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Petroleum ministry may put brakes on railways’ crude oil import plan
The Indian Railways has been denied approval by the ministry of petroleum and natural gas to import and refine crude oil. The national carrier’s plan was to import 500,000 tonne of crude oil on a pilot basis as part of its strategy to import and refine crude oil on its own to reduce fuel bill by around Rs.3,000 crore annually. Given low crude oil prices, the Indian Railways sought permission from the petroleum ministry to import crude oil and refine it at state-run Indian Oil Corp. Ltd’s (IOC) refineries. The strategy included selling other refined products extracted from the crude through IOC to garner additional revenue, as reported by InfraCircle on 2 September.
“The petroleum ministry is not agreeing. We had sought permission to import 500,000 tonne. Its (petroleum ministry) argument is that it did not give permission to the ministries of defence and aviation either to import crude oil. It looks like it is not happening, though the railway minister’s letter is yet to be replied by the petroleum ministry,” said a senior railway ministry official requesting anonymity.
Diesel expenditure is the second-largest component of the railways’ revenue expenditure. The railways consumes 2.6 billion litre of diesel, costing around Rs.20,000 crore annually and accounting for almost 3.2% of the total diesel consumption of India’s transportation sector. The national carrier spends around Rs.30,000 crore on energy bill annually. “We have communicated it to the ministry of railways that it shall be difficult to give permission due to a lot of issues. We are yet to send them an official letter. The matter is still is process and is being discussed,” said a petroleum ministry official who also did not want to be named.
Queries emailed to the spokespersons of the ministries of railways and petroleum on 17 November remained unanswered. According to experts, many countries follow the practice of unbundling refining from the downstream activities such as marketing. “As a practice, in countries with competitive markets, refining is unbundled from supply and trading. Crude is procured and supplied to refineries to refine for a charge who in turn supply products at gate. New Zealand and Kenya are good examples. Entities who cannot buy all products can find the method challenging though,” said Deepak Mahurkar, leader-oil and gas industry at PwC India, a consultancy.
The national carrier estimates its energy demand to triple by 2030 to 49 billion units of electricity. The national carrier is saddled with falling revenues and non-availability of funds and is looking to reduce costs. The railways capital outlay for the financial year 2016-17 is Rs.1.21 trillion compared with around Rs.1 trillion in the last budget. Any savings will help the railway which plans to invest Rs.8.5 trillion in the next five years. Alex Iafallo Jersey
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