Govt directs ONGC to build Rs 15,000 crore strategic oil reserve at Mangaluru in post-Iran war scenario

Key Insights 

The government of India has asked Oil and Natural Gas Corp (ONGC) to construct and fill up a new 1.75 Million Metric Tons (MMT) underground strategic oil reserve at Mangaluru at a cost of approximately Rs 15,000 crore. 

India already has three underground strategic reserves with 5.33 MMT of storage capacity collectively spread at Vizag, Mangaluru and Padur, with a cumulative cost of Rs 4,098.35 crore. ISPRL, a subsidiary of ISPRL, manages this storage. 

Why Has the Government Asked ONGC to Build a New Oil Reserve at Mangaluru?

The government has asked ONGC to develop India’s next strategic petroleum reserve facility, a government-directed move that could cost around ₹15,000 crore. The Iran war exposed how limited India's emergency oil storage really is. That vulnerability pushed the government to act fast. The proposed 1.75 MMT underground cavern will expand India’s current emergency storage of 5.33 MMT by roughly 1/3rd.

ONGC already owns the land needed for this project. It may need to spend about ₹5,000 crore on construction and another ₹10,000 crore to fill the cavern with crude at current prices. This is the 1st time a state-run oil company has been asked to fund and build an SPR facility directly. 

How Does India's New Oil Reserve Plan Affect Fuel Security for Ordinary Households?

India consumes over 80 per cent of its crude oil requirements from imports thus, it is very much vulnerable to external supply shocks. India has existing 3 reserves at Visakhapatnam, Mangalore & Padur, which cover only 9.5 days of the entire national consumption.

That’s far below the 90-day buffer recommended by the International Energy Agency. A bigger reserve at Mangaluru means fewer fuel price spikes at the pump during future conflicts.

The positive side is clear for daily commuters and transporters. A larger buffer cushions India against the kind of price shocks seen during the Iran war, when global crude briefly crossed $100 a barrel. For households managing tight monthly budgets, every rupee saved on fuel matters. LoansJagat notes that over 21% of financial claims, including EPF, get delayed each year due to administrative gaps. A stable fuel supply reduces one more source of financial stress for working families already managing inflation.

What Do Industry Sources Say About ONGC Funding Its Own Strategic Reserve?

People familiar with the matter told reporters that the sources did not specify how ONGC would recover its ₹15,000 crore investment. It also remains unclear whether the facility will function purely as a strategic reserve or include a commercial storage component. 

In previous rounds of SPR, India had roped in the private sector. The Saudi Arabian oil company Saudi Aramco and ADNOC had. For example, stored crude at the state-owned company’s facilities at Mangaluru and Padur in return for commercial rights on some of that crude. 

Former Petroleum Minister Dharmendra Pradhan had earlier said that for every $10 per barrel rise in crude prices, India's GDP growth falls by 0.2 to 0.3 percentage points. A practical solution being studied is a hybrid model, where ONGC could later bring in a foreign partner to share both cost and commercial use of the Mangaluru cavern, similar to the ADNOC and Aramco deals at the existing sites.

Conclusion

The new ₹15,000 crore ONGC-led reserve marks a shift in how India funds its energy security. With 1.75 MMT more capacity planned, India edges closer to the IEA’s 90-day buffer standard. But how ONGC recovers its investment remains the key question for FY27.

FAQs

Why has the government asked ONGC to build a new oil reserve at Mangaluru? 

The government has asked ONGC to build India’s next strategic petroleum reserve - a 1.75 million metric tonne underground crude oil storage cavern at Mangaluru, costing about ₹15,000 crore. The recent geopolitical tensions proved how a large stock of oil could absorb the shock from supply shortages and prices spikes. 

Why has the price of petrol and diesel not dropped even if crude oil price and rupee weakened? 

Though crude has retreated to below the recent highs, the oil retailers have yet to announce any cuts in prices. This is because oil companies would typically wait for price movements to persist before reducing pump rates. Also, the state-owned OMCs have some margin debt to take care of from their high-cost purchasing period and hence want to restore profit margins before any reduction.