Strategic Oil Reserve Expansion Suggested Amid Funding Disruptions and Delays

India's Strategic Crude Oil Reserves Underutilized

Key Highlights

• The government has spent less than half its budget for strategic crude oil reserves over the past two financial years, with actual expenditure at 75%, 45%, and 47% of budget estimates in FY24, FY25, and FY26, respectively.
• The current reserves are at 64% of the capacity, raising concerns over India's energy security amidst heightened geopolitical tensions.
• The petroleum ministry and oil marketing companies (OMCs) have been recommended to explore additional storage caverns and fast-track clearances to meet the global standard of 90 days of crude reserves.

Budget Expenditure

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• The government provides budgetary support to Indian Strategic Petroleum Reserve Ltd (ISPRL) for operating and maintaining strategic petroleum reserve facilities at Visakhapatnam, Mangaluru, and Padur.
• The three underground caves have a total capacity of 5.33 million tonnes.
• There has been a gap between budget estimates (BE), revised estimates (RE), and actual expenditure (AE) in the last three fiscals, with the actual expenditure at 75%, 45%, and 47% of BE allocated in FY24, FY25, and FY26, respectively.

Supply Worries

• The Iran war has put 50% of India's oil and 90% of its LPG imports at risk following the disruption of the Strait of Hormuz, a key chokepoint for the country's energy supplies.
• India meets 88% of its crude needs through imports, with strategic reserves at two-thirds of their capacity.

Phase II Delays

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• The construction of two more strategic petroleum reserves under Phase II remains stalled.
• The government approved two reserves with 6.5 million tonne capacity in July 2021, but land acquisition in Chandikhol is at an advanced stage, and financial closure is in progress.
• The committee has recommended that the oil ministry ensure better planning, timely execution, and optimal utilisation of funds to meet the objectives of the strategic reserve programme.