Chidambaram highlights need for strategic energy partnership

Chidambaram highlights need for strategic energy partnership
Updated 30 January 2014

Chidambaram highlights need for strategic energy partnership

Chidambaram highlights need for strategic energy partnership

Saudi Arabia and India have agreed to work closely in “a broad range of areas” that will eventually lead to the signing of some MoUs in those sectors in near future with a focus on development and economic cooperation, said Indian Finance Minister P. Chidambaram.
He said the two countries had agreed to enhance cooperation in energy, pharmaceutical, textile, education, tourism and vocational training.
In an exclusive interview with Arab News after his talks with senior Saudi officials including Crown Prince Salman, deputy premier and minister of defense; and Prince Muqrin, second deputy premier, Chidambaram said the goal of his visit to Riyadh was to strengthen bilateral relations, improve mutual understanding and find ways for both sides to benefit from their complementary economies.
Chidambaram said he and Saudi Commerce and Industry Minister Tawfiq Al-Rabiah reviewed the progress made by the two countries in various sectors including trade and investment; oil and gas; pharmaceuticals, higher education; civil aviation; tourism and culture; and security affairs.
They also talked about ways and means of boosting cooperation in the areas of information and communication technology, vocational and technical training; textiles, engineering affairs, health and family welfare; agriculture research and SMEs.
Chidambaram, who signed the minutes of the joint commission meeting with Al-Rabiah, also discussed the importance of Saudi investment in India and presented specific projects to the Saudi side.
Major projects presented to Saudi Arabia include Delhi Mumbai Industrial Corridor (DMIC); Opal Petrochemical Complex, Gujarat; Petrochemical Complex at Mangalore, Karnataka; IOCL’s LNG Project at Ennore, Tamil Nadu; Paradip Refinery/ Petrochemical Project of IOCL at Paradip; and Kochi Petrochemical Project of BPCL.
In the context of India, Chidambaram said the Indian government had launched an ambitious skills development program that aims “to skill about 500 million youth in the country by 2022.”
A little more than one-half of the people of India are below the age of 25 years, said the finance minister, while referring to the surge in enrollment in colleges and universities.
Asked about the specifics of his talks with senior Saudi officials, Chidambaram said the main objective of his visit was to attend the India–Saudi Arabia Joint Commission Meeting.
This is an important dialogue mechanism between India and Saudi Arabia in the economic field, said Chidambaram, while referring to the progressively growing relations between Saudi Arabia and India following the visit of Custodian of Two Holy Mosques King Abdullah to India in 2006 and return visit of Prime Minister Manmohan Singh in 2010.
He said the two countries had been able to make significant progress in their relationship in the last few years.
“Our two-way trade has grown significantly,” he added.
Asked as how he evaluates the state of India’s economic relations with Saudi Arabia, Chidambaram said: “The Riyadh Declaration signed in 2010 reiterated the mutual desire of India and Saudi Arabia to develop as knowledge-based economies based on advances in the areas of information technology, space science and other frontier technologies.”
The areas identified include cooperation in the field of research and education, information technology and services, science and technology, life sciences, and peaceful uses of outer space. On commercial front, India-Saudi economic relations have shown remarkable growth, with bilateral trade doubling to $43 billion in 2012-13, from $23.1 billion in 2007-08.
“The latest figures point to a continued rise this year as well,” predicted the finance minister, adding that there is also a need to move from traditional buyer-seller relationship to a strategic partnership based on mutual complementarities in the field of energy cooperation.
He said the two countries had identified several sectors for cooperation and dealt with some of the constraints.
The Bilateral Investment Promotion and Protection Treaty (BIPPA) and the Double Taxation Avoidance Agreement (DTAA) signed would help in further trade and investment, he said.
Chidambaram also said India had streamlined its visa policy for Saudi businessmen to travel to India.
“Our engagement at the people-to-people level is on the rise. More Saudi students are looking at India for higher education and more Saudi families are visiting India for health tourism,” he said.
Chidambaram called on the private sector to identify areas to diversify the economic interaction
On the investment side, the potential for investment in India by Saudi companies is huge, he said.
Asked about the prospect for further cooperation in the energy sector between the two countries, Chidambaram said India imports almost 19 percent of its crude oil from Saudi Arabia.
