June 27, 2018

Speaking at Press Conference on Cabinet Decisions in New Delhi

Good afternoon friends. As you know the Union Cabinet met this morning and they have taken some important decisions. To brief you on those, we have with us Hon’ble Minister for Railways, Coal, Finance and Corporate Affairs, Sh. Piyush Goyal Ji. A warm welcome to you sir! You can brief now sir. Thank You.

Thank you Mr. Kar! Today, important decisions relating to the petroleum sector, exports and the ethanol industry where the sugar industry, India’s imports of diesel – it has a very holistic dimension – were all finalized in the Cabinet. On the export front, I am delighted to share with you that the Cabinet has decided to increase the allotment of capital, enhance the capital base of ECGC, the Export Credit Guarantee Corporation, by Rs. 2,000 crore.

Last year, Rs. 50 crore was given as capital to ECGC but with the growing export numbers and you are well aware that the export growth this last two months has been very robust. We realized that there will be greater demand for export credit insurance, and therefore, in the current year, the government will be providing Rs. 1,450 crore as additional capital to ECGC and next year, another Rs. 500 crore, 50 having already been given last year. So, Rs. 2,000 crore infusion of capital has been approved for ECGC.

It will align it with the best practices that RBI has stipulated. It will also give it more headroom to write policies for supporting our export thrust. It will expand its role in the ever-growing export basket, and particularly, for the focused countries where we are making effort to increase exports. This increased ability to write insurance policies will be a great support to the exports sector.

Simultaneously, the government has also been working to promote project exports and I am delighted to share with you that the Cabinet today has approved overall additional institutional support or grant support to the National Export Insurance Account. It’s a trust that was formed, the NEIA trust, which writes insurance policies for project exports.

So last year, Rs. 440 crore was given to the NEIA trust in anticipation of approval. This year, we will give another Rs. 300 crore and next year, another Rs. 300 crore, making it a total of Rs. 1,040 crore additional grant in the form of capital for the NEIA trust to support project exports.

Many of you may be aware that the idea of having a strategic storage has been discussed in the country for over 12 years now. It was first decided, actually 14 years, it was first decided when Mr. Atal Bihari Vajpayee was the Prime Minister during NDA-I on the 7th of January, 2004 that considering India’s high import dependence for oil and gas and in the interest of meeting the objective of India’s energy security, we should take up the construction of crude oil reserve facilities as a buffer to deal with any situation of supply chain disruption due to external sources. And also in exceptional circumstances, we can use this buffer stock of oil to insulate India from abnormal spikes in the global oil prices.

While the original expectation and approval in 2006 was given for storage of about 27 days of oil reserves, which was the assessment carried out at that time, we only saw one strategic reserve come up before 2014, and sadly, even that was not provided the capital support and funding to fill up the oil reserves in that storage facility.

The government under Prime Minister Modi has on 25th January, 2017 signed a definitive agreement on oil storage and management with Abu Dhabi National Oil Corporation of UAE, under which one of these two SPR caverns at Mangalore having capacity of 5.86 million barrels would be filled up by their crude.

So, they would be funding this and a mechanism has been created that 50% of the quantity will be the minimum strategic quantity, 15% shall be additional strategic quantity and the remaining 35% shall be a commercial quantity. Learning from our successful experience of a public-private partnership for building the country’s strategic oil storage, the Cabinet today has given an in-principle approval for establishment of two additional facilities aggregating 6.5 million metric tonnes as strategic petroleum reserves at Chandikhole in Odisha for 4 million metric tonnes and Padur in Karnataka for 2.5 million metric tonnes.

So, additional two more strategic oil reserves at Chandikhole in Odisha, 4 million metric tonnes and Padur in Karnataka, 2.5 million metric tonnes. Creation of both these underground rock caverns strategic petroleum reserves will significantly help India’s energy security and we shall be exploring the PPP mode for executing both these projects for which potential investors will now be approached.

I must also mention about the fourth very important decision taken today on the mechanism for procurement of ethanol by the public sector oil marketing companies. We have had some successes over the last 3-4 years in expanding the ethanol production and blending with imported petroleum products, but we were keen to create a more holistic framework in which the pricing of ethanol over a longer period can be given some stability and predictability, so that we can encourage investments in the ethanol production space.

This programme was again launched by Prime Minister Mr. Vajpayee in 2003 but had languished over the period – 2004 to 2014 – with very small amounts of blending of ethanol actually taking place. After the Modi government came in, we had notified an administered price of ethanol since 2014 and it had significantly improved the supply of ethanol during the past four years.

In fact, the numbers speak for themselves. As against 38 crore litres which was procured by the public sector OMCs in the ethanol supply year 2013-14, it has increased to about 140 crore litres in 2017-18. So, within a span of four years, it’s almost three and a half times. That is the scale of growth. This has helped us to bring down the import of petroleum products. It has also given an alternate revenue stream to the sugarcane industry which indirectly straight away goes to support sugarcane farmers and helps the sugar industry to pay the farmers their dues.

Therefore, along with many other decisions this government has taken for reduction of farmers’ dues in sugarcane. Today, we have decided that we shall have a sustaining formula for deciding the price of B-heavy molasses and sugarcane juice, which was never done before, also to be used for ethanol production. So, for the first time, we have decided on a formula to price B-heavy molasses and sugarcane juice, which will have a positive impact on the capability of sugar industry to pay the farmers’ dues and also increase the availability of ethanol for the ethanol blending programme of the Government of India.

We have also decided that for the forthcoming sugar season 2018-19 during the ethanol supply period from 1st December, 2018 to 30th November, 2019, we shall fix the ex-mill price of ethanol derived out of C-heavy molasses at Rs. 43.70 per litre as against Rs. 40.85 at present. So, almost a Rs. 3 increase. In addition, GST and transportation charges will also be paid over and above that.

