Cash in on opportunity

With reference to Jyoti Mukul and Shine Jacob’s report, “First shale oil cargo to arrive later this month” (November 4), successful negotiation of commercial transactions for mutual benefit depends on the current state of political relationships between countries. 

Oil, whether shale or crude, is essential for almost all economic activity in India, be it consumption or cash products. Trade transactions in oil between India and the US had remained frozen since 1975, when ties between the two countries were at a low point. As the relationship between the two countries is more reciprocal now, the onus is on India to cash in on the economic opportunity. 

Oil supply across the country to large, medium and small industries as well as the tertiary sector and agriculture will ensure higher turnover at cheaper rates for products in competitive markets. Cost of oil import will also reduce, leading to a drop in cost of production and post-manufacture product quality, which would strengthen the economy. 

Diversification of sources for oil imports is essential because a monopoly would be financially and developmentally harmful to the economy and increase import costs and, in turn, the cost of production. Diversification will ensure supply of good quality oil at competitive rates to maximise product supply. This applies to procurement of liquefied natural gas by the Gas Authority of India as well.

In a competitive environment, the quality of the end product can be ensured only when the production is cost-effective. Markets thrive on competition and the worldwide approach to economic functioning is capitalism. Reduction in production costs will cut reliance on subsidies and lead to a favourable balance of trade.

Gopinath Nair via email

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