the outlook is bleak.
Prime Minister Modi has appealed to people to conserve energy by using public transport and electric vehicles, forming car pools, using railways instead of trucks for transport of goods, use compost instead of chemical fertilisers, and switching to natural farming, and at the same time, reducing consumption of edible oil.
In order to conserve foreign exchange, Modi has appealed to people to at least stop buying gold for one year and avoid foreign trips. India consumes 700-800 metric tons of gold annually, and 90-95 pc of this is imported.
India imports USD 775 billion worth of goods from other countries, out of which gold comprises nearly 10 per cent, i.e. USD 72 billion. India is the world’s second-largest buyer of gold.
A 30-40 per cent drop in gold consumption in India can save $20-25 billion in foreign exchange. If consumption drops by half, $36 billion of foreign exchange can be saved. This can be better utilised to import oil, gas and fertilisers.
Many can question why Modi asked people to consume less edible oil. It has two benefits. One, less consumption of oil food can improve one’s health, and two, the nation can save Rs 70,000 crore being spent on importing 1.7 crore tonnes of edible oil, which includes palm oil, soyabean oil and sunflower oil.
India produces only 40 pc of its edible oil needs, while the remaining 60 pc comes from other countries. The annual import bill for edible oil is USD 18-19 billion. A 20-30 pc reduction in edible oil consumption can save USD 4-5 billion annually.
While international crude price has jumped by 50-55 pc, prices of fertilisers like urea, potash and phosphate have risen by nearly 25 pc. After Iran attacked Qatar, its LNG production facilities were closed down. Qatar is the world’s largest LNG exporter.
It may take three to four years to repair Qatar’s LNG facility. LNG prices in Asia and Europe have increased by up to 140 per cent.
To avoid a shortage of petrol, diesel and LNG, India has started importing from the US, Russia, Australia and Nigeria. Petrochemical products and fertilizers are being imported from Oman.
The rising import bill has caused our current account deficit to grow. The Centre has to spend more foreign exchange to import essential goods from other sources.
In plain language, let me explain. Out of Rs 100 worth of goods imported by India, Rs 31 accounts for crude oil and Rs 9 for gold.
Since India imports 90 pc of its fertilisers from abroad, it cannot cut this import bill because of food security. The import bill can go down only if consumption is reduced.
The Centre is keeping a close watch on the situation. The Empowered Group of Ministers, headed by Defence Minister Rajnath Singh, met on Monday and it was attended by Petroleum Minister Hardeep Singh Puri, Health Minister J P Nadda, Shipping Minister Sarbananda Sonowal, Parliamentary Affairs Minister Kiren Rijiju and other secretaries.
Rajnath Singh explained that the Prime Minister’s appeal to the people to cut consumption of gold and fuel should not create unnecessary panic. It was only meant to caution and seek people’s cooperation. He said, India has adequate stocks of oil and gas, and all possible measures are being taken to keep supply of essential goods normal.
At a time when countries across the world are taking measures to face the challenges posed by the Gulf war, opposition parties in India have attacked Prime Minister Modi.
Congress, Samajwadi Party, Aam Aadmi Party, RJD and Trinamool Congress alleged “policy failures” on part of the government. Rahul Gandhi alleged that the Prime Minister is shirking from his responsibility at this time of economic crisis.
Akhilesh Yadav wrote on social media: “The 'crisis' erupted the moment elections were over. Actually, there is only one crisis, and that is BJP.”
AAP chief Arvind Kejriwal asked, Is India going to face an economic crisis? Congress leaders demanded that a special sitting of Parliament be convened and the ground realities be explained to the people.
My opinion: What is the need to make a hue and cry if the Prime Minister makes an appeal to people to save fuel and gas ? Why so much hullabaloo if Modi appeals to people to avoid buying gold and splurge money on foreign trips?
Modi did not trigger the US-Iran conflict. The world oil crisis did not take place because of Modi. Why should anybody have problems in saving foreign exchange through austerity?
The problem lies with some opposition leaders. Their credibility has taken a hit because of their baseless remarks and common people have stopped taking them seriously.
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