The Finance Ministry has diverted a significant amount meant to be infused into Oil Industry Development Fund (OIDF) for reducing the fiscal deficit. According to informed sources, out of Rs1,14,000 crore collected through cess on petrol sales from common public till date , only around Rs920 crore have been put into the fund for financing the setting up of strategic oil reserves across the country.
OIDF had been set up under the aegis of Oil Industry Development Board (OIDB) Act, which was passed by Parliament in 1974, wherein all the cess collected through petrol sales is to be infused. The fund is meant primarily for financing important petroleum sector projects. That the Finance Ministry has not put the desired amount in it and has used it for addressing the fiscal deficit concerns seems obvious as fiscal deficit in the recent past has shown some decline.
According sources close to the development, the Petroleum Ministry, which is already overburdened by the strain of shouldering the under-recoveries of oil marketing companies (OMCs), has sought urgent infusion of funds in OIDF as it is becoming increasingly difficult for it to fund the Indian Strategic Petroleum Reserves ltd (ISPRl which envisages setting up strategic crude oil reserves worth 5 million tonnes), on its own.
The Petroleum Ministry has said that it has been funding the ISPRl by itself considering the fact that it is a strategically important project and the OMCs have been busy with the work of setting up the required infrastructure for it (like laying of pipelines) as they are public sector entities and national interest comes first and foremost for them.
Sources said that the ministry has no qualms about funding the project in national interest, but the fact that it is hard pressed for funds towards compensating OMCs for their under-recoveries as well as paying them compensation for selling ‘aam admi’ fuels like lPG and diesel at much below market price, and now being burdened with the added responsibility of implementing the ISPRl, has drained it financially.
Therefore, in a message to the Finance Ministry, the Shastri Bhavan officialdom has said that OIDF needs to funded on a regular basis, in other words, if not all then at least a significant portion of the Rs1,14,000 crore collected till date through cess earned on petrol sales needs to be put into it.
Once this is done, then the ISPRl could be funded through OIDF and this would considerably ease the burden from the Petroleum Ministry.
The Petroleum Ministry, sources said, has been unhappy about Finance Ministry’s inability to regularly infuse money in OIDF and despite repeated requests, only around Rs920 crore have been sent into it, which is inadequate for funding the project of the magnitude of ISPRl.
The ministry has indicated that any project to be implemented in the name of national interest requires smooth cooperation among all the Government departments and therefore the message sent to the North Block babus holds greater significance in the light of the fact that ISPRl had been envisioned on the lines of strategic oil reserves maintained by China.
State-run OMCs like Indian Oil, Hindustan Petroleum and Bharat Petroleum are expected to make an under-recovery loss of Rs1,60,000 crore by the end of this financial year and this burden has to be shouldered by the Petroleum Ministry.
ISPRl project had been envisioned by the Government in 2011 which involves construction of crude oil reserves with a capacity of 5 million tonnes or about 10 days of consumption to be stored in underground rock caverns at three locations, one at Vishakhapatnam (one million metric tonnes) and the other two at Mangalore (2.5 million metric tonnes) and Padur (1.5 million metric tonnes). The projects are scheduled to be completed by end of this year.