How the Indira Gandhi government dealt with the oil price hike of 1973 by signing beneficial agreements with Iraq and Iran.
IN retaliation for Israel’s victory in the Yom Kippur Arab-Israeli War of 1973, the Arab countries of West Asia together set up a new international organisation, the Organisation of Petroleum Exporting Countries (OPEC). The first thing it did was to hike the price of crude oil from the then prevailing $18 a barrel to $40 a barrel.
At that time, India was importing about 50 per cent of its crude oil requirements from OPEC in hard currency and 50 per cent from the then Soviet Union on rupee payment terms. So, India was badly hit by OPEC’s sudden and steep increase in oil prices. How did it respond to this development? It responded in two ways—first by conserving oil consumption to the maximum extent and, secondly, by maximising exports to Arab member countries of the OPEC.
Prime Minister Indira Gandhi set up two inter-agency task forces, one under Mantosh Sondhi, Secretary, Heavy Industries, and the other under Lovraj Kumar, Secretary, Ministry of Petroleum. The mandate of both task forces was to maximise exports of projects, products, technology and skills to OPEC countries to pay for the oil India was importing from them. Thus, the Sondhi task force facilitated the setting up of a 110-km railway line in Iraq by the Indian Railway Construction Corporation (IRCON), on a turnkey basis and a major TV transmitter and TV studio complex in Baghdad by the public sector company Engineering Projects (India) Ltd (EPI) in collaboration with Mitsubishi Heavy Industries of Japan. The railway project was worth $300 million (all of which came to India), while the TV complex project was worth $100 million, of which 50 per cent came to India. Another major initiative was a series of new townships in Iraq. Five such projects executed by EPI were worth $800 million.
This story is from the February 16, 2018 edition of FRONTLINE.
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This story is from the February 16, 2018 edition of FRONTLINE.
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