Context: As per the petroleum minister, India’s strategic crude oil reserves will exhaust their capacity by mid-May.
- India is trying to leverage the depressed prices to fill in its strategic crude oil reserves.
- With the global oil demand plunging due to the global dip in oil prices provide India with an opportunity for the ambitious and costly Indian Strategic Petroleum Reserves (ISPR) programme.
- Strategic crude oil reserves, which are typically state-funded and meant to tackle emergency situations, allow a country to tide over short-term supply disruptions.
- International Energy Agency (IEA) members maintain emergency oil reserves equivalent to at least 90 days of net imports.
- India will have oil reserves equivalent to at least 87 days of net imports, once the $1.6 billion second phase of ISPR, which aims to add 12 days of crude storage, is operational.
- These facilities together will help support 22 days of India’s crude oil requirements.
- Indian refiners also maintain 65 days of crude storage, taking the total tally to 87 days.
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- India, the world’s third largest crude oil importer has an existing storage capacity of 5.3 million tonnes (mt).
- Apart from that,companies have 7 million metric tons of floating oil in their contracts.
- This is operational and can support 9.5 days of net imports.
- Domestic online capacity in crude oil or products has storage of around 25 million metric tons.
- This is around 18% of India’s annual requirement of energy.
Price control in the wake of Filled reserves
- India is a major consumer so its viewpoint is that price should be reasonable and responsible.
- Very low prices are not the answer but reasonable prices.
- Prices should give some space to the producer countries.
- It should be profitable for them and also viable for them.
- Several state governments have raised petrol and diesel prices by increasing value-added tax (VAT) on transportation fuels to shore up revenues.
- Also, the union government has been repeatedly raising the excise duty on petrol and diesel.
India’s strategic oil reserves
- India is building up its strategic reserves, taking advantage of the cheap prices.
- Indian Strategic Petroleum Reserves Ltd (ISPRL) is responsible for building and filling of SPR sites.
- Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, which is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.
- India has a capacity to hold over 39 million barrels of oil at its strategic reserves.
- Locations of strategic reserves: Vishakhapatnam, Mangalore and Padur, near Udupi, Karnataka.
- These are underground salt caverns converted and built to store crude oil.
- The strategic storage capacity is now being increased even as the existing caverns are being filled.
- Though India approved construction of two new caverns in 2018, as part of its phase two expansion, in Chandikhol in Odisha (4mt) and Padur II in Karnataka (2.5mt), work is yet to commence on these projects.
- In comparison, each IEA country has to hold emergency oil stocks equivalent to at least 90 days of imports. India should be working on similar lines.
International Energy Agency
- It came into being in the backdrop of the 1973 (set up in 1974) oil crisis which led to steep increase in oil prices by the OPEC cartel.
- It is headquartered in Paris, France.
- It is an organisation of autonomous nature, that works to facilitate reliable, affordable and clean energy to its 30 member countries, 8 association countries in its ambit and beyond.
Areas of Focus
The IEA has four main areas of focus,namely
- Energy security,
- Economic development,
- Environmental awareness
- Engagement worldwide.
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- India became an associate member of International Energy Agency in 2017.
- Mexico officially became the 30th member country of IEA in 2018, and its first member in Latin America.