The Hindu Business Line : CCEA approves funding of crude oil strategic storages

THE Cabinet Committee on Economic Affairs (CCEA) on Friday gave its nod for the funding of the proposed 5-million-metric tonnes (MMT) of strategic crude oil reserves in three locations of the country.

The strategic reserves would be built at an estimated cost of Rs 11,267 crore through the existing Oil Industry Development Board (OIDB) cess. The operating cost is estimated at Rs 90 crore a year.

Speaking to newspersons, the Defence Minister, Mr Pranab Mukherjee, said that the storages would be built over a nine-year period.

"The project will enhance the energy security of the country particularly during short term oil disruptions."

India imports 73 per cent of its crude oil requirement and spent some Rs 83,000 crore in 2004-05 on crude oil imports.

Indian Strategic Petroleum Reserves Ltd (ISPRL) will build these strategic storages at Mangalore, a site near Mangalore, and Visakhapatnam.

The CCEA also gave its approval for making ISPRL a subsidiary of OIDB for implementation and management of the strategic crude oil storages.

Initially, IOC was to float a special purpose vehicle (SPV) for building the reserves but the CCEA has now decided that equity held by IOC in the SPV would be transferred to OIDB.