Delays Continue to Stall India’s Strategic Petroleum Reserves Expansion

India’s strategic petroleum reserves expansion faces delays despite rising import dependence, budget cuts, and growing global energy security risks.

Cover Image Attribute:  One of the underground storage caverns of India’s Strategic Petroleum Reserve, developed as part of the country’s emergency crude oil storage infrastructure. / Source: Engineers India Limited.

 Six years after a detailed IndraStra Global's article outlined ambitious growth in underground crude oil storage to shield the economy from supply shocks, India's strategic petroleum reserves program remains largely unchanged in scale, even as global disruptions reflects the vulnerabilities of heavy import dependence. The country, which imports more than 88 percent of its crude requirements, continues to rely on a limited network of salt cavern facilities whose combined capacity has not expanded since the early 2010s, leaving policymakers to weigh fiscal pressures against the risks of geopolitical instability in West Asia and volatile energy prices.
The existing infrastructure consists of three underground cavern sites at Visakhapatnam in Andhra Pradesh, Mangalore in Karnataka, and Padur in Karnataka, holding a total of 5.33 million metric tonnes of crude oil. These facilities, carved from natural salt domes through water-injection techniques that create stable, non-corrosive storage voids, currently contain about 3.37 million tonnes, or roughly 64 percent of capacity. At full utilization, they would cover approximately nine-and-a-half days of national crude consumption; at present levels, the buffer shrinks to around six days in a crisis scenario, according to parliamentary disclosures. Commercial inventories held by oil marketing companies add another 64 to 65 days of cover, yielding a combined operational cushion of roughly 74 to 75 days. Yet this total falls short of international benchmarks for major importers and leaves little margin when roughly 40 percent of India's crude must transit the Strait of Hormuz.
Proposals to enlarge this underground network date back more than a decade. In the mid-2000s, the government established the Indian Strategic Petroleum Reserves Limited as a special-purpose vehicle to manage emergency stockpiles separate from commercial holdings. By 2015, the first phase—roughly 5.33 million tonnes across the three sites—had reached operational readiness, prompting analysts to highlight the opportunity presented by then-low global oil prices. One assessment from that period noted that filling the initial reserve at prevailing market rates could generate a potential 50 percent return if prices later rebounded to pre-2014 highs, while simultaneously enhancing physical supply security and easing fiscal strains from import bills. The emphasis was on treating reserves not merely as insurance but as a strategic asset whose acquisition timing could yield economic dividends amid a global market favoring buyers.
By 2020, planning had advanced to include an additional 6.5 million tonnes of capacity, split between a new site at Chandikhol in Odisha and an expansion at Padur. Further projects were identified in Bikaner, Rajasthan, and Rajkot, Gujarat, with the explicit goal of extending the emergency buffer and addressing the gap between India's rapidly growing consumption—rising from about 158 million tonnes in fiscal 2013-14 to 239.17 million tonnes in fiscal 2024-25—and static reserve infrastructure. Underground storage was positioned as the preferred method because salt caverns offered low construction costs relative to surface tanks, natural sealing properties, and minimal environmental footprint when properly engineered. The approach mirrored practices in other major economies, where salt-dome or rock-cavern facilities provide long-term stability without the corrosion risks associated with above-ground alternatives.
Yet implementation has lagged. The 2021 cabinet approval for the Chandikhol and Padur expansions under a public-private partnership model has not translated into completed facilities. Land allocation for Chandikhol has been secured, and a global tender for the 4-million-tonne project—estimated to cost $1 billion for construction alone, plus another $3 billion to fill—remains in preparatory stages as of early 2026, with the request for proposals expected shortly. At Padur, the Phase II expansion to add 2.5 million tonnes has reached the engineering stage following a work order issued in September 2025, but actual cavern excavation and pipeline integration have yet to begin. Broader pipeline projects, including those in Rajasthan and Gujarat, remain exploratory. Parliamentary committees have repeatedly flagged the pattern: repeated under-utilization of budgeted funds, delays in bidding, and milestone payment shortfalls that forced reallocations. In the current fiscal year, allocation for filling and expanding reserves stood at 5,876 crore rupees ($620 million), but actual spending is projected at only 1,039 crore ($110 million), with the next year's provision slashed further to 200 crore ($21.1 million).

