It's artificial oil price rise: India

New Delhi: India, the world's third-largest oil importer and consumer, on Monday said oil prices have to be reasonable and market-determined as it expressed concern over rise in rates on supplies being artificially adjusted below demand by producing countries.

With a rise in international oil prices pushing retail petrol and diesel rates to record high, India last month agreed to release five million barrels of crude oil from its Strategic Petroleum Reserves, Minister of State for Petroleum and Natural Gas Rameswar Teli said in a written reply to a question in the Rajya Sabha. This was being done "in consultation and parallelly with other major global energy consumers including the USA, People's Republic of China, Japan and Republic of Korea", he said.

"This step is being taken in a bid to control inflationary pressures and provide relief to citizens." This is the first time ever that India, which stores 5.33 million tonnes or about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast, is releasing stocks for such purposes.

While the US will release 50 million barrels of oil from its strategic petroleum reserves, the stocks to be released by India are almost equal to its daily oil consumption of 4.8 million barrels. "India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces," the minister said. In a reference to output quotas set by OPEC and its allies to regulate prices, he said, "India has repeatedly expressed concern at the supply of oil being artificially adjusted below demand levels by oil-producing countries, leading to rising prices and negative attendant consequences."

As per the consumption pattern of 2019-20, the total capacity in the established Strategic Petroleum Reserves (SPR) facilities is estimated to provide for about 9.5 days of crude oil requirement. Oil marketing companies (OMCs) currently have stock for 64.5 days. "Hence, total capacity storage of petroleum products is 74 days," he said. India is 85 per cent dependent on imports to meet its oil needs and so domestic retail rates are aligned with prices of benchmark global commodities.

The government, he said, has been taking all ameliorating measures to safeguard the energy security of the country by ensuring energy justice for all citizens. And, with domestic retail rates rising to record highs, it reduced the central excise duty on petrol and diesel by Rs 5 per litre and Rs 10 a litre, respectively, on November 3, he said. This was followed by a reduction in value-added tax (VAT) on fuel by 28 states and Union territories.