Comments
Prime Minister Narendra Modi’s diplomatic win by clinching a deal with UAE’s Abu Dhabi National Oil Company for storing crude at the Mangaluru strategic petroleum reserve is facing commercial hiccups as ADNOC is not satisfied with the incentives offered.
According to top government officials, ADNOC has sought blanket exemption from entry tax, value added tax, Central service tax and income tax. ADNOC has also said that it wants exemption from bearing any operational costs it would incur to maintain the crude oil reserve.
ADNOC’s insistence on a tax break follows the government’s demand that crude oil from the Mangaluru reserves should be traded in India. Sources say the proposal before ADNOC allows for 35 per cent of the total crude oil stored in the reserve to be traded with domestic players in India. There is a window to allow the trade of another 15 per cent of stored crude oil upon a special request.
Besides, ADNOC will have to refill the reserve within a stipulated time-frame under the agreement. Under no circumstance will ADNOC be allowed to let the stored reserves fall below 50 per cent of the committed capacity.
Two compartmentsThe Mangaluru strategic petroleum reserve has two compartments with a combined capacity of 1.5 million tonnes.
The facility was commissioned in October 2016 for ₹1,227 crore. One compartment was filled through crude oil procured by Mangalore Refinery and Petrochemicals and Bharat Petroleum. The other compartment has been reserved to procure crude oil from ADNOC.
In January this year, ADNOC and the government-owned Indian Strategic Petroleum Reserve Ltd (ISPRL) had signed a ‘definitive agreement’ to store 5.86 million barrels (0.81 million tonne) of crude oil at the ISPRL storage facility at Mangaluru.
An official statement after the Cabinet approval for the same in March said, “Out of the crude stored, some part will be used for commercial purpose of ADNOC, while a major part will be purely for strategic purposes.”
When contacted by BusinessLine , ISPRL’s Chief Executive Officer Rajan K Pillai refused to comment on the ADNOC deal. He said discussions are on at the ministerial level for the crude storage agreement.
More than ADNOC’s storage commitment, commissioning existing projects is a priority for ISPRL. Pillai said, “The ISPRL in Visakhapatnam is functioning at its optimum capacity with 1.03 mt of crude oil reserves stored. Another 0.3 mt of crude oil reserves are being used by HPCL for its Visakhapatnam refinery.”
Work on the Padur storage has neared completion and the project is likely to be commissioned in the next two months. This will take the country’s total crude oil storage capacity to 5.03 mt, he added.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.