Editorials/Opinions Analysis For UPSC 05 June 2023

Editorials/Opinions Analysis For UPSC 05 June 2023

Contents

1. India’s Strategic oil reserve
2. The World’s Largest Grain Storage Plan

India’s Strategic Oil Reserve

Context

The Rajasthani salt caverns are being investigated by a government-owned engineering business to see if strategic petroleum reserves can be created there.

Relevance – GS Paper 1 – Geography – Natural resources,

GS Paper 3 – Energy

Mains Question

What does “strategic petroleum reserve” mean to you? Why do nations keep these oil reserves? Talkon India’s potential to hold these reserves as well.  (150 Words)

Global strategic petroleum reserve

• The price of a product is decided by the demand-supply chain in the age of globalisation, which is what the global strategic petroleum reserve is. Because of the interconnectedness of the world’s oil markets, disturbances in one region are likely to have an impact on prices over a much wider region.
• Countries with reserves might enhance the amount of oil on hand in the case of a significant disruption caused by politics or a natural calamity by releasing a portion of their supplies. The increased supply would restrain the price rises brought on by the catastrophe.
• According to an agreement among IEA members, every nation that does not export more reserves than it imports is required to keep reserves equal to its average annual imports of crude oil for 90 days.

Strategic Oil reserves of India

• The endeavour to develop adequate emergency stocks along the lines of the reserves that the US and its Western allies established following the first oil crisis of the 1970s is represented by India’s strategic oil reserves.
• In order to meet the government’s goal of expanding the nation’s capacity for strategic oil storage, the government-owned engineering consultancy firm Engineers India (EIL) is researching the potential and viability of creating salt cavern-based strategic oil reserves in Rajasthan.
• India might obtain the country’s first oil storage facility built inside a salt cavern if the plan is realised. The three strategic oil storage facilities that are now in use by the nation are located in the states of Andhra Pradesh, Mangaluru, and Padur.
• To counteract significant supply interruptions in the global supply chain, nations build strategic crude oil reserves. India, the third-largest consumer of oil in the world, imports more than 85% of what it needs, therefore strategic petroleum reserves (SPR) could assist maintain energy security and availability in times of emergency or disruption in the world’s supply.
• The current SPR capacity of India is 5.33 million tonnes, or roughly 39 million barrels of crude, which can supply the country’s needs for 9.5 days. At Chandikhol in Odisha (4 million tonnes) and Padur (2.5 million tonnes), the nation is currently enlarging its SPR capacity by a total of 6.5 million tonnes.
• The Indian Strategic Petroleum Reserve (ISPRL), a special purpose company under the Petroleum Ministry, is responsible for managing India’s strategic oil reserves. As the project management consultant, EIL played a crucial role in establishing the nation’s current SPR.
• Salt cavern-based storage, which is thought to be less expensive and labour- and cost-intensive than rock caverns, might add a new, crucial chapter to India’s SPR history.

Do You Know?

• India has three strategically important oil deposits, located in the rock caves of Mangaluru, Padur, and Visakhapatnam.
• The state of Rajasthan is chosen for the salt-based cavern petroleum oil reserve project due to its geological and infrastructure advantages and is regarded as an ideal location.

Rock vs. salt cavern reserves: which are more abundant?

• In contrast to underground rock caverns, which are created through excavation, salt caverns are created using a method called solution mining, which entails pumping water into geological formations that contain significant salt deposits and dissolving the salt.
• Crude oil can be stored in the area once brine (water with dissolved salt) has been pumped out of the deposit. Compared to creating excavated rock caverns, the procedure is easier, quicker, and less expensive.Oil storage facilities built in salt caverns are also naturally well-sealed and designed for quick injection and extraction of oil.
• According to a report by the Massachusetts Institute of Technology’s (MIT) Environmental Solutions Initiative, this makes them a more desirable alternative than storing oil in other geological formations.
• These caves are ideal for storage because the salt that lines their interiors has a very low oil absorption, which offers a natural impermeable barrier against liquid and gaseous hydrocarbons. Furthermore, salt cavern-based storages can be built and maintained almost entirely from the surface, unlike rock caverns.
• Up to this point, the United States’ entire SPR programme has relied on storage facilities built in salt caverns. The US Strategic Petroleum Reserve is made up of four locations with deep underground storage caverns built in salt domes along the Gulf of Mexico coast in Texas and Louisiana. It is the largest emergency oil storage facility in the world.
• There are approximately 727 million barrels of strategic oil in the US; natural gas and liquid fuels are also stored in salt caverns around the world. They are also thought to be excellent for storing hydrogen and compressed air.

Potential for storing crude oil and petroleum products in India:

• Rajasthan, which has the majority of the country’s necessary salt deposits, is seen to be the most suitable region for the construction of strategic salt cavern storage facilities.
• The examination of the feasibility of salt cavern-based strategic storage in Rajasthan might be considered as a repeat of the proposal made ten years ago to establish a strategic oil reserve in Bikaner, according to EIL.There will soon be a refinery built in Barmer, and crude pipelines also exist in Rajasthan; such infrastructure is ideal for creating strategic oil reserves.
• However, neither EIL nor any other Indian company possessed the necessary technical know-how to construct a salt cavern-based system for strategic hydrocarbon storage.EIL recently partnered with Germany’s DEEP.KBB GmbH, a business that specialises in cavern storage and solution mining technologies, to overcome this access to technology divide.

