Chidambaram, MPs agree on need to raise oil, coal output

The suggestion was made by members of consultative committee attached to Finance Ministry

With the country’s trade deficit having crossed $20 billion in May, close to a record, members of Parliament today asked the government to raise production of oil and coal, by ensuring the allocated blocks for oil exploration and coal mining start production at the earliest to narrow down current account deficit (CAD).

The suggestion from members of the consultative committee attached to the finance ministry came after minister P Chidambaram said production of both had to go up and import of gold to come down, to narrow the CAD. Trade deficit is part of larger CAD. This was, he said, the “only way to contain the CAD”.

The topic of the meeting was the CAD and how to contain it. Chidambaram said it was important to finance the CAD than to draw from the reserves. He said even as the world economies were in recession, India remained an attractive destination for foreign capital. Despite the odds, he said, the government was able to finance the CAD and had added around $3 bn to the forex reserves in 2012-13.

He expressed confidence that the CAD would be financed without dipping into the reserves this year, too.

Some of the members suggested foreign investors’ confidence in the Indian economy needed to be restored to ensure more of FDI and FII. Chidambaram said the government might consider doing away with foreign direct investment (FDI) caps in sectors where they were not serving a purpose. “All European economies except Germany are in recession and so is the case with Japan and other developed economies. Only the US economy is showing some signs of revival.  However, India continues to remain a desired destination for FDI and FII (foreign institutional investment),” he added.

Yesterday, Commerce and Industry Minister Anand Sharma had said his ministry would move the Cabinet on FDI liberalisation. He hinted that 100 per cent FDI might be allowed in telecom against the present cap of 74 per cent and the limits on FDI in defence could be revisited. 

He further said the government is proactively working towards operationalisation of 215 stalled projects involving about Rs 7 lakh crore, with a view to give a push to the production activity in the country.