As the first phase of the construction of the three underground caverns nearing completion, a bigger concern has emerged for the government, that is, who will fund the crude that will be stored in these caverns? As per estimates, an amount of Rs 23,500 crore would be required to fully utilize the storage capacity being created in the first phase.
It may be noted here that the phase-I of the Indian strategic crude oil reserve programme involving construction of the storage units of 5.33 million metric tonnes (MMT) of imported crude oil at Visakhapatnam (1.33 MMT), Mangalore (1.50 MMT) and Padur (2.50 MMT) in unlined rock cavern is currently in progress and will be completed in the current fiscal. Indian Strategic Petroleum Reserves Limited (ISPRL) is constructing the storage facilities.
Several funding options are being discussed but no final decision has been arrived at. Some had suggested options like using country’s Sovereign Wealth Fund or renting the capacity at cost plus 14% return on investment. There was also a suggestion that the RBI should be directed to hold crude oil reserves in the same way as it does gold and forex reserves. However, considering the volatility in the international oil market, there are not many takers for this option. Options of private sector funding are also being explored for the purpose.
Sources in Petroleum Ministry say that decision in this regard need to be taken on an urgent basis as the second phase of the project is also lined up. In the second phase 12.5 Million Metric Tonne (MMT) of crude oil storages at four locations viz., Bikaner, Rajkot, Chandikhol and Padur are planned.
