India Plans $10 Billion Sovereign Fund, Singh’s Adviser Says

India is considering a plan to set aside $10 billion from its foreign-exchange reserves and create a sovereign wealth fund to secure energy assets overseas, an aide to Prime Minister Manmohan Singh said.

“The idea of a sovereign wealth fund really boils down to sequestering a certain amount of your foreign-exchange reserves,” Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, said in an interview in New Delhi late yesterday. “I doubt if what would be done is anything more than just an experiment. Maybe $10 billion, or something.”

India has been outpaced by China in the quest to acquire oil blocks and coal fields to meet growing energy demand in the world’s fastest-growing major economies. Chinese companies have announced about $46.6 billion of energy acquisitions overseas since January 2010, compared with $8.3 billion by Indians, data compiled by Bloomberg show.

“Rising oil prices are driving the valuation of energy assets and Indian companies can use any help they can get from the government,” said Rina Sanghavi, a Kolkata-based research analyst at SPA Securities Ltd., who recommends investors buy shares of Oil & Natural Gas Corp., the country’s biggest explorer. “India’s demand is rising and our companies haven’t had a good record competing against the Chinese.”

India has $282 billion in foreign-currency assets, while China has $3.2 trillion, according to Bloomberg data.

Oil Prices

Crude oil in New York trading has gained 27 percent in the past year. Crude for August delivery increased as much as 85 cents to $98.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.08 at 1:40 p.m. Singapore time.

India’s oil ministry had asked the finance ministry to start a fund using part of the reserves, a government official said in March last year. The official had declined to be identified because a decision hadn’t been reached.

The fund was proposed to help state-run companies compete with their overseas counterparts for energy assets abroad, the official said, without providing an estimate for its size.

The International Energy Agency predicts India’s energy use may more than double by 2030 to the equivalent of 833 million metric tons of oil from 2007. The Paris-based agency says China’s use may rise 87 percent to 2.4 billion tons in the period.

Oil Imports

India imported about 3.3 million barrels of crude a day in the year ended March 31, equivalent to about 83 percent of the total oil processed by the country’s refiners, according to oil ministry data. State-run companies are forming ventures to bid for energy deposits around the world and fend off competition.

New Delhi-based ONGC and GAIL India Ltd. may bid for OAO Novatek’s liquefied natural gas project in Russia in partnership with Petronet LNG Ltd., Joeman Thomas, managing director of ONGC Videsh Ltd., said May 30. Petronet is a venture formed by government-owned oil companies.

Ahluwalia said a formal decision on establishing the fund is awaited. He said it may be “subject to restrictions” by the Reserve Bank of India.

ONGC failed to win Exxon Mobil Corp.’s 25 percent stake in an Angolan oil block after making a $2 billion offer, two people with knowledge of the matter said March 14. Indonesia’s PT Pertamina is the preferred bidder for the stake and is in talks with Cnooc Ltd. on a possible joint bid to help fund the deal, an official at the Jakarta-based energy company said May 11.

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