After much bickering between the ministries on who would bear the cost of building additional storage capacity for crude oil, the government finally decided to go ahead with a plan to build storage capacity by 45 days. This plan was arrived at a meeting on Monday chaired by the Prime Minister and attended by finance minister, external affairs minister, disinvestment minister, coal minister, commerce and industry minister, petroleum minister and Planning Commission deputy chairman.Briefing reporters after the meeting, Petroleum Minister Ram Naik said that according to rough estimates, the cost of building the 45 days reserves would include a capital cost of building storage to the tune of Rs 4,350 crore and inventory (crude oil) cost of around round Rs 1,800 crore per annum. The high-level meeting decided to built storage facilities to stock 15 million tonnes of crude oil to meet contingency requirements.The government proposes to build this capacity within a period of three years to meet contingency requirements like disruption in supplies in the event of war.The government is at present considering two options to fund the amount required for building the reserves. The first is that government gives grants for initial capital investment and annul cost is recovered through OIDB (Oil Industry Development Board) cess. The second option is to levy a special cess on petrol and diesel that would go for creation of storage capacity as well as inventory cost. Consultants would be appointed to study the various options, the petroleum minister added. However, according to ministry sources, a mix of both government grants and partial cess on petro products is likely to be accepted by the government to fund the project. Strategic reserves for the country is being planned on the lines of the ones maintained by US, Germany and Japan. At present, US and Germany has 90 days storage capacity while Japan has 120 days capacity.Currently, the total crude oil storage capacity with domestic refineries is 19 days (5.7 million tonne). Of the proposed tankage, 2.5 million tonnes would be at Rajkot, 1.5 million tonnes at Mangalore and 1 million tonnes at Vizag. Besides, the country at present has tankage to provide for 45 days cover of petroleum products.