Programme for Strategic Petroleum Reserves: Up to This Point –

• The endeavour to develop adequate emergency stocks along the lines of the reserves that the US and its Western allies established following the first oil crisis of the 1970s includes India’s strategic oil reserves.
• The International Energy Agency (IEA), a Paris-based autonomous intergovernmental organisation in which India is a ‘Association’ country, has authorised the government to release crude oil from the reserves in the event of supply disruptions caused by a natural disaster or an unanticipated global event that results in an abnormal increase in prices.

Conclusion

• The oil marketing companies (OMCs) in India have storage facilities for crude oil and petroleum products for 64.5 days, which means there is enough storage to meet approximately 74 days of the country’s petroleum demand.
• This is in addition to the SPR, which are sufficient to meet 9.5 days of oil requirement.
• The Abu Dhabi National Oil Company (ADNOC) stockpiled around 0.8 million tonnes of crude oil in the Mangaluru strategic reserve as part of India’s decision to commercialise its strategic petroleum reserves.
• In order to cut costs and maximise the reserves’ commercial potential, the government plans to create strategic reserves through public-private partnerships in the second phase of the strategy.

The World’s Largest Grain Storage Plan

Context

• The establishment of the “world’s largest grain storage plan in the cooperative sector” with an estimated budget of Rs 1 lakh crore has received clearance from the Union Cabinet.
• This programme attempts to improve food security, avoid crop loss, and lessen farmer distress sales.

Relevance: 

GS Paper 2: Government Policies and Intervention

Mains Question

“Explain the goals and major highlights of the cooperative sector’s largest grain storage plan in the world. Describe how this project can help India overcome its problems with food security, crop loss, and distressed sales. Additionally, consider how the strategy would affect the agricultural industry and the rural economy. (250 words)

Major Highlights of the Grain Storage initiative:

• Goals: By developing godowns and agricultural infrastructure at the Primary Agricultural Credit Societies (PACS) level, the initiative aims to increase food security, decrease waste, and empower farmers.
• Convergence of projects: To address India’s lack of agricultural storage infrastructure, this ambitious project seeks to combine eight active projects from three ministries.
• Pilot Project: To evaluate and improve the strategy, the Ministry of Cooperation will carry out a pilot project in at least 10 carefully chosen areas.
• Inter-Ministerial Committee: The Minister of Cooperation will serve as the chair of the Inter-Ministerial Committee (IMC), which will also include the Secretaries of Agriculture, Consumer Affairs, Food and Public Distribution, and Food Processing Industries.

Justification for the Plan:

1. Strengthening Cooperatives: In line with the mission of “Sahakar-se-Samriddhi” (Cooperation for Prosperity), the Ministry of Cooperation seeks to capitalise on cooperatives’ strengths and turn them into prosperous economic businesses.
2. Empowering PACS: The strategy aims to empower PACS, which are important in the agricultural and rural environment, by creating agri-infrastructure such as warehouses, custom hiring centres, and processing units at the PACS level.
3. Wide-Reaching Impact of PACS: With over a million PACS and more than 13 crore farmers as members, the plan intends to increase PACS’s economic viability and support the expansion of the Indian agricultural industry.

Gains from the Plan:

1. Addressing Infrastructure Shortage: To address the nation’s lack of agricultural storage infrastructure, the initiative seeks to develop godowns at the PACS level. The programme intends to increase India’s cooperative sector foodgrain storage capacity by 700 lakh tonnes. About 1,450 lakh tonnes of grain may now be stored throughout the nation.
2. Diversification of PACS Activities: PACS would have the authority to carry out a variety of tasks, such as acting as fair pricing shops, common processing units, custom hiring centres, and procurement centres for state agencies like the Food Corporation of India (FCI). The farmer members’ revenues will increase as a result of this diversification.
3. Reducing Food Grain Wastage: The plan intends to reduce grain wastage, which will improve food security, by establishing local, decentralised storage capacity.
4. Preventing Distress Sales: The approach gives farmers the tools they need to avoid selling their crops at a loss, allowing them to command higher prices for their goods. In addition to storing their produce in the facilities, the farmers will have access to loans from these societies with interest rates as low as 70%.
5. Cost Savings: By establishing storage facilities at the PACS level, food grain transportation expenses to procurement hubs and fair-priced stores will be drastically reduced.

Primary Agricultural Credit Societies (PACS):

• In India’s Short-Term Cooperative Credit (STCC) structure, PACS is the lowest tier. They work hand in hand with farmers.
• The Union Budget for 2023–24 allotted Rs 2,516 crore for the computerization of 63,000 PACS over the next five years. PACS, founded in 1904, engages in short-term lending, giving loans to farmers for their agricultural requirements at the beginning of the cropping cycle.
• This action intends to increase accountability and openness while enabling PACS to expand their operations and engage in new ventures.

Conclusion

The development of the largest grain storage system in the cooperative industry is a big step towards improving food security, cutting waste, and giving farmers more leverage. The initiative intends to overcome the lack of agricultural storage facilities and support the expansion of the Indian agricultural sector by utilising the power of cooperatives and empowering PACS.