New Delhi, February 3
In an attempt to cushion any adverse impact of fluctuations in the supply of crude oil from the international market, India has decided to create a strategic reserve of crude oil of 15 million tonnes, Petroleum Minister Ram Naik said here today.

The decision was taken at a high-level meeting chaired by Prime Minister Atal Behari Vajpayee here.

“The government has decided to build storage facilities to stock 15 million tonnes of crude oil to meet contingency requirement”, Mr Naik told newspersons after the meeting.

The capital cost would be about Rs 4,350 crore, while the cost of carrying forward the inventory would roughly be to the tune of Rs 1,800 crore per annum.

Mr Naik said the government was basically looking at two options for building the strategic oil reserve facility.

“There are two options to build strategic reserves. The first is that the government gives grants for initial capital investment and the annual cost is recovered through Oil Industry Development Board (OIDB) cess. The other option is to levy a special cess on petrol and diesel, that would go for the creation of storage capacity as well as the inventory cost”, he said.

Consultants will shortly be appointed to study both options, he said.

“A feasibility study will be conducted by professionals in the near future”, Mr Naik said.

Mr Naik, who made a detailed presentation on views in favour of creating a strategic oil reserve, said the government had also decided to acquire equity oil in more countries. Presently, the government has virtually acquired equity oil in nine countries and discussions are on with four other countries.

The meeting, which lasted for two hours, discussed the policies on oil exploration and production and was attended by Finance Minister Jaswant Singh, External Affairs Minister Yashwant Sinha, Disinvestment Minister Arun Shourie, Coal Minister Karia Munda, Commerce Minister Arun Jaitley, Deputy Chairperson of the Planning Commission K.C. Pant, Principal Secretary to the Prime Minister Mr Brajesh Mishra, and senior government officials.

Currently, the total crude oil storage capacity in Indian refineries is 5.7 million tonnes (roughly equivalent to the requirement of 90 days).

The Petroleum Minister has put forward the proposal for phased creation of strategic oil reserves starting with storage at Rajkot, Mangalore and Vishakapatnam to stock 5 million tonnes.

At the meeting it was also decided to bring under its purview the implementation of oil projects which involved an investment in excess of Rs 500 crore.