New Delhi: The government is likely to begin unwinding the emergency energy-security measures it rolled out during the West Asia conflict once it is satisfied that global conditions have returned to normal, an official said on Thursday. The precautionary steps — tighter monitoring of LPG supplies, a reordering of domestic natural gas allocations and stricter checks against fuel hoarding — were put in place over the last three months to protect domestic energy availability as worries grew over possible disruptions to international oil and gas supply chains.
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The shift in outlook follows the release of the text of an interim agreement signed by the presidents of the US and Iran to bring their 111-day war to a close. The deal holds out the prospect of reopening or normalising shipping through the Strait of Hormuz, a development that would offer considerable relief to India, which is among the world's largest crude buyers.
"We have been reviewing the evolving situation. The measures which we took will be reviewed and eased once we get the confidence that situation globally has normalised," the official said.
The official described the emergency measures as preventive, aimed at keeping essential fuel supplies flowing through a phase of acute geopolitical uncertainty. "As the international situation normalises and supply risks recede, the government will review these restrictions and consider their phased withdrawal," said the official.
The Strait of Hormuz, the narrow channel separating Iran and Oman, carries close to a fifth of the world's oil consumption and is the main export gateway for leading Gulf producers, like, Saudi Arabia, Iraq, Kuwait, the United Arab Emirates (UAE) and Qatar, all of which are key energy suppliers to India.
The movement of crude oil, which acts as the feedstock for petrol and diesel, and natural gas, through Strait of Hormuz had been disrupted since the war began in end-February. The disruption pushed up crude prices, shipping insurance premiums and freight rates sharply.
Sources said the reopening of the route and the cooling of tensions should help steady global energy markets and brighten the outlook for import-dependent economies such as India.
Updating reporters at an inter-ministerial press briefing on West Asia on Thursday, officials said efforts were under way to bring Indian-flagged vessels out of the region.
"I would like to state that we are closely coordinating with MoPNG, (Ministry of) Fertilizers, MEA and all relevant stakeholders to ensure that everyone is prepared and our vessels return as soon as possible. After Disha, as of now, no other Indian-flagged vessel has moved out of Strait of Hormuz," said Opesh Sharma, Director, Ministry of Ports, Shipping and Waterways.
"We are closely coordinating with all our stakeholders to ensure that our energy vessels as well as our flagged vessels come out," he added.
India, the world's third-largest oil importer and consumer, had announced a string of contingency measures to shield domestic fuel supplies after hostilities escalated in West Asia, a region that supplies a sizeable portion of the country's crude oil and LPG.
The government invoked the LPG (Supply and Distribution Regulation) Order, giving authorities powers to track inventories closely, stop the diversion of domestic cylinders and act against hoarding and black-market sales. State governments and oil marketing companies were asked to keep a close watch on LPG distribution networks and ensure households and essential services faced no interruption.
Refiners were directed to step up LPG output by rerouting streams earlier used for petrochemicals. On the consumer side, the gap between refill bookings was widened and supplies to commercial users such as hotels and restaurants were curtailed.
The Ministry of Petroleum and Natural Gas, meanwhile, drew up a reprioritisation plan for domestic natural gas, placing city gas distribution networks serving homes and transport, along with the fertiliser sector, ahead of less critical industrial users in case supplies were squeezed. State-owned fuel retailers were also told to tighten inventory management and dissuade panic buying.
Other steps included fixing minimum gaps between LPG cylinder bookings to curb stockpiling, capping unusually large petrol and diesel purchases by non-contract customers, and watching retail outlets for unusual demand spikes.
Oil prices have slid to a three-month low over the past couple of days, though retail petrol and diesel rates in India remain below their international benchmarks, the official said.
At the height of the war-related disruption, global oil had climbed to as much as USD 119 per barrel, up from USD 70-72 a barrel in February, raising the cost of producing petrol and diesel. The government, however, deferred any revision in retail rates until mid-May. On March 27, it cut excise duty on petrol and diesel by Rs 10 per litre each to head off a price increase ahead of polls in five crucial states, including West Bengal.
Once the assembly elections were over, retail petrol and diesel prices were raised by about Rs 7.50 per litre each and CNG by Rs 6 per kg. The price of a 14.2-kg LPG cylinder used for household cooking went up by Rs 89 in two instalments.
Even after these increases, state-owned oil companies are still losing around Rs 550 crore a day as retail prices trail costs. International prices were around USD 78 per barrel on Thursday.
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On retail pricing, Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas, said: "The government is seized of the matter and appropriate decision regarding retail prices will continue to be taken in line with the evolving international situation."
She also pointed to the expanding availability of E85 fuel. "45 retail outlets are currently dispensing E85 fuel. By the end of this year, another 500 retail outlets will have this facility and by the end of the next year, the number will reach 5,000," she said.
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