The proposal was not following the agreed plan, said government's think-tank.
The government’s think-tank Niti Aayog has shot down petroleum ministry’s demand for nearly Rs 10,000 crore of public money for building more strategic crude oil reserves as the proposal strays from the agreed plan to rope in private sector investments for crude storage beyond the existing 5 million tonnes.
While pointing out that there was neither plan fund allocated for the project nor any funding tie-up for it from other resources, Niti Aayog said that during the preparation of the 12th Five Year Plan the ministry had agreed to private sector involvement in building and operating strategic storage.
Therefore Niti Ayog is not in agreement with the proposal and recommends that the ministry ought to come up with a policy to encourage private sector investment instead of deploying government funds.
Under the first phase, India built 5.33 million tonnes storages at Visakhapatnam, Mangalore and Padur to provide for 12 day supply cover. Of this, Visakhapatnam has been commissioned while the other two are slated to start by end of this year.
National oil companies of Abu Dhabi, Kuwait and Saudi Arabia and private major Shell have expressed interest in storing oil at these caverns after India’s last Budget announced income tax exemption on sale of stored crude oil by foreign firms to local buyers as an incentive for foreign oil companies to lease space.
However, foreign investors are awaiting regulatory issues such as local taxes and India’s ban on crude oil exports to be settled before pumping money in building storage facilities.
Under Phase II, the petroleum ministry plans to build an additional 10 million tonnes of storage capacity at Bikaner (5.6 million) in Rajasthan and Chandikhol (4.4 million) in Odisha to take the strategic cover to 99 days from current 75 days (63 days at refinery plus 12 days strategic).
For this, it had asked the Ministry of Finance to provide Rs 10,000 crore partly from plan funds and partly out of the oil industry development cess collected on crude oil production as there is no Budget provision for this project.
Source: News Agencies