Crude oil is fickle, with a reputation for defying punditry. Few anticipated its rout from $115 a barrel in June 2014 — ISIS was rampaging across Iraq then. Fewer expected its sharp rally from the lows in January this year. But there, you have it. Brent has doubled in four months and is now kissing $50 a barrel. And this means an opportunity lost to buy and store the fuel cheap — an imperative for a country that imports more than 80 per cent of its needs.
Sure, the Government used crude oil’s rout over the past two years to good effect — it decontrolled diesel price, raised excise duties, and got its companies sweet deals on gas imports and asset acquisitions abroad. But it should have done much more on the strategic storage facilities for crude oil. Three underground caverns — at Visakhapatnam, Mangaluru and Padur — to stockpile oil were envisaged more than a decade back. Even after years of delays and heavy cost overruns, only the 1.03 mt Visakhapatnam facility is up and running now (it was commissioned last June). Indian Strategic Petroleum Reserves Ltd that is building the storage facilities had revised the completion dates for the 1.5-mt Mangaluru facility and the 2.5-mt Padur facility to February and April 2016. These deadlines too have passed. While construction activities at these sites have been completed, delays in laying pipelines have pushed back their commissioning. Had the projects been completed on time, the country’s energy security would have been enhanced at much lower cost.
It’s better late than never, though. Before oil prices shoot up further, the powers-that-be need to expedite completion of the pending works. Also, the plan to create four more strategic reserves should be taken up on a war-footing. India has much catching up to do with countries such as China that have built up gigantic storage reserves.
Chief Research Analyst