India will start pumping crude oil into its newly-created strategic reserves from April with the finance ministry last month sanctioning a mammoth budgetary support of Rs 4,948 crore that now needs a formal ratification by the Cabinet Committee on Economic Affairs before being included in the Budget.
Stating that “present conditions are favourable to fill up reserves as crude price had dropped significantly”, a committee headed by the expenditure secretary on January 20 approved Rs 2,500 crore to start filling up the 1.03 million tonne rock cavern at Visakhapatnam which would be ready to receive crude oil by mid-February.
It also approved another Rs 2,448 crore for filling up Mangalore (1.5 million) and Padur (2.5 million) caverns that are scheduled to be ready by October but directed the petroleum ministry to explore alternate models, including “commercial utilisation by other interested parties” for filling part of the reserves at both locations.
Middle Eastern countries have expressed interest in using these caverns for parking their buffer stock but talks have not made much headway over who would get the right of first use.
The Expenditure Finance Committee also agreed to provide an annual Rs 179 crore towards operation and maintenance costs of the three caverns “in view of their essential strategic nature for meeting the energy security needs of the country”.
It recommended that the security at these locations be provided by the Central Industrial Security Force with the Ministry of Home Affairs picking up the tab for CISF deployment.
Once the funds are made available, Indian Oil Corp would procure the crude oil on behalf of the government, said sources.
The 5.03 million tonne capacity would be sufficient to cover 13 days of demand in case of supply disruption. The strategic reserves would be in addition to the 65 days cover already available at crude oil and product storage tanks at different refineries during the course of commercial operations.
India plans to create reserves to provide a cover of 90 days on net oil imports for which it would require another five million tonne storage capacity. Detailed study has been conducted to construct the facilities at Bikaner in Rajasthan, Rajkot in Gujarat and Chandikhol in Orissa. Strategic reserves are built by nations to tide over crisis supply situations and boost energy security.
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