Strategic Petroleum Reserves

In News 

• Recently, India has started selling crude oil from its strategic reserves to state refiners with a view to soften the blow from surging global crude prices.

About 

•  Strategic petroleum reserves are essentially huge stockpiles of crude oil to keep the wheels of the country running in crunch situations.
• The petroleum reserves are strategic in nature and the crude oil stored in these reserves will be used during an oil shortage event, as and when declared so by the Government of India.
• Strategic Petroleum Reserves (SPR) programme: Under the first phase of the Strategic Petroleum Reserves (SPR) programme, the Government of India through its special purpose vehicle, the Indian Strategic Petroleum Reserve Limited (ISPRL), has set up petroleum storage facilities with a total capacity of 5.33 Million Metric Tonnes (MMT) at 3 locations, namely 
  • Visakhapatnam (1.33 MMT)
  • Mangaluru (1.5 MMT) 
  • Padur (2.5 MMT), and all the storage facilities have been filled with crude oil.

• Second Phase: The government has approved the setting up of two additional commercial-cum-strategic facilities with a total storage capacity of 6.5 MMT underground storage at Chandikhol (4 MMT) and Padur (2.5 MMT) in July 2021, on PPP Mode. 
  • This would raise India’s strategic reserve capacity to 11.83 MMT, and in times of crisis, India can manage its oil requirement for a specific time period.

• Importance of SPR Programme: The Gulf War in 1990 led to a sharp rise in oil prices and a huge increase in India’s imports. 
  • During the post-1991 Indian economic crisis, foreign exchange reserves could barely finance three weeks’ worth of imports, while the government came close to defaulting on its financial obligations.
    •  India was able to address the crisis through policies that liberalized the economy. 
  • However, India continued to be affected by volatility in oil prices. 
    • In 1998, former Prime Minister Atal Bihari Vajpayee administration proposed the creation of petroleum reserves as a long-term solution for managing the oil market. 

Source: New Indian Express