India Invites Bids for ₹8,571 Crore Strategic Petroleum Reserve in Odisha Under PPP Model
In a major step to fortify national energy security against geopolitical shocks, the Indian government, through state-run Indian Strategic Petroleum Reserves Limited (ISPRL), has issued tenders inviting private developers to construct and operate India’s largest strategic crude oil storage cavern at Chandikhol, Odisha.
The greenfield underground facility, designed with a storage capacity of 4 million metric tonnes (MMT) of crude oil, entails an estimated capital outlay of ₹8,571 crore (approx. $910 million). To make the capital-intensive project economically attractive for private domestic and global infrastructure conglomerates, the Union government has provided a viability gap funding (VGF) grant capped at 60% of the project cost, amounting to ₹5,142 crore ($546 million).
Bidding Dynamics and Revenue Mechanism
According to the tender framework released by ISPRL, the concession will be awarded to the qualified bidder quoting the lowest government grant requirement. The deadline for submission of bids for the Chandikhol cavern has been set for February 26, 2027.
Under the commercial-cum-strategic Public-Private Partnership (PPP) model, the concessionaire will be granted land and allowed to monetize capacity during normal operating conditions:
- The operator can lease storage space to domestic refiners, global traders, and national oil companies.
- The concessionaire may trade crude stored within permitted operational windows.
- In times of supply crises or national emergencies, the Government of India retains the primary right of first refusal to requisition the stored crude reserves.
Expanding Phase-II Energy Buffer
India currently relies on imports for over 85% of its crude requirements, leaving the economy vulnerable to maritime chokepoints and overseas conflict zones. Phase-I of India's Strategic Petroleum Reserve (SPR) program established a cumulative storage capacity of 5.33 MMT across three underground rock caverns:
- Visakhapatnam, Andhra Pradesh: 1.33 MMT
- Mangaluru, Karnataka: 1.5 MMT
- Padur, Karnataka: 2.5 MMT
Existing SPR caverns hold around 39 million barrels of crude, representing only 8 to 9 days of India’s net oil consumption. Including commercial storage held by domestic oil refiners (such as IOCL, BPCL, and HPCL), total emergency cover stands at around 74 days, below the International Energy Agency’s (IEA) recommended mandate of 90 days.
The Chandikhol facility forms the cornerstone of the Phase-II expansion, which also includes a 2.5 MMT facility at Padur. Once operational, the Chandikhol project alone will augment the country’s existing underground SPR capacity by 80%.
Significance for the Indian Economy
Recent disruptions around key Middle Eastern transit routes, including the Strait of Hormuz, highlighted India's exposure to overseas supply interruptions, forcing domestic refiners to scramble for alternative, costlier spot cargoes. Rapidly adding decentralized storage along both the western and eastern coastlines is central to stabilizing domestic inflation, refining operations, and the rupee during international supply crunches.
Alongside the Chandikhol tender, ISPRL has also initiated bids for partial leasing of its existing Visakhapatnam storage cavern, signaling India's broader push to integrate domestic storage assets into the global oil trading architecture while limiting sovereign fiscal liabilities.
