The Hindu Business Line : Strategic oil reserves to come directly under Govt

Strategic move
The ownership of India's strategic oil reserves would be on a pattern similar to that in the US, Japan and South Korea.
IndianOil has initiated the move to transfer shares of the value of Rs 1 crore to the OIDB.

New Delhi , April 1

The ownership of strategic oil reserves will soon come directly under Government control with Indian Oil Corporation Ltd (IndianOil) all set to transfer its equity share in Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle, to the Oil Industry Development Board (OIDB).

Thus, ownership of India's strategic oil reserves would be on a pattern similar to that in the US, Japan and South Korea. According to sources, this would also facilitate easier funding of projects.

With the board's of the two companies having given their nod for the transfer of equity shares, IndianOil has initiated the move to transfer shares of the value of Rs 1 crore to the OIDB.

The company had created ISPRL with an equity infusion of Rs 1 crore in June 2004.

2 port cities identified

The Government has identified two port cities to build three tanks to store emergency crude oil stocks of 5 million metric tonnes per annum (MMTPA).

The selected sites are at Mangalore (1.5 MMTPA), Visakhapatnam (1 MMTPA), and another location near Mangalore (2.5 MMTPA).

Though the actual cost of filling up the strategic crude oil storage would be based on the then prevailing international prices of crude, it is estimated that setting up a 5 MMTPA reserve will cost around Rs 11,267 crore over nine years, including the cost of imported crude.

The operational cost will be around Rs 90 crore annually.

With the Government deciding to fund the creation of the reserves from the existing cess on domestic crude oil production, consumers have so far been spared any additional price burden.

Oil Industry Act

The Oil Industry (Development) Act provides for the collection of cess as a duty of excise on indigenous crude oil and natural gas. However, the cess is levied only on production of domestic crude at present.

The OIDB, established in 1975, renders assistance to the oil industry by way of payment of loans for projects and disbursement of grants for research and development, besides other development activities.

As regards the structure of ISPRL, sources said that could be headed either by the OIDB Chairman or the Petroleum Secretary.

ISPRL's board members will include seven nominees of the OIDB, among others. The company's letter of association provides for 12 directors, officials said.

An inter-ministerial committee, headed by the Secretary in the Petroleum Ministry, will monitor the release or sale of strategic crude oil reserves.