Prime Minister Narendra Modi’s diplomatic win by clinching a deal with UAE’s Abu Dhabi National Oil Company for storing crude at the Mangaluru strategic petroleum reserve is facing commercial hiccups as ADNOC is not satisfied with the incentives offered.
According to top government officials, ADNOC has sought blanket exemption from entry tax, value added tax, Central service tax and income tax. ADNOC has also said that it wants exemption from bearing any operational costs it would incur to maintain the crude oil reserve.
ADNOC’s insistence on a tax break follows the government’s demand that crude oil from the Mangaluru reserves should be traded in India. Sources say the proposal before ADNOC allows for 35 per cent of the total crude oil stored in the reserve to be traded with domestic players in India. There is a window to allow the trade of another 15 per cent of stored crude oil upon a special request.
Besides, ADNOC will have to refill the reserve within a stipulated time-frame under the agreement. Under no circumstance will ADNOC be allowed to let the stored reserves fall below 50 per cent of the committed capacity.