India plans Phase-2 of strategic petroleum reserves under PPP model at estimated ₹14,527 crore
The government announced plans for Phase-2 of India's Strategic Petroleum Reserve (SPR) programme to be developed under a Public-Private Partnership (PPP) model, at an estimated project cost of ₹14,527 crore.
Phase-2 is planned to add crude storage capacity through facilities on the east and west coasts, building on the existing Phase-1 network at Visakhapatnam, Mangaluru, and Padur.
Phase-1 of the SPR programme had already established a cumulative capacity of 5.33 million metric tonnes (MMT) of crude storage — Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT), and Padur (2.5 MMT).
The PPP structure is intended to bring in private capital and operational efficiency while preserving the government's right to draw on the reserves during a supply emergency.
The programme is implemented by Indian Strategic Petroleum Reserves Limited (ISPRL) under the Ministry of Petroleum and Natural Gas.
Strategic Petroleum Reserve (SPR) Programme and ISPRL
India's SPR programme stores crude oil in underground rock caverns to cushion the economy against global supply disruptions and price shocks. It is implemented by Indian Strategic Petroleum Reserves Limited (ISPRL), a subsidiary of the Oil Industry Development Board (OIDB), under the Ministry of Petroleum and Natural Gas (MoPNG).
Key Details
- Phase-1 capacity: 5.33 MMT — Visakhapatnam (Andhra Pradesh, 1.33 MMT), Mangaluru (Karnataka, 1.5 MMT), Padur (Karnataka, 2.5 MMT).
- Storage is maintained in underground rock caverns for strategic/emergency use, distinct from the commercial storage held by public-sector oil marketing companies.
- India's SPR commitment is linked to its status as an Associate Member of the International Energy Agency (IEA), which recommends member/associate countries maintain reserves equivalent to at least 90 days of net oil imports; India's strategic reserves alone cover only a fraction of this benchmark, which is why Phase-2 expansion is being pursued.
Phase-2 is the next capacity addition to this same institutional framework, aimed at narrowing the gap between India's current strategic buffer and the IEA's 90-day import-cover benchmark.
Public-Private Partnership Structuring — DBFOT and Viability Gap Funding (VGF)
Phase-2 uses a Design-Build-Finance-Operate-Transfer (DBFOT) PPP structure, under which a private concessionaire builds and operates the storage facility for an agreed term and holds rights over the crude inventory, while the government retains a first right of refusal on the stored crude during emergencies.
Key Details
- The central Viability Gap Funding (VGF) Scheme, administered by the Department of Economic Affairs (Ministry of Finance) and revamped in November 2020, provides capital grants to make economically desirable but financially unviable PPP projects bankable.
- Under the revamped guidelines, VGF support for most sectors is capped at 40% of Total Project Cost (up to 20% each from the central government and the sponsoring authority); for select categories (including certain infrastructure/social-sector projects) combined support can go up to 60% (up to 30% each from central and sponsoring authorities).
- The ₹14,527 crore Phase-2 SPR project is being structured with government viability gap support reported at up to 60% of project cost, reflecting this higher-support category.
VGF is the specific financial instrument that makes an otherwise commercially unviable strategic-reserve project attractive enough for private concessionaires to bid on, while keeping the reserve under ultimate government control during a crisis.
India's Crude Oil Import Dependence and Energy Security
Strategic reserves are one pillar of India's energy security strategy, which also includes import diversification, ethanol blending, and renewable energy expansion, given India's heavy and rising reliance on imported crude.
Key Details
- India's crude oil import dependence has risen sharply, from roughly 55% in FY1999 to over 88–90% in FY2025-26.
- India is the world's second-largest crude oil importer; Russia, Iraq, Saudi Arabia, and the UAE are among its largest suppliers.
- Strategic reserves provide a short-term buffer against supply disruptions (e.g., a Strait of Hormuz shock), distinct from long-term diversification strategies.
Rising import dependence is the underlying driver for expanding the SPR programme through Phase-2, since a larger share of India's oil needs now comes from potentially disruptable external sources.
- Phase-2 SPR estimated cost: ₹14,527 crore, under a PPP (DBFOT) model
- Phase-1 cumulative capacity: 5.33 MMT — Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT), Padur (2.5 MMT)
- Implementing agency: ISPRL, a subsidiary of the Oil Industry Development Board, under MoPNG
- IEA associate-member benchmark: 90 days of net oil import cover
- VGF Scheme (revamped 2020): up to 40% of Total Project Cost for standard sectors; up to 60% for select higher-support categories
- India's crude oil import dependence: approximately 88–90% (FY2025-26)