Financial Daily from THE HINDU group of publications
Tuesday, Jun 11, 2002
Industry & Economy
Build petroleum reserves for 15 days: FICCI
NEW DELHI, June 10
THE Federation of Indian Chambers of Commerce and Industry (FICCI) has said that India must build strategic petroleum reserves for at least 15 days initially.
In view of the critical role that oil plays in India's economic activity, FICCI, in its survey on India's oil security has covered three main issues -- the likely impact of an oil shock on Indian industry, building strategic oil reserves and equity oil.
Disclosing some of the findings of the survey on the likely impact of an oil shock, Dr Amit Mitra, Secretary-General of FICCI, said that 57 per cent of the 376 respondents surveyed across sectors felt that the impact of the possible oil shock would be quite serious and 33 per cent believed it would be very serious.
On how extensively the impact would be felt, 78 per cent felt an oil shock would have an impact across the economy with key parameters ranging from consumer behaviour to growth being likely affected.
The survey identified transportation, aviation, petrochemicals, travel and tourism, chemicals and fertilisers besides engineering as the hardest hit sector in the event of a oil scarcity.
Sharing the outcome of the survey with presspersons here on Monday, Dr Mitra said that on the issue of how to cope with the crisis, 77 per cent of the respondents felt that higher costs should be absorbed through higher production and efficiency in oil usage. While 60 per cent of the respondents suggested developing alternative fuels and 19 per cent recommended passing on the higher costs to consumers.
Commenting on an effective strategic reserves system, he said that the system should ensure that stocks are available and accessible as and when needed. The International Energy Agency (IEA) stipulates 90 days of stock for member countries. Therefore, oil stocks for three months is the general benchmark.
On the modality of stockholding, he said that separation of emergency from commercial stocks enhances security and transparency. Further, rolling of stocks also needs to be ensured so that supplies are fresh.
While on the subject of the management of the stocks, Dr Mitra said that it can be held by Government, private sector or jointly. Further, the necessary legislation also needs to be put in place to put up the SPR, FICCI said.
Elaborating on equity oil, Dr Mitra said that since India does not have sufficient indigenous hydrocarbon resources to satisfy demand, equity oil can play a significant role in improving our oil position.
"A key issue is where to look for oil security,'' he said. The right balance of `attractiveness of the country' in terms of oil availability along with `the ability to compete' is essential.
The bottlenecks faced and interventions required in pursuit of equity oil are: India's oil refining and oil recovery capability and overall oil technology is wanting; more needs to be done on intelligence, co-ordination, system and procedure; India lacks an overall dynamic energy model; and image of Indian oil companies abroad needs to be refurbished.
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