By Anupam Manur, Rohan Seth, and Narayan Ramachandran
Energy security is a strategic imperative for India, given its strong growth aspirations. As the country does not have self-sustaining oil production, it is almost entirely dependent on imports for its energy requirements. In such a scenario, having an insurance policy, such as a strategic petroleum reserve (SPR), is in India’s national interest. SPR refers to holding oil inventories or stockpiles to help maintain national security during an energy crisis.
To ensure that India’s SPR provides oil security and mitigates risk, we propose the following policy recommendations:
- For mitigating costs and improving benefits, the Union Government should have formal rules and processes to ensure oil remains available in times of emergency. This requires formalising the mobilising processes of the SPR and defining the authority which can command a withdrawal of the SPR. This also involves a mobilisation plan for oil held by petroleum refineries in India.
- Use a price benchmark for filling up the SPR. For the government-owned stocks, ISPRL can consider filling up the SPR each time the global price of crude oil falls below $45.
- In cases where private players are holding underground reserves, the minimum levels of oil meant for emergency purposes should be well defined, and the Union government should have the first right of refusal of the sale in emergencies.
- To achieve security and mitigate risk, India must diversify its strategic petroleum reserve holdings based on geographical location (within India and elsewhere), storage location (underground and overground), and product type (refined and crude).
- Finally, as the world’s largest democracy, India must set the standard for transparency in the case of the SPR by reporting on the plan, execution, and data related to our reserves.