Similarly, the ex-mill price of ethanol derived from B-heavy molasses. As I mentioned earlier, B-heavy molasses and sugarcane juice was never determined earlier. It’s for the first time we have brought in that in the ambit of ethanol. The price has been fixed at Rs. 47.49 per litre. Again, GST and transportation charges will be paid in addition to that.

These prices of ethanol are based on the estimated FRP for the sugar season 2018-19 and will be modified; we have given authority to the Petroleum and Natural Gas Ministry to modify it as per the actual FRP that may be declared in the future. It’s called B-heavy molasses. It is the first time we are fixing it. Earlier, it was not there at all. Rs. 47.49 per litre, December 2018 to November 2019, that is the ethanol supply year. That’s traditionally the ethanol supply year when both the crops come out.

So, we expect the ethanol availability for the ethanol blending programme to significantly increase due to the higher price for C-heavy molasses based ethanol and the new ability to procure ethanol from B-heavy molasses and sugarcane juice. And our effort is that we must move towards the 10% ethanol blending which will significantly give a leg up or a boost to the sugarcane farmers and also reduce the import bill on petroleum products.

Thank you


Q: Rs. 3 hike sir. Rs 3 hike in ethanol, who is going to get this Rs. 3 hike. It’s all makers, manufactures……?

A: Logically, it flows to the farmers because if the product is converted to ethanol, a) it stabilizers the excess sugar that’s available in the market and it also helps them to clear the farmers’ dues.

Q: Ethanol is sold to the petroleum industry sir. So, you are charging the petroleum industry this Rs. 3 hike?

A: No, it is still much cheaper than the price that they would be required to pay for the import of petroleum products. That’s right. It is still cheaper than the price for imported products.

जीएसटी तो जो कानूनी है वह लगता है, उसमें तो कोई हमारी कैबिनेट के पास कोई पावर नहीं है उसमें कुछ करने के लिए |

Q: I think this strategic oil reserve concept. It was conceived after the Kargil war and I remember that when this was mentioned that the cost of building the strategic oil reserve at that time was proposed to be Rs. 50,000 crore?

A: 11,000 crore. No, I am sorry I can tell you what it was exactly at that time if you are very interested. The Cabinet had decided, it was decided in 2004, not after the Kargil war, much later, and the expectation was that these strategic reserves as per the CCEA decision of 6th January, 2006 was to finance the strategic reserves, which would cost about Rs. 11,267 crores based on September 2005 prices. So, it was not 50,000, but what you are talking about, probably, there will be some escalation between 2005 and 2018 but I still don’t think it will go to 50,000 crores.

Q: What is the cost  sir, how much is the expected cost?

A: I think we have today taken an in-principle decision on both these to be constructed. Obviously now, we will now have to do engineering studies, because these are very high quality, highly designed underground caverns, which store these petroleum oils. So, they are extremely complicated engineering designs, which will certainly take some time. Today is the in-principle approval.


A: Not in today’s Cabinet.

प्रश्न: 2000 करोड़ का जो फंड है, उसमे MSMEs को इसमें कैसे…….

उत्तर: सबसे ज्यादा ईसीजीसी जो पॉलिसीज लिखता है, इंश्योरेंस जो करता है वह सबसे अधिक छोटे उद्योग, लघु उद्योग और मध्यम वर्गीय उद्योग को ही लाभ मिलता है| तो यह जो 2000 करोड रुपए आज ईसीजीसी के कैपिटल में वृद्धि करने का निर्णय लिया गया है यह डिमांड भी तब उठी थी जब टेक्सटाइल सेक्टर वगैरा सबने कहा कि ईसीजीसी कवर होने से हमारे ब्याज के दर भी कम हो जाते हैं, तो इसका सबसे बड़ा लाभ छोटे और लघु उद्योग और मध्यम वर्गीय उद्योगों को होगा|

प्रश्न: ….

उत्तर: नहीं यह इंश्योरेंस पॉलिसी होती है कि अगर आपका जो buyer है जिसको आपने सामान विदेश में दिया अगर वह डिफॉल्ट करता है तो आपको इंश्योरेंस से पूरा पैसा मिल जाता है| तो जो बड़े एक्सपोर्टर होते हैं, बड़े एक्सपोर्टर तो बहुत छानबीन करके बड़े लोगों को बेचते हैं तो कई बार उनको इंश्योरेंस लेने में कोई रुचि नहीं रहती है| छोटे एक्सपोर्टर के लिए पैसा डूब जाए कभी कुछ, तो बहुत बड़ा धक्का पड़ता है इसलिए एक्सपोर्ट क्रेडिट गारंटी कारपोरेशन अधिक से अधिक छोटे और लघु उद्योग और मध्यम वर्गीय उद्योग को सहायता देने के काम में जुटी रहती है तो यह दो हजार करोड़ से सीधा 20 गुना और इंश्योरेंस कवर करने की एबिलिटी बढ़ जाती है ईसीजीसी की और 20 गुना जब वह बढ़ती है, तो सालाना लगभग उसका भी 4 गुना आप इंश्योरेंस पॉलिसीज़ लिख सकते हैं| इंश्योरेंस जो डेटर होते हैं वह कभी एक महीना होता है, 2 महीना, 3 महीना| तो लगभग अगर दो हज़ार करोड़ दिए जाते हैं तो सीधा-सीधा दो लाख करोड़ का एडिशनल इंश्योरेंस कवर छोटे लघु उद्योग को डायरेक्ट इनडायरेक्टली मिल जाता है|

आज सिर्फ कैबिनेट के डिसीजन्स पर|


Subscribe to Newsletter