Cheap oil and strategic reserves The sharp slide in global crude oil prices has raised the spirits of the country’s policymakers. Sticky economic problems ranging from ballooning subsidies to unbridled inflation have all been solved by the 40 per cent fall in Brent crude prices between June and now. The cheaper oil prices now present an opportunity for the government to reform and revamp the energy sector; it is also an excellent chance to build up our strategic storage, which is now next to nil. India relies on imports for almost 80 per cent of its oil needs. To provide a bit of background, India had conceived of a strategic petroleum reserve as far back as in the late 1990s and after several committees and studies, the project to build a strategic storage for crude oil was given the go ahead early in 2004 by the NDA government. The plan was to build storage capacities in three places — Mangaluru and Padur (near Mangaluru) on the west coast and Visakhapatnam on the east. With a total capacity of 5 million tonnes, this storage was estimated to cover two weeks’ requirements. A special purpose vehicle — Indian Strategic Petroleum Reserves Ltd. (ISPR) — was floated under the Oil Industry Development Board to implement the project. So far, so good. The problem started when the UPA government, which assumed office soon after, decided to review the strategic storage plan and precious time was wasted in further studies by the Planning Commission. To cut a long story short, a decade after the project was initiated, not one of the three planned storages has been completed till now. Costs have, meanwhile, escalated and the opportunity to secure the country’s energy supplies has been squandered.
Posted on: Mon, 08 Dec 2014 06:54:48 +0000
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