The Comptroller and Auditor General of India (CAG) has flagged the “sub-optimal” utilisation of strategic petroleum reserves (SPRs) by the Ministry of Petroleum & Natural Gas (MoPNG), both for emergency crude oil shortages and for commercialisation.
The Oil Ministry established the Indian Strategic Petroleum Reserves (ISPRL) to implement and operate strategic crude oil storage projects. It manages storage capacities of 5.33 million tonnes (mt) — Visakhapatnam (1.33 mt), Mangalore (1.50 mt), and Padur (2.50 mt).
Creating 5 mt of strategic reserves, revised to 5.33 mt in 2011, is equivalent to about 14 days of cover on a consumption basis and 19 days on an import basis, with FY07 as the base year.
The CAG audit covered the period from FY18 to FY22 (updated up to March 2024). It covered the planning and execution of Phase I. It also audited the progress in purchasing and filling of crude oil, release & replenishment, and maintenance & operation since the first crude oil was filled in Visakhapatnam in May 2015.
Underutilisation
Since FY19, when all the caverns had been commissioned, CAG pointed out, adding that caverns remained underutilised (ranging from 8.74 per cent to 58.41 per cent) except in FY21.
The total capacity of caverns available with ISPRL (excluding the compartment given to HPCL/foreign oil company) was 3.98 mt as on March 31, 2024.
However, only 2.91 mt of the cavern capacity was filled with crude oil, and the balance capacity (1.07 mt) remained vacant, resulting in underutilisation of the cavern capacity to the tune of 27 per cent, it said.
“Current filled capacity of 2.91 mt held by ISPRL as on March 31, 2024 could provide import cover only for 4.56 days as against the envisaged SPR capacity with import cover of 19 days,” the audit revealed.
In its March 2024 reply, ISPRL said that caverns are kept partially empty in line with the mandate given to ISPRL for partial commercialisation. MoPNG, however, did not offer any specific comment on the underutilisation of caverns.
“Management reply may be viewed in light of the fact that commercialisation was approved in July 2021 whereas most of the space in caverns was underutilised in FY19 (58.41 per cent) and FY20 (55.84 per cent) when the exploration for commercialisation was being made and by that time, no mandate was in place for commercialisation of empty space of caverns,” CAG said.
Delay in commercialisation
Under Phase I of commercialisation, 30 per cent of the reserves were leased, 20 per cent of the crude oil capacity was allowed for sale or purchase by ISPRL, and 50 per cent of the capacity was retained as strategic.
ISPRL sold 1.298 mt crude oil worth ₹5,378.02 crore (excluding VAT of Rs 118.32 crore) to HPCL (0.537 mt) and MRPL (0.761 mt) up to March 2024 for the purpose of creating leasing space in caverns.
After TDS and other deductions worth Rs 5.53 crore, ISPRL deposited a realised amount of Rs 5,372.49 crore to the Centre. It also entered into an agreement with HPCL (February 2024) to lease 0.30 mt of cavern space at Visakhapatnam, effective from January 2024.
The Union Cabinet in July 2021 allowed trading (sale/ purchase) of crude oil, which had to commence within six months of the decision, by January 2022.
“However, trading (sale/purchase) of crude oil has not commenced so far (as of August 2024) as modalities of the same could not be framed. As per Cabinet approval, ISPRL was expected to earn upto ₹174 crore per year from sale/purchase of crude oil of 20 per cent capacity which could make ISPRL financially self-sufficient,” CAG added.
Neither ISPRL could achieve self-sustenance after more than three years from the approval, nor could it fill the cavern space at Mangalore, which has been empty by 0.761 mt since March 2022, it pointed out.