India may impose a charge on cooking gas and natural gas consumers to help fund a planned $42 billion strategic fuel reserve, according to two sources with direct knowledge of the matter, after disruptions from the Iran war exposed supply chain vulnerabilities.
The plan would extend India's strategic reserves beyond crude oil for the first time, with stockpiles designed to cover about two months of crude and liquefied natural gas demand, and around six weeks of liquefied petroleum gas, or cooking gas, consumption, the two sources said.
Under the plan, cooking and natural gas storage infrastructure would be financed through levies on users that could raise about $1.5 billion annually, the two sources said.
India's Ministry of Petroleum and Natural Gas is considering a levy of 1.29 Indian rupees ($0.0136) per kg of LPG, which would raise about $460 million a year based on current consumption and add about 18 rupees to the cost of a standard domestic cooking gas cylinder, the sources said.
For natural gas, the ministry has proposed a levy of 1.43 rupees per standard cubic metre, generating about $1 billion annually at current consumption levels, the sources said.
It was not immediately clear how the levies would be collected. The proceeds would primarily fund natural and cooking gas storage infrastructure, while crude reserves and strategic fuel inventories would continue to be financed by the federal government, the sources said.
The sources requested anonymity because the proposal is being discussed across ministries and has not yet received final approval from the cabinet of Prime Minister Narendra Modi.
The proposed levies would add about 2% to household gas bills, the sources said. This would be a politically sensitive move for Modi's government as it raises the costs for millions of consumers amid elevated fuel prices.
The funding mechanism, including the proposed levies on cooking and natural gas consumption, has not previously been reported.
The Ministry of Petroleum and Ministry of Finance did not respond to requests for comment sent by Reuters on Tuesday.
MULTI-FUEL STRATEGIC RESERVES
The decade-long strategic reserve programme will require about $42 billion, the two sources said, with more than half earmarked for building storage infrastructure and the remainder for stocking the reserves.
India's government estimates it will need an additional 28 million metric tons of crude storage capacity, 9 million tons of LNG storage and 4 million tons of LPG storage over the next 10 years, they said.
The plan was drawn up after supply disruptions linked to the Middle East crisis drove up import costs and highlighted India's dependence on imported fuel, the sources said.
India is the world's third-largest oil importer and consumer and buys nearly 90% of its crude from overseas, which heavily exposed it to the turmoil from the U.S.-Israeli war on Iran and subsequent disruptions in the Strait of Hormuz, a key route for oil and gas shipments from Gulf producers to global markets.
New Delhi currently has 5.33 million tons of government-owned strategic crude storage capacity, with another 6.5 million tons under construction, but lacks dedicated strategic reserves for LPG and LNG.
The country's emergency fuel buffers lag those of major Asian peers. Government-controlled reserves currently cover less than 10 days of demand, compared with more than 100 days in Japan and South Korea.
($1 = 95.1400 Indian rupees)
