India is considering a policy modelled on practices followed by China that would require domestic oil refiners to maintain substantially larger crude oil reserves, according to a report by Business Today. The move comes in the wake of disruptions caused by the US-Iran conflict and the subsequent disruption to shipping through the Strait of Hormuz, which challenged the long-standing belief among Indian policymakers that the country's proximity to the crude-rich Persian Gulf reduced the need for large strategic petroleum reserves.
Current Strategic Reserve Levels
Data from the US Energy Information Administration shows that, at the end of 2025, India held about 21 million barrels of strategic crude reserves, compared with 1,397 million barrels in China, 413 million barrels in the United States, and 263 million barrels in Japan. The vast gap highlights India's relative vulnerability to supply disruptions.
| Country | Strategic Crude Reserves (million barrels, end 2025) |
|---|---|
| China | 1,397 |
| USA | 413 |
| Japan | 263 |
| India | 21 |
The Proposal for Refiners
Under the proposal, refiners would be asked to hold inventories beyond the roughly 15 days of crude oil they currently keep for routine operational requirements, according to an ET report cited by Business Today. The idea remains at an early stage, and several aspects of the plan are still being worked out. People aware of the matter said no final decision has yet been made on whether or how the proposal will be implemented.
Industry participants are expected to resist the move because of the significant investment required to build additional storage capacity and procure the extra crude needed to fill those facilities, one of the people said.
Required Volumes and Costs
If refiners are ultimately required to raise their stock levels to cover about 30 days of national consumption, they would collectively need to maintain around 150 million barrels of crude oil, based on India's daily demand of approximately 5 million barrels. At prevailing crude oil prices and current exchange rates, Indian refiners could collectively need to spend nearly Rs 60,000 crore on additional crude purchases if they are required to double their inventory holdings.
Beyond the cost of acquiring oil, companies would also have to invest several thousand crore rupees in expanding storage infrastructure. Building new tank facilities is a capital-intensive exercise that could take several years to complete.
Flexibility and Singapore Model
According to a person familiar with the industry's position, any such policy should provide refiners with sufficient flexibility regarding the location of storage facilities and the commercial use of the crude held in them. The person said policymakers should incentivise the development of storage capacity near ports so that inventories can be easily traded in global markets. He pointed to Singapore's extensive storage network, which has played a key role in establishing the city-state as Asia's premier oil-trading centre.
The proposal, if implemented, would significantly alter India's energy security posture. However, with the plan still at an early stage and industry resistance expected, the timeline and final scope remain uncertain. For commodity traders and analysts, the potential for a sudden jump in Indian crude demand—if the policy moves forward—could tighten global crude markets, particularly for medium-sour grades favoured by Indian refineries. Additionally, the need for expanded storage infrastructure may create opportunities for tank terminal operators and engineering firms.
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