Constantly being out bid by sovereign fund-backed rival China for overseas energy acquisitions, despite foreign exchange reserves of $283.5 billion, India has finally realised the need to have a sovereign wealth fund to help its oil companies make much needed energy acquisitions overseas.
Such a fund would have proved valuable in acquiring foreign resources when the value of hydrocarbon assets had plunged due to the recession, with oil falling to a low of around $42 a barrel in late 2008 and early 2009.
Armed with a pittance of a budget, petroleum minister Murli Deora made a futile trip to Africa in January this year to seal oil and energy asset pacts, (See: Murli Deora goes on African oil hunt with small change) in the aftermath of India's oil majors repeatedly losing out to fund-flush Chinese rivals in overseas bidding, (See: ONGC, OVL pitted against Chinese sovereign funds for foreign acquisitions).
The country is finally planning to set up a $20-billion sovereign fund to aid state-owned ONGC to compete with its Chinese rivals in acquiring oil and gas assets abroad.
Deora had asked the finance ministry in January to allocate a special fund to help public sector oil and energy companies to enable them to match foreign bidders for overseas energy assets. (See: Petroleum ministry wants special fund for overseas acquisitions)
The much needed fund is required to sidestep the multi-layers of approvals required by Indian oil and gas majors, when they enter bidding contracts for oil and gas assets in competitive global markets.