India is moving to expand its strategic reserves of crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), part of a long-debated effort to cushion the country against supply shocks. Yet the central question facing policymakers is whether building storage capacity alone can deliver genuine energy security, or whether the system will remain incomplete without the ships, pipelines, and distribution networks needed to move fuel when it is needed most.
India currently operates underground crude storage at Visakhapatnam, Mangalore and Padur, facilities built under a public-private model with funding from the Indian Strategic Petroleum Reserve phase. The government has signalled plans to expand these sites and add new locations, alongside dedicated storage for LNG and LPG, which are not currently held in strategic quantities.
Analysis: Storage is the most visible component of a strategic fuel system, but it is not the binding constraint. A reserve that cannot be released quickly to refiners, state-run fuel retailers, or gas utilities functions as a costly inventory rather than a security asset. India’s experience during the 2022 global energy price spike, when it relied on price-based mechanisms and emergency imports rather than drawdowns, underscored the gap between physical stock and operational readiness.
Three structural gaps stand out.
First, logistics. India’s existing crude caverns are located on the southern and western coasts, away from the country’s largest refining clusters in Gujarat and along the east coast expansion zones. Without dedicated pipelines, port-handling agreements, and pre-cleared shipping arrangements, releasing stored crude can take weeks rather than days. Comparable systems in the United States and China include not just caverns but also binding rights-of-way and dispatch protocols that bypass commercial queuing during declared emergencies.
Second, governance. Strategic reserves raise unresolved questions about ownership, release triggers, and replenishment rules. India’s current framework treats crude storage as a government asset leased to private operators, but it does not yet specify who decides when to draw down reserves, under what price or supply conditions, and how stocks are to be replaced once used. The absence of clear rules creates a risk that reserves are tapped only in extreme crises, defeating the purpose of smoothing shorter-term disruptions.
Third, financing. Expanding caverns, building floating LNG storage, and adding LPG tankage requires sustained capital outlay. The existing model relies on a mix of public spending and user fees from oil companies, but the economics depend on global crude prices remaining high enough to justify the carrying cost. Analysts have noted that low-price periods erode the case for private participation, leaving the burden on the exchequer.
Analysis: India’s dependence on imported crude, near-total reliance on LNG for incremental gas demand, and rising LPG consumption make strategic reserves a rational policy goal. Roughly 85% of crude consumed domestically is imported, and the country’s energy import bill remains a major macroeconomic vulnerability. Reserves, however, are a hedge, not a substitute for diversified sourcing, demand management, and transition planning. A system that stores fuel but cannot deliver it efficiently, or that lacks transparent release rules, may offer political reassurance more than operational security.
The government’s stated direction suggests an integrated approach: expanded storage tied to pipeline capacity under the planned national gas grid and expanded refinery connectivity. The test will be whether the design is treated as a single system or as parallel projects, each managed by different ministries and agencies, with rules drafted only after construction begins.
Analysis: A credible strategic fuel programme requires three preconditions before new caverns are dug. First, a published doctrine on release triggers, decision authority, and replenishment timelines. Second, binding logistics arrangements that guarantee transport from storage to refinery or distributor within a defined window. Third, a transparent financing model that does not collapse when oil prices fall. Without these, India risks building stockpiles that are difficult to access precisely when they are most needed.
Energy security planning in India is also constrained by the structure of its fuel markets. Crude imports are dominated by a handful of state refiners, LPG distribution by public-sector oil marketing companies, and LNG regasification by a mix of public and private terminals. Coordinating a drawdown across this chain requires operational agreements that do not yet exist on paper. Comparable systems in member states of the International Energy Agency have explicit standby arrangements with industry that can be activated without renegotiation.
India’s existing strategic crude reserves, currently about 5.33 million metric tonnes in usable storage, cover roughly 9.5 days of net imports, well below the 90-day benchmark that countries belonging to the International Energy Agency maintain through a combination of stocks, demand restraint, and indigenous production. Closing that gap through storage alone would require infrastructure investment on a scale that has not been budgeted, and would still leave the country short of the operational capacity that defines a true strategic system.
Analysis: The political appeal of strategic reserves is straightforward: they are tangible, they project sovereignty, and they reassure consumers during price volatility. The technical reality is more complex. Reserves are one instrument within a broader energy security toolkit that includes diversification of suppliers, strategic petroleum agreements with Gulf and African producers, refinery flexibility, demand response, and long-term LNG contracts. Treating reserve expansion as a standalone achievement risks diverting attention from the harder, less visible reforms needed to make those reserves functional.
Whether India builds a strategic fuel system or simply builds strategic storage will depend on decisions made in the coming planning cycles, particularly on whether the government pairs physical infrastructure with the legal, logistical, and financial architecture that turns stock into security.
Sources
The Hindu – National: https://www.thehindu.com/news/national/can-india-build-a-strategic-fuel-system-explained/article71396293.ece
Corrections
If you believe this article contains an error, contact Herald Express with the source URL and supporting evidence.
Story synopsis gathered from: The Hindu – National — source
