'India must lead in developing strategic reserves of petroleum products'

Since 1992, India has transformed its petroleum refinery structure, producing fuels that meet global standards. Mangaluru and its suburbs are part of this progress.

Karnataka sugar mills have successfully produced ethanol from sugarcane. India has mastered blending, ensuring engines run lighter and smoother, up to 20%.

Karnataka also hosts Strategic Petroleum Reserves, which ensure a minimum supply of crude to refineries in both anticipated and unforeseen situations. When foreign interests once requested exclusive access, this was declined in favour of national interest—showing India’s maturity as a democracy with strategic depth.

India must lead in developing Strategic Reserves of Petroleum Products, with commercial interest, citizen participation, and institutional research. Citizens should help expand this into a Bharat Petroleum Products Reserve (BPPR), supported by central and state entities, utilities, and local bodies.

The BPPR should be managed by a government legal entity within SEZ status. It would provide flexibility for international financing, forward trading, and storage.

The domestic market has 30 crore consumers across the petroleum chain. Petroleum blending needs to expand into 70 independent Ethanol Blending Hubs and Complexes instead of transporting ethanol to refineries.

Each hub should have a unique identity tied to farmers and producers. MRPL and ISPRL in Mangaluru, with Delhi counterparts, can identify optimal sites for port-based blending with imported Ethanol.

The Ministry of Petroleum with the Ministry of Commerce & Industry can declare MRPL’s SEZ tankage as delivery points for forward trading denominated in international currencies. Railway tracks can connect SEZ territory to blending centres. All petroleum companies can use the 70 hubs as trading markets before duties and taxes are applied. The sites should be custom bonded and secure.

Products must be capable of physical delivery, with currencies freely convertible in the SEZ and subsequently in the DTA.

The investment plan should include:

Tankage of optimum capacities at 1,200+ locations nationwide at rural railway stations with third- and fourth-line loops.

Partly underground and overground tankage for convenience and optimisation to deliverable. 

Rolling stock under the Own Your Wagon Scheme of Indian Railways so that stocks kept in motion also match immediate daily consumption.

The cost of maintaining reserves should not depend heavily on the Union Budget. Public participation is crucial.

The Reserve Bank of India and the Forward Markets Commission could allow citizens to own petroleum product certificates—duty-free, tradable, and redeemable at petrol pumps. Taxes would be collected at exit gates of hubs. Investors could earn around 1% monthly returns. India’s recent success in developing its digital currency will assist commercial banks in managing the cash flows.

The current appetite for public equity can enable bonds worth at least ₹1,80,000 crore to be mobilised, with inventory as collateral, making the reserve self-sustaining. Oil company Executive Directors will then manage 90 days of stock without losses from evaporation or storage.

A crisis is an unforeseen event. The BPPR must be built on ethanol blending. Karnataka and Mangaluru pioneered E20 as a consumer-recognised symbol. Refiners can also launch E5, E10, and E15, each with export potential to East Africa.

All African nations—from Egypt to South Africa—can serve as investment zones for petroleum products. Distribution firms can use coupons. For example, a trucker may buy Diesel E20 at a discount, with delivery after 90 days. Citizens could invest in these coupons, saving 3–5%. A prepaid card system, integrated with digital payments, would simplify payouts.

A Farmers’ Fund of ₹300,000 crore can be floated by the Central Government in lieu of urea subsidies. These would generate yields of 9% to 12% based on the real economy. 

A National Convergence Centre can be established at Nandikur Railway Station for effectiveness. Employment in petroleum-linked and railway-linked sectors will grow. It is crucial to have institutional and public endorsement of Mangaluru, Karnataka, as a petroleum products reference price point. The reference price would be international and of plural character.

In the short term, importing 1–2.5 million tonnes of ethanol per annum from Brazil, USA, and other nations that generate surpluses would help. Strategic storage practices should converge with commercial use near consumption and transport networks. This would free resources in urban areas.

(The writer was President of the Kanara Chamber of Commerce and Industry (2001–2003) and promoted the Mangalore SEZ with the Karnataka State Government, ONGC, and its subsidiaries.)