India falls short on strategic oil reserves funding amid West Asia crisis

India's strategic oil reserve spending in FY26 is set to reach only 18% of the Budget estimate, even as West Asia tensions disrupt supply and highlight vulnerabilities in the country's energy security

India is expected to spend ₹1,039 crore on its strategic petroleum reserves in the current financial year (FY26), far below the budget estimate of ₹5,876 crore. The gap highlights a significant underspending as West Asia tensions strain energy security.

 

Why this matters

This comes as the country’s strategic oil reserves, designed to provide cover for about 9.5 days of supply during disruptions or price shocks, are currently at around two-thirds of capacity. The reserves have come under the spotlight amid the ongoing conflict in West Asia, which has disrupted oil supplies to major importers across the globe. 

 

India, the world’s third-largest energy consumer, depends on imports for about 88 per cent of its crude oil needs.

   

Moreover, the allocation for oil reserves in the proposed Budget for 2026–27 has been sharply reduced to ₹200 crore.

 

How big is India’s crude oil buffer?

Minister of State for Petroleum and Natural Gas Suresh Gopi told the Rajya Sabha on Monday that Indian Strategic Petroleum Reserve Ltd (ISPRL) currently holds about 3.372 million tonnes (MT) of crude, or roughly 64 per cent of its total storage capacity.

 

"Quantity of the crude available in the caverns varies depending on market conditions...The actual reserve is a dynamic number depending on the stocks and actual consumption, both of which are not static," he added.

 

India has strategic underground storage facilities with a combined reserve capacity of 5.33 MT across three locations: Visakhapatnam (1.33 MT) in Andhra Pradesh, and Mangaluru (1.5 MT) and Padur (2.5 MT) in Karnataka. These reserves are used for storing crude oil which can act as a buffer for short-term supply shocks.

 

Gopi also said the country’s total storage capacity for crude oil and petroleum products, including that of oil marketing companies (OMCs), stands at 74 days.

 

Capacity expansion

He added that the Centre, in 2021, had also approved the establishment of two additional commercial-cum-strategic petroleum reserve facilities with a total storage capacity of 6.5 MT. These include Chandikhol (4 MT) in Odisha and Padur (2.5 MT) in Karnataka.

 

While construction of the Padur facility began in 2021, the Odisha project is facing delays as the state government is yet to execute the lease deed and hand over the land, according to a report by Business Standard. The ISPRL has urged the Odisha government to expedite the land allotment process for the early commissioning of the strategic petroleum reserve project.

 

Once the two projects are completed, India’s strategic petroleum reserves will be able to meet around 21 days of emergency crude oil demand.