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. “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.
India has $282 billion in foreign-currency assets, while China has $3.2 trillion, according to Bloomberg data.
India’s oil ministry had asked the finance ministry to start a fund using part of the reserves, a government official said in March 2010. 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% to 2.4 billion tons in the period.