en.Wedoany.com Reported - A day after unveiling details of an expanded strategic crude oil reserve program, the Indian government plans to shift part of the cost of a $42 billion strategic fuel reserve initiative onto natural gas consumers through a new financing mechanism. According to a proposal disclosed by India's Business Standard, the government is considering levying taxes on liquefied petroleum gas (LPG) and natural gas consumption, which could raise approximately $1.5 billion annually to fund new storage infrastructure.
The proposal imposes a tax of 1.29 rupees (approximately $0.0136) per kilogram on LPG, expected to generate around $460 million in revenue annually; and 1.43 rupees per standard cubic meter of natural gas, which could raise approximately $1 billion per year at current consumption levels.
Unlike India's existing strategic petroleum reserve system, this ten-year plan will increase crude oil reserves while also establishing dedicated emergency reserves for liquefied natural gas (LNG) and LPG. Once completed, the reserve capacity could cover approximately two months of crude oil and LNG demand, and about six weeks of LPG consumption.
Revenue from the proposed taxes will primarily fund LNG and LPG storage facilities, while strategic crude oil reserves will continue to be directly financed by the federal government. The proposal is still under discussion among multiple ministries and has not yet received cabinet approval.
If approved, these taxes would increase household gas bills by approximately 2%, a politically sensitive issue for the government led by Prime Minister Narendra Modi. However, Modi has previously pushed for much larger fuel subsidy reforms and LPG pricing adjustments.
India estimates it will need an additional 28 million tonnes of crude oil storage capacity, 9 million tonnes of LNG storage capacity, and 4 million tonnes of LPG storage capacity over the next decade. Of the total $42 billion cost estimate, more than half will go toward building storage infrastructure, with the remainder used to purchase fuel inventories.
India currently has 5.33 million tonnes of government-owned strategic crude oil storage capacity, with another 6.5 million tonnes under construction, but has no strategic reserves for LNG or LPG, and existing emergency fuel reserves can cover less than 10 days of demand. According to Reuters data, Japan and South Korea hold reserves of approximately 100 days.
