Following Prime Minister Narendra Modi’s appeal to citizens to reduce fuel consumption, Oil Minister Hardeep Singh Puri has raised concerns over the mounting losses of oil marketing companies. While they are digesting some of the crude cost increases, the under-recoveries of these companies are expected to add up to nearly Rs 2 lakh crore during the April-June quarter alone. But this crisis is not just about corporate losses – what they show is the severity of the crude supply constraints facing the country.
So far, disruptions in the flow of crude oil, liquefied natural gas and LPG through the Strait of Hormuz have stretched to more than 75 days. The oil minister has said that India’s total oil reserves – including strategic reserves and reserves available with refiners – could last 76 days. This is very little, especially when compared to China. India’s effort to build a strategic reserve, which began in 2004, has stalled at 5.3 million tonnes for more than two decades. Meanwhile, China’s stockpiles, launched in 2007, have grown to more than 200 MT.
As the third largest importer of crude oil in the world, India should surely have planned for a longer horizon. Not long ago, we were buying Russian oil at a discount, even though the US and Europe were pressuring us not to. Most of the cheap imports were bought by private refiners, who found ready markets for their refined products in the US and Europe. Of course, some of these supplies could have been used by the government to add to strategic reserves given the growing concern in West Asia.
