Unlearnt lessons: On India’s inadequate strategic petroleum and gas reserves

Published 2026-05-20 · Updated 2026-05-25 · 3 min · 530 words

UPSC CSE Context Why in News: Centre hiked retail fuel prices after four years, exposing India's inadequate strategic petroleum and gas reserves. Syllabus Connection: GS Paper 3: Indian Economy – Infrastructure (Energy), Resource Mobilization; GS Paper 2: International Relations – Energy Security. Exam Relevance: Highlights India's vulnerability to global oil price shocks and the need for strategic reserves, relevant for questions on energy security, import dependence, and economic resilience. ## Core Issue India's strategic petroleum and gas reserves are insufficient to ensure energy security. Key Development: Fuel price hike after four years, coupled with rupee depreciation and inflation, underscores decades-old neglect of strategic reserves. Stakeholders: - Government of India - Public sector OMCs - International Energy Agency - Petronet LNG - BPCL ## Static Knowledge High-Value Background: - Strategic Petroleum Reserve (SPR) programme was conceived post-1991 economic crisis and formalized in early 2000s. - IEA recommends 90 days of net oil imports as strategic reserve cover. Concepts in Context: - Under-recoveries: Losses incurred by OMCs when selling fuel below cost due to government price controls. - Spot market spikes: Short-term price surges in global oil markets that affect import-dependent nations. Institutions and Mechanisms: - Strategic Petroleum Reserve (SPR): Underground storage facilities to cushion supply disruptions. ## Dynamic Analysis ### Economy - India's SPR covers only 7 days of consumption, far below IEA's 90-day norm, exposing vulnerability to supply shocks. - Combined with OMC inventories, total cover is over 70 days, but this is still inadequate given rising demand. - LPG and LNG reserves are critically low: LPG storage is less than 2 days of consumption; LNG lacks underground storage. - Rupee depreciation and high crude prices worsen the fiscal burden, as seen in the recent price hike. ### International Relations - India's energy security is tied to geopolitical stability in the Middle East and global oil markets. - China's defiance of US sanctions on Russian oil secured cheaper supplies, highlighting India's constrained strategic autonomy. - EU's rapid reduction of Russian gas dependence post-Ukraine war shows proactive reserve building. ### Governance - Decades of underinvestment in strategic reserves reflect policy neglect despite post-1991 lessons. - Price hikes are politically sensitive, often delayed until after elections, compromising timely economic adjustments. - Lack of underground LNG storage for fertilizer production threatens agricultural supply chains. ## Prelims Takeaways - India's SPR capacity: 36.7-39 million barrels (about 7 days of consumption). ## Mains Value Addition Arguments: - Political economy of fuel pricing leads to delayed pass-through of costs, exacerbating fiscal and trade deficits. - Comparison with US and China shows India's reserves are disproportionately low relative to its consumption and import dependence. - Lack of LNG storage threatens fertilizer production, linking energy security to food security. Examples: - US built SPR after 1973 oil shock; current 400 million barrels provide ~20 days cover. Data Points: - India's daily oil consumption: 5.5 mbpd. - India's LPG daily consumption: 80,000 tonnes; storage: 1.4 lakh tonnes. Counterpoints: - Building strategic reserves is capital-intensive and may strain fiscal resources. - Global oil market dynamics and renewable energy transition may reduce long-term need for petroleum reserves. ## Way Forward - Expand SPR capacity to meet IEA's 90-day norm through public-private partnerships. - Invest in underground LNG storage facilities to secure fertilizer feedstock. - Diversify oil import sources and strengthen long-term contracts to hedge against spot market volatility. - Accelerate renewable energy adoption to reduce structural dependence on imported fossil fuels.

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