NEW DELHI, June 8
The new coalition government is expected to ensure policy continuity for the energy and commodity sectors with a focus on energy transition and meeting the goal of net zero by 2070, analysts said.
However, the lower-than-expected seat share by the Bharatiya Janata Party in Lok Sabha has created fears of regulatory risks to the PSU-dominated oil and gas sector, ICICI Securities said.
Moreover, now that the elections are over, analysts are hopeful of a change in the pricing policies of the state-owned oil marketing companies and see them revising the retail prices of petrol and diesel once again.
“We are fairly sanguine on any material changes to pricing policies of OMCs and even margin trends for the gas companies post the formation of the new government at the Centre,” the brokerage firm said in its latest report.
Analysts at ICICI Securities expect a reduction of `3 per litre in both petrol and diesel prices, with gross refining margins assumed at $5 per barrel as seen in the first quarter of FY25 so far. Increasing demand for oil, gas, and renewable energy sources is further expected to drive investments in the country, analysts say. “India’s rapid economic growth will be underpinned by a multidimensional energy transition — with strong demand growth for oil, gas and renewables,” said Atul Arya, chief energy strategist at S&P Global Commodity Insights. “With this win, we can expect policy continuity. It will present new investment opportunities for both domestic and international investors,” he said.
The firm noted that the new government will start office with some familiar challenges of keeping energy supply affordable, reliable and clean — all of which underpin the goal for natural gas to have a 15% share of the country’s primary energy mix by 2030. The government first set the target of a 15% share of natural gas back in 2017 when the share of gas was just over 6% but no major change has happened since.
“While the 15% target has remained unchanged, the energy landscape has evolved rapidly during that period, raising questions over whether it is still relevant,” S&P Global Commodity Insights said. Moreover, the previous government’s target of a 20% ethanol blending rate in gasoline by 2025, still remains to reach its destination. Analysts say that market participants have been concerned about a scarcity of first-generation feedstocks, primarily sourced from sugarcane and corn, that could delay this timeline. The industry now expects the new government to address challenges in utilising second-generation feedstocks such as agricultural and biomass waste to ensure a stronger ethanol production supply chain. While the Modi-led government has tried to increase the domestic oil and gas production since it came to power, the output has remained stagnant with the import dependency only reaching new highs. What needs to be seen is how the new coalition government navigates through rising geopolitical tensions and demand-supply concerns that have long plagued the global oil market.
