America’s raging war on Iran has triggered anxious discussions in India over its energy security, especially after Prime Minister Narendra Modi called for fuel-saving measures and later spoke about a global “decade of disasters”.
The concern stems largely from disruptions around the Strait of Hormuz, a narrow but strategically crucial shipping route through which nearly 30 per cent of India’s crude oil imports pass. India sources crude oil from around 40 countries and has diversified its suppliers over the years. Still, as the world’s third-largest energy consumer and most populous nation, India remains heavily dependent on imports for nearly 90 per cent of its oil needs, leaving it vulnerable to disruptions in global supply chains.
Government estimates suggest the country requires around 55 lakh barrels of crude oil every day.
Oil shock at doorstep
Fuel prices in India have remained largely stable through the three months of disruption around the Hormuz. But the bigger question is how long New Delhi can continue shielding consumers from a sharp spike in crude oil prices.
The pressure is already mounting. Brent crude touched $111 a barrel in international markets on Monday. At the same time, government data showed oil companies were incurring losses of nearly ₹1,000 crore every day in early May as they continued to hold retail fuel prices steady.
Last week, the government raised petrol and diesel prices by ₹3 per litre. In Delhi, public sector oil companies are now selling petrol at ₹97.77 per litre and diesel at ₹90.67 per litre.
It is for moments like these that countries build strategic petroleum reserves (SPRs) — massive emergency crude oil stockpiles maintained by governments to protect their economies during wars, supply disruptions, sanctions, or sudden price spikes.
First conceived in a time of war
The idea of maintaining emergency oil reserves began to take shape toward the end of the Second World War, when countries realised how vulnerable energy supply chains could become during conflicts.
The first major global push, however, came during the 1956 Suez Canal crisis, when disruptions in maritime trade exposed the risks of depending heavily on imported oil.
Then came the turning point: the 1973 Yom Kippur War. Oil-producing Arab nations coordinated supply cuts and sharply raised prices, triggering a global energy crisis.
In response, the United States passed the Energy Policy and Conservation Act in 1975 under President Gerald Ford, laying the foundation for the world’s first large-scale Strategic Petroleum Reserve.
The law authorised the US government to store up to one billion barrels of crude oil for emergencies.
The United States currently holds around 413 million barrels in its government strategic reserve system, according to the US Energy Information Administration (EIA).
The world’s largest strategic petroleum reserves, though, are not in America – but in China.
China’s billion-barrel insurance policy
Beijing has built reserves on a much larger scale. The EIA estimates China’s petroleum reserves at nearly 1.4 billion barrels – more than three times the American reserve.
But Beijing is not just ahead in oil reserves. It maintains reserves of soybeans, rice, wheat and even pork, as part of a broader strategy to prepare for global supply disruptions and geopolitical crises.
India’s 2004 awakening
All this big talk about China and the US must make one wonder, where does India stand?
Unfortunately, India formally began building strategic reserves only in 2004.
In 2004, the National Democratic Alliance (NDA) government led by Atal Bihari Vajpayee approved the creation of a strategic petroleum reserve system and authorised the construction of storage facilities.
The same war of work was carried on by the UPA government afterwards. On June 16, 2004, the government established the Indian Strategic Petroleum Reserve Limited (ISPRL), a special-purpose vehicle created to develop and manage the reserves.
Initially set up as a subsidiary of Indian Oil Corporation, ISPRL later became a wholly owned subsidiary of the Oil Industry Development Board in 2006.
Prime Minister Narendra Modi formally dedicated the first phase of ISPRL facilities to the nation in February 2019.
Delhi’s 74-day cushion
According to government estimates based on the 2019-20 consumption pattern, India’s dedicated strategic reserves can cover about 9.5 days of the country’s crude oil requirement.
However, the government argues that strategic reserves are only one part of the broader emergency stockpile system. Oil marketing companies (OMCs) separately maintain crude oil and petroleum product inventories that cover around 64.5 days of demand.
Combined, India currently has about 74 days of storage capacity for crude oil and petroleum products.
Notably, Modi’s visit to the UAE earlier this week also led to a new strategic collaboration agreement between ISPRL and Abu Dhabi National Oil Company (ADNOC) “to enhance the UAE’s participation in India’s reserves by up to 30 million barrels.”
Treacherous mountains, tough job
If countries like the United States and China are so aggressive about building stockpiles and strategic reserves, why is India not taking the same approach at a similar scale? The answer lies in the sheer complexity of building strategic petroleum reserves.
To build these reserves, giant underground caverns have to be carved into hard rock formations near coastlines using tunnel-boring machines. Coastal locations make it easier to transport imported crude from ports, while the hard rock formations help reduce the risk of seepage and leakage.
The engineering process is both expensive and time-consuming, as the caverns require specialised lining and structural reinforcement to store millions of tonnes of crude oil underground safely. This is one of the main reasons countries cannot rapidly expand strategic reserves during a crisis.
Race to build a bigger buffer
India’s first phase of SPR infrastructure was developed at three locations:
- Visakhapatnam in Andhra Pradesh
- Mangaluru in Karnataka
- Padur in Karnataka
Together, these facilities have a total storage capacity of 5.33 million metric tonnes (MMT) of crude oil.
The Visakhapatnam facility has a capacity of 1.33 MMT, Mangaluru stores 1.5 MMT, while Padur can hold 2.5 MMT.
The next phase includes two additional commercial-cum-strategic reserves:
- Chandikhol in Odisha with a planned capacity of 4 MMT
- Expansion at Padur in Karnataka with another 2.5 MMT capacity
These projects are being developed under a public-private partnership model.
Apart from this, work is underway on additional storage plans in Rajasthan, where salt caverns have been identified for a proposed 5.625 MMT reserve. The government is also considering above-ground storage facilities in Mangaluru and Bina in Madhya Pradesh.
Is an end in sight?
As the country’s dedicated SPRs can barely meet 9.5 days of crude oil demand, while combined reserves held by oil companies and the government together provide a cushion of around 74 days, the future now hinges on how long the Iran war continues.
Tehran has effectively restricted movement through the Strait by threatening commercial shipping, sharply reducing tanker traffic and pushing global crude prices higher.
Several reports suggest that vessels still attempting passage are being subjected to strict scrutiny and additional charges of $1 per barrel by Iran’s Revolutionary Guards.
With repeated warnings from US President Donald Trump, continuing military escalation, and diplomatic proposals failing to gain traction, there is still little indication of a lasting peace.
A report by US media outlet NBC also suggested that Washington is preparing contingency plans for renewed large-scale military action, reportedly named ‘Operation Sledgehammer’, if the fragile ceasefire collapses.
With the war showing no signs of ending, concerns over India’s energy security remain high.
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