These structural constraints reflect deeper challenges. Building underground caverns is capital-intensive, requiring coordination across central ministries, state governments, environmental regulators, and private partners. Budgetary trade-offs compete with priorities in infrastructure, welfare, and defense, while bureaucratic processes for land acquisition and clearances add years to timelines. A research analyst at the Centre for Social and Economic Progress observed that procuring crude oil and maintaining reserves demands sustained fiscal commitment at a time when governments must balance multiple demands. Operation and maintenance costs for the existing sites alone reached 153 crore ($16.1 million) rupees in fiscal 2023-24 and 100 crore ($10.6 million) in fiscal 2024-25, highligting the ongoing expense even without expansion. Public-private partnerships were introduced precisely to leverage private capital and accelerate delivery, yet the model has not overcome institutional hurdles.
Game-theoretic analyses of strategic stockpiling decisions by India and China, two of the world's largest developing importers, illustrate how one country's actions influence regional market dynamics. In a shared global oil market, individual reserve policies interact through price effects and supply expectations; uncoordinated buildup can moderate price spikes but also risks early drawdowns or suboptimal sizing if acquisition capacities are constrained. Such modeling suggests that India's relatively modest reserve scale compared with China's leaves it more exposed to persistent disruptions, particularly when transition probabilities between normal and crisis market states remain uncertain. Comparative reviews of global practices further highlight India's position: while countries like the United States maintain vast reserves through a mix of government and commercial holdings, and others emphasize legislative mandates for private-sector contributions, India's system blends state oversight with limited private involvement, yet progress on scale has been slower than in peers facing similar import dependence.
Recent price volatility amplifies the stakes. Studies examining asymmetric responses show that energy price fluctuations exert stronger effects on import volumes in upper quantiles—periods of high prices—than in lower ones, driven by exchange-rate movements, geopolitical risks, and policy uncertainty. For India, a sustained $1 per barrel increase in crude prices adds roughly 16,000 crore rupees ($1.69 billion) to the annual import bill, while supply interruptions compound economic losses through reduced output and employment. The 2008 global financial crisis, the 2011 European debt turmoil, the 2014 oil-price collapse, the COVID-19 demand shock, and the Russia-Ukraine conflict each triggered sharp price swings that tested reserve adequacy. During the 2020 price plunge, India filled existing caverns to near capacity, demonstrating the value of ready infrastructure, yet the absence of expanded underground space limited the scale of that opportunity. Conversely, current elevated prices amid West Asia tensions make large-scale filling more expensive, reinforcing arguments that reserves should be built opportunistically during troughs.
Government statements acknowledge the need for acceleration. In parliamentary replies in March 2026, officials confirmed plans to ramp up capacity, noting that land allocation for key sites has been completed and that progress on pipeline projects will be expedited. A standing committee has urged scaling reserves toward a 90-day cover to align more closely with international norms. Yet the gap between intent and delivery persists. If the Chandikhol and Padur expansions, plus additional sites, were completed, total capacity could reach around 20 million tonnes—roughly 35 days of cover at current consumption levels. Achieving that would require not only overcoming current delays but also addressing financing for both construction and crude procurement, potentially through leasing arrangements or international partnerships that preserve emergency drawdown rights.
The broader energy-security picture extends beyond crude oil. India's primary energy mix remains coal-dominant, with natural gas and renewables playing growing but still secondary roles. Strategic reserves for liquefied petroleum gas are minimal—only two underground caverns totaling 140,000 tonnes—leaving household and transport sectors exposed to price pass-through effects. Policy initiatives, from ethanol blending targets to exploration licensing reforms, seek to reduce import reliance over time, yet near-term vulnerabilities remain tied to physical stockpiles. International coordination, such as through the International Energy Agency framework that India has expressed interest in adopting, could enhance resilience, but domestic capacity gaps limit the effectiveness of such alignment.
In the context of an uncertain global oil market shaped by competition among exporters, technological shifts in refining, and persistent geopolitical flashpoints, the slow pace of underground storage expansion represents a structural lag rather than an outright failure. The original vision—leveraging low-price windows to build buffers that deliver both security and fiscal returns—retains analytical merit, as evidenced by consistent recommendations across academic and policy assessments. Realizing it, however, demands sustained political will to streamline approvals, secure predictable funding, and integrate private expertise without compromising emergency control. Until those barriers are addressed more decisively, the country's energy security will continue to rest on a narrow margin, exposing its economy to the very disruptions the reserves were designed to mitigate. The coming months, with tenders advancing and work orders in place, will test whether the latest urgency from external crises can finally translate into measurable underground capacity growth.

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