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Recently we have heard the government give us this wonderful view of an India where over USD 1 trillion, or Rs
50,00,000 crore will be spent on infrastructure projects.
At a conference I attended in New Delhi in March, 2010, I heard every Union Minister who mattered speak about
what his department and secretariat plan to do on the infrastructure side. The program was inaugurated by
Prime Minister Manmohan Singh, overseen by Deputy Planning Commissioner Montek Singh Ahluwalia, with a
glimpse from the Finance Minister on how it all was to be funded.
Indian was open for business and meant business.
The USD 1 trillion spend was our answer to the China infrastructure miracle.
Jai Ho!
Slippery oil
The infrastructure plan itself is, as such, not a plan in the grand sense of the word.
Every department had its plans to spend - that was true.
But was anyone thinking about which department really needed more money? Or which department deserved
more money in the overall "where is India heading" sense?
For example, there was no discussion on whether all the road building of 20 km / day being adopted with great
gusto would ever be matched with the mundane - but eventually critical - need for more petrol to fuel the cars
that will be driven on the roads.
I have not heard the Ministry of Petroleum raise any objections or concerns on this ambitious road-building plan.
But here are some numbers with some quick assumptions. I am sure the members of the Planning Commission -
accused of sitting on armchairs by the road builders - have more hard data than my 5-minute check list, but here
goes:
And assume that, because the roads are being built and car ownership is being encouraged, Indians buy 1
million additional cars every year, that means we need 1 billion litres of extra petrol every year to fuel those extra
1 million new cars.
Since there are about 159 litres in a barrel of oil, this works out to about 50 million barrels of refined and finished
petrol - new demand created every year.
A barrel of crude oil sells for USD 75, add transportation and refining costs and we get to maybe USD 85 per
barrel.
So we need to buy USD 535 million worth of crude oil for the extra 1 million cars.
But what if the price of crude oil increases? Not so long ago, we saw crude oil prices at USD 150 per barrel.
Maybe those high oil prices will come back to haunt us in the next few years.