India will release five million barrels of crude oil from its strategic petroleum reserves in a concerted effort to bring down global crude oil prices. This is roughly equivalent to one day consumption of the country. Sector watchers say that while the quantity of crude oil is not much, it is a symbolic gesture that has wider implications for the global energy markets.

       “India has agreed to release five million barrels of crude oil from its Strategic Petroleum Reserves. This release will happen in parallel and in consultation with other major global energy consumers including the USA, People’s Republic of China, Japan and the Republic of Korea,” the oil ministry said in a statement on Monday.

       The development is in line with the Joe Biden administration's call to bring down global crude oil prices, which were crossing $85 a barrel last month. The White House said the US will release 50 million barrels from the American Strategic Petroleum Reserves. This coordinated release of crude from strategic reserves will be first of its kind globally.

       Brent, the most popular benchmark for international crude oil trade, touched at $86.40 a barrel on October 26. Prices have now cooled down to below $80 a barrel and traded at $78.86 a barrel on Monday.

       “India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces. India has repeatedly expressed concern at supply of oil being artificially adjusted below demand levels by oil producing countries, leading to rising prices and negative attendant consequences,” the oil ministry statement added.

       “This release of crude oil will be in addition to the existing arrangements in place,” an oil ministry official told Business Standard without specifying the timeline that is being contemplated within the government.

       HPS Ahuja, the Chief Executive Officer (CEO) of Indian Strategic Petroleum Reserves (ISPRL), the government entity authorized to develop and manage these reserves said in October that some cheaply bought crude oil is being traded. Mangalore Refinery and Petrochemicals (MRPL) was the recipient of this crude oil that was stored in the strategic reserves. The sale of roughly 5 million barrels of crude oil is already underway since August 2021 and is expected to be completed by January 2022. This was being done to free up space in the strategic reserves for more commercial trade.

       It is expected that MRPL and Hindustan Petroleum Corporation (HPCL) will be the recipients of this fresh batch of crude oil that is poised for release. Both these public sector undertaking companies, that are subsidiaries of Oil and Natural Gas Corporation (ONGC), have pipeline connectivity to the strategic petroleum reserves.

       India’s three strategic storages at Visakhapatnam, Mangalore, and Padur, collectively store 5.33 million tonnes (MT) of crude oil. Visakhapatnam's storage has a capacity of 1.33 MT (9.77 million barrels), Mangalore has a capacity of 1.5 MT (11 million barrels) and Padur can stock 2.5 MT (18.37 million barrels). The combined cost of the three projects is pegged at Rs 4,098.35 crore. These reserves can meet around 9 to 10 days of India’s crude oil demand.

       Higher crude oil prices result in more expensive petrol and diesel in India that is dependent on imports to meet around 85 per cent of the domestic requirement.India imports roughly 226 MT (1,656.58 million barrels) of crude oil every year.

       Facing flack of rising prices, the Indian government had to bring down the taxes it levied on auto fuels. The Finance Ministry had lowered excise duty on petrol by Rs 5 a litre and on diesel by Rs 10 a litre on November 3. Most state governments also followed suit in a bid to calm inflationary forces and bring a much awaited relief to consumers that were facing record high petrol and diesel prices.

       Petrol sold at Rs 103.97 a litre while diesel sold at Rs 86.67 a litre in the national capital. These prices have remained unchanged from November 4.