| Date: |
02-02-2016 |
| Subject: |
Concessions to encourage crude import for strategic reserves |
In a bid to capture 12-year low oil prices, the government today exempted crude oil imported for storage in strategic reserves from payment of interest on unpaid customs duty.
India is building three underground storages at Mangalore and Vizag for use in contingencies like supply disruptions and abnormal spike in oil prices. The government wants these to be filled when oil prices are trading at around USD 35 per barrel.
The Central Board of Excise and Customs (CBEC) issued a notification exempting the oil imported for storage at the strategic reserves from payment of interest on unpaid customs duty.
"The CBEC, being satisfied that it is necessary so to do in the public interest, hereby specifies... crude imported and stored in underground rock caverns, in respect of which no interest shall be charged under the said Section 61," it said in a notification.
With these strategic storages, India will join the select league of nations like the US and China that stock oil for emergencies. The US uses the stockpile as a balancing force in times of undue volatility, releasing them to cool prices. The storages at Vizag in Andhra Pradesh, Padur near Mangalore and Mangalore can meet India's demand for oil for 11-12 days.
Under Section 61 (2) of Customs Act, an importer has to pay interest on Customs Duty if it has not been paid for 90 days. The rate of interest, which is fixed by the government, could range from 10-36 per cent. India imports nearly 80 per cent of its crude oil needs.
The underground storages at Visakhapatnam, Mangalore and Padur will store about 5.33 million tonnes of crude oil. Visakhapatnam facility has a capacity to store 1.33 million tons of crude oil in underground rock caverns. Huge underground cavities, almost ten storey tall and approximately 3.3 km long have been built to stock oil.
A similar facility in Mangalore has a capacity of 1.55 million tons while the Padur has capacity of 2.5-million tons.
Source : moneycontrol.com
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