India has massive underground storage capacity for oil. (File photo)

NEW DELHI: The last time crude oil prices rose as sharply in a single day as they did on Monday (September 16) was during the 1990-91 Gulf crisis. Apart from triggering a balance of payments crisis that led to the reforms of 1991, the crisis also left India with oil reserves for just three days at one point. Today, India can survive for more than two months without importing oil. That's a big cushion.

What changed? While India's financial situation (with forex reserves of $430 billion) puts it in a much better position to deal with price spikes, it is the improved oil storage infrastructure that's behind the limited insurance we have in case of a supply crunch. India imports over 80% of its oil requirement.

How many days? India's refineries usually keep a stock to last for around 60 days. To keep the flow of crude to refineries going in case of a supply disruption, India also has massive underground storage capacity for oil. They are called strategic petroleum reserves (SPRs).

The oil in the three facilities already built can help meet 10 days of crude requirement and the two planned ones can hold supply of about 12 more days.

So, once completed, the country will have crude oil storage capacity to last for 82 days. Countries like US, Japan, China, UK and EU have strategic oil storage capacities too. In fact, on Monday, oil prices retreated after the US President approved the use of his country's oil stockpile to ensure stable supply.

Where's the oil? India has three underground storage facilities that can store 5.33 million tonnes of crude oil. The one in Visakhapatnam is already filled with 1.33 MT of oil, deals to fill another 1.50 MT capacity in Mangalore have been signed and the third (with 2.5 MT capacity) in Padur, Karnataka, is built but awaiting oil for storage.

News agency Reuters reports that about 55% of the 5.33 MT storage capacity is already filled with oil. India also plans to build an additional 6.5 MT facilities at Chandikhol in Odisha and Padur.

Whose oil? Last year, India signed two pacts with foreign oil companies to fill up these facilities - one was to lease out a part of its storage at Padur to Abu Dhabi National Oil Co (ADNOC) for storing crude oil and the other to fill half of the storage at Mangalore.

The agreement allows ADNOC to sell crude oil stored in these facilities to local refiners but it also gives Indian government the first right to the oil in case of an emergency. Allowing foreign companies to store oil will help Centre save Rs 10,000 crore.

However, it's not that surging crude oil prices won't affect the world's third largest oil importer. Petrol and diesel prices in the national capital registered their biggest single-day hike since the budget on July 5 — with petrol rising 14 paise per litre to Rs 72.17 per litre and diesel rising 15 paise per litre to Rs 65.58 per litre, on Tuesday.

Investors also see rising prices as a major threat to government finances, especially as it threatens to make the economic slowdown even worse. BSE sensex tumbled 642 points (or 1.73%) to close at 36,481 points, while NSE Nifty ended at 10,817, down 186 points (1.69%) on Tuesday amid oil price worries.

