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India to hike tax on petroleum products for strategic oil reserves
Tuesday, 04 February 2003, 20:30 IST
NEW DELHI: The Indian government is likely to increase tax on petroleum products in the forthcoming annual budget for 2003-04 with a view to raising strategic crude oil reserves for 45 days.
"We are initially studying plans to create reserves for 45 days," Petroleum Minister Ram Naik told reporters here after a meeting with Prime Minister Atal Bihari Vajpayee to take stock of developments in the oil and gas sector.
"The capital investment for the project is estimated to be 
43.50 billion while the inventory carrying cost for 15 million tonnes of crude would be 18 billion," he added.
At any given time, the refineries in the country have stocks for 15 days. In addition there is also the rolling stock with the petrol pumps. All this roughly totals around five million tonnes.
The decision to set up strategic crude oil reserves to meet the country's needs for 45 days in case of any disruption in supplies comes in the wake of rising fears of a U.S.-led strike on Iraq.
Dependent on imports for 70 percent of its requirement, India has been studying plans to set up strategic reserves on the lines of those in the U.S. and Germany, which have permanent stocks for 90 days.
In the case of Japan, which is totally dependent on imports, reserves for 120 days have been created to ensure continued supply of oil in case of any emergency.
Naik said Vajpayee has directed the petroleum ministry to engage a professional agency to study and formulate plans for setting up a strategic crude oil reserve.
In addition to 43.50 billion investments for setting up strategic reserves, there would also be the interest repayment cost for the capital investment and also the maintenance cost on the tanks to be created, said official sources.
Among the options being explored for setting up the reserves is to "have the government make the grant of the initial capital cost and operation expenditure of the reserves or levy a cess on the petroleum products on the lines of that being done for generating funds for the highway projects," said Naik.
The reserves would enable India to tide over any disruption in supplies due to any possible conflict in key markets as is feared in the Middle East currently.
"Currently all our tanks (at refineries) are full and there will be no disruption in supplies due to any unfortunate conflict with Iraq," said Naik.
Unlike the one rupee cess currently being levied on petroleum products to raise funds for highway development, the additional levy may include cess on crude oil also, sources said.
The Indian Oil Corporation (IOC) and the Oil and Natural Gas Corporation (ONGC) are among the state-owned oil majors expected to take charge of setting up and maintaining the strategic oil reserves infrastructure.
"With the move to privatise oil companies, setting up a separate company to maintain the strategic reserves may also be considered," official sources said.
During the meeting, Vajpayee was told about India's success in securing oil equity in nine countries including Russia, Vietnam, Sudan, Libya, Syria, Iraq, Iran and Myanmar with an investment exceeding 126 billion.
India is also hopeful of getting exploration blocks in Venezuela, Qatar, Kazakhstan and Indonesia.
Through equity oil, India hopes to secure sources of future supplies that would help to reduce the impact of the continuing volatility in the prices of global crude oil prices.
"Having secure supplies are very vital as they have great bearing on the economic growth of the country," said Naik.
To help bridge the growing gap between demand and supply, with around four percent annual growth in demand, India has in the last few years stepped up exploration and production efforts through the award of 70 blocks that will see around 145 billion investment.
Source: IANS
43.50 billion while the inventory carrying cost for 15 million tonnes of crude would be 18 billion," he added.
At any given time, the refineries in the country have stocks for 15 days. In addition there is also the rolling stock with the petrol pumps. All this roughly totals around five million tonnes.
The decision to set up strategic crude oil reserves to meet the country's needs for 45 days in case of any disruption in supplies comes in the wake of rising fears of a U.S.-led strike on Iraq.
Dependent on imports for 70 percent of its requirement, India has been studying plans to set up strategic reserves on the lines of those in the U.S. and Germany, which have permanent stocks for 90 days.
In the case of Japan, which is totally dependent on imports, reserves for 120 days have been created to ensure continued supply of oil in case of any emergency.
Naik said Vajpayee has directed the petroleum ministry to engage a professional agency to study and formulate plans for setting up a strategic crude oil reserve.
In addition to 43.50 billion investments for setting up strategic reserves, there would also be the interest repayment cost for the capital investment and also the maintenance cost on the tanks to be created, said official sources.
Among the options being explored for setting up the reserves is to "have the government make the grant of the initial capital cost and operation expenditure of the reserves or levy a cess on the petroleum products on the lines of that being done for generating funds for the highway projects," said Naik.
The reserves would enable India to tide over any disruption in supplies due to any possible conflict in key markets as is feared in the Middle East currently.
"Currently all our tanks (at refineries) are full and there will be no disruption in supplies due to any unfortunate conflict with Iraq," said Naik.
Unlike the one rupee cess currently being levied on petroleum products to raise funds for highway development, the additional levy may include cess on crude oil also, sources said.
The Indian Oil Corporation (IOC) and the Oil and Natural Gas Corporation (ONGC) are among the state-owned oil majors expected to take charge of setting up and maintaining the strategic oil reserves infrastructure.
"With the move to privatise oil companies, setting up a separate company to maintain the strategic reserves may also be considered," official sources said.
During the meeting, Vajpayee was told about India's success in securing oil equity in nine countries including Russia, Vietnam, Sudan, Libya, Syria, Iraq, Iran and Myanmar with an investment exceeding 126 billion.
India is also hopeful of getting exploration blocks in Venezuela, Qatar, Kazakhstan and Indonesia.
Through equity oil, India hopes to secure sources of future supplies that would help to reduce the impact of the continuing volatility in the prices of global crude oil prices.
"Having secure supplies are very vital as they have great bearing on the economic growth of the country," said Naik.
To help bridge the growing gap between demand and supply, with around four percent annual growth in demand, India has in the last few years stepped up exploration and production efforts through the award of 70 blocks that will see around 145 billion investment.
Source: IANS