“We could build on our complementarities in the hydrocarbon sector to strengthen our strategic energy partnership,” said the Indian finance minister, adding that there is a need for deeper economic partnership including joint ventures in both the countries and also in third countries in energy sector.
Responding to a question about the reports of slowdown in Indian economy, he said: “India today is the third largest economy in terms of GDP on PPP terms.”
Moreover, India benefits greatly from domestic demand from a growing young population and emerging middle class.
“It hosts several global corporate giants. Many high–tech global players have set up software development centers in India, and about 306 Fortune 500 companies have established their regional headquarters in India,” said Chidambaram, while referring to the strength of India, which continues to be one of the leading software service providers to the world.
He said the Indian government has taken steps in recent months to enhance growth and bring more stability to its finances.
These are beginning to take effect, he said.
The agriculture sector bounced back in 2013 after a drought year, said Chidambaram, while referring to a number of measures that have been taken to stabilize the economy and give greater confidence to the investors.
He said the Ministry of Finance had announced a new fiscal consolidation path recently under which the fiscal deficit would be contained at 5.3 percent in 2012-13 and reduced every year until it reached 3 percent in 2016-17.
Asked about the steps being taken by the Indian government to reciprocate the contributions of the NRIs to India’s economy, he said: “I am proud of the performance of the Indian community in Saudi Arabia. All the Saudi leaders whom I met have praised the contributions of the Indian community, their technical knowledge and skills and their integrity and loyalty.”
The federal government in India and state governments attach priority to the welfare of the Indians working abroad, he said.
Replying to a question about the fallout of Nitaqat, Chidambaram said he did not see any negative impact of the Saudization on the Indian work force or on India’s economy.
He said there are opportunities back home in India, where an investment of $1 trillion is estimated for investment in infrastructure during the 12th plan i.e., 2012-17.
India has now pioneered PPP (public-private partnership) projects, which are highly successful and are now major source of private investments, he said.
The DMIC (Delhi Mumbai Industrial Corridor) is one such project, which provides an attractive opportunity for foreign investments to reap benefits.
The Delhi Mumbai Industrial Corridor, entailing over $90 billion in investment, will link Delhi to Mumbai’s ports, covering an overall length of 1,483 km passing through six states, he informed.
He said the project will have nine mega industrial zones of about 200-250 sq. km. each, high speed freight lines, three ports, six airports, a six-lane intersection-free expressway connecting the country’s political and financial capitals, and a 4000 MW power plant, and provide a plug and play environment for manufacturing investment.
Asked about the move to allow greater investment into the multibrand retail sector, Chidambaram said the government has taken steps to make India more attractive for Foreign Direct Investment.
FDI limits have been increased in several sectors, including retail and telecom, and restrictions in the banking sector have been eased.
“Policy in India is clear and that is the reason we have been able to attract consistently strong FDI flows that total $309 billion since April 2000,” said the finance minister.
The policy on FDI in the retail sector requires initial local sourcing. Many products that will be sold in these multibrand retail stores can be — and in fact are being — produced in India, he added.
Responding to a question about incentives for Saudi investors, he said some of the investor-friendly decisions by the Indian Cabinet Committee on Investments had already started showing results. “About 287 projects involving investments of about $100 billion have already been facilitated,” said Chidambaram.
The time taken to grant various approvals has improved considerably and once these projects go forward and come on stream, they will greatly add to the rate of growth, he said.
Asked about foreign businesses and corporate houses, which are worried about India’s tax rules and fear that new ways are being created to try to extract more taxes from them, he said he did not see any reason for such concerns.
All steps taken are consistent with international best practices and, in some cases, mirror the concerns being actively discussed by the OECD Organization for Economic Co-operation and Development (OECD).
“A developing country needs resources, especially tax revenues and I have stated that our policy is stable tax rates, clarity in the laws, a non-adversarial tax administration, and a fair and just dispute redressal mechanism,” he said.