New Delhi, Feb. 3: Prime Minister Atal Bihari Vajpayee today gave the go-ahead for building strategic storage facilities for crude oil to last the country 45 days in case of any disruption in supplies due to exigencies such as war. The stocks can also be used when international prices go through the roof.
Petroleum minister Ram Naik said that the strategic underground tankage would have a capacity to stock 15 million tonnes of crude oil and will be built over the next three years. He said the petroleum ministry “would conduct studies for cost effective options for setting up strategic oil reserves in the next three years and in the meantime the present efforts would be accelerated.”
The petroleum ministry has already worked out plans to create strategic reserves to the tune of 5 million tonnes in the first phase. This underground tankage will be built at Rajkot, Mangalore and Vizag. This stock will be sufficient to meet the country's requirement for an additional 15 days.
The minister said that it would cost the nation Rs 4,350 crore to build the tankage for 15 million tonnes of crude. Another Rs 1,800 crore would be required each year as carrying cost for the crude oil inventory.
Naik disclosed that the government was weighing two options to finance the building of the strategic storage facilities. The government could extend grants for initial capital investment and the annual recurring cost could be recovered through cess contributions made by oil companies to the oil industry development board.
Alternatively, a special cess will be levied on petroleum products which will be used to construct the additional tankage and for bearing the cost involved in keeping the crude oil inventory as well.
The reserves are being planned on the lines of those maintained by the US, Germany and Japan. While the US and Germany have 90 days of strategic reserves, Japan which does not have any oil of its own, keeps 120 days of crude oil reserve.
Others present at today’s meeting were finance minister Jaswant Singh, external affairs minister Yashwant Sinha, disinvestment minister Arun Shourie, commerce minister Arun Jaitley and Planning Commission deputy chairman K.C. Pant.