New Delhi – India must significantly expand its strategic petroleum reserves under its own control, according to former Planning Commission Deputy Chairman Montek Singh Ahluwalia. His urgent call comes amidst renewed tensions in the West Asia region, particularly concerning the vital Strait of Hormuz.
Ahluwalia, a prominent economist, emphasized that while global crises might see the use of international strategic reserves, India requires its own substantial stockpiles to counter disruptions that specifically affect the nation. "We need much larger Indian reserves under Indian control. And that basically means building up storage capacity in different parts of the country," he stated in a conversation with Nidhi Razdan for DeKoder.
Hormuz Crisis Highlights Vulnerability
The Strait of Hormuz, a critical maritime chokepoint, facilitates the passage of approximately one-fifth of the world's energy supplies. Recent reports indicate that Iran again struck a civilian ship and shut the strait, reigniting concerns over global oil supply stability.
This renewed disruption follows a previous crisis earlier in the year, which saw crude prices surge to around $120 a barrel before retreating after an interim deal between the US and Iran. Ahluwalia noted that India navigated the earlier Hormuz crisis relatively well, partly due to market expectations of de-escalation.
Diversification and Domestic Capacity Are Key
However, the broader lesson from these events, Ahluwalia argued, is the imperative to reduce dependence on concentrated supply routes and bolster domestic strategic stockpiles. He highlighted two critical priorities for India's energy security: diversification of supply sources and a substantial increase in strategic reserve levels, noting that current levels are "too low."
India has already initiated steps to enhance its emergency crude storage infrastructure. State-run Oil and Natural Gas Corp (ONGC) recently announced plans to construct a 1.75 million metric tonne (approximately 13 million barrels) strategic petroleum reserve in Mangalore, Karnataka. This facility aims to complement existing reserves managed by the Indian Strategic Petroleum Reserves Ltd (ISPRL) in Mangalore, Padur, and Visakhapatnam, which collectively hold up to 5.33 million metric tonnes.
As of late March, during the height of the West Asia crisis, India's total reserve capacity stood at 74 days, with actual stock cover at around 60 days, encompassing crude stocks, product stocks, and dedicated strategic storage. Ahluwalia's recommendations underscore a strategic shift towards greater self-reliance and resilience in India's energy policy.