Megha Engineering & Infrastructures Ltd (MEIL) has secured a landmark contract worth ₹5,700 crore to build and operate India’s first private sector Strategic Petroleum Reserve (SPR). The facility will be established in Padur, Karnataka, with plans to hold 2.5 million metric tonnes (MMT) of crude oil.
Key Details of the Project
- MEIL has been given five years to build the facility and 60 years to operate it.
- The filling cost for crude oil at current market rates is estimated at US$1.25 billion (about ₹11,020 crore).
- The Centre’s agency, Indian Strategic Petroleum Reserves Ltd (ISPRL), which manages existing SPRs, handled the bidding process.
Strategic Significance & Capacity
- This private SPR adds to India’s existing 5.33 MMT strategic stockpile located at Visakhapatnam, Mangaluru, and Padur. At full capacity, current reserves cover roughly 8-9 days of India’s crude oil demand.
- Once the new facility comes online, it will enhance India’s readiness to manage supply disruptions and price shocks in global oil markets.
Funding & Land Allotment
- The project includes viability gap funding (VGF) capped at 60% of the total cost (≈ ₹3,420 crore). MEIL’s bid came slightly below that cap.
- ISPRL is expected to provide a 214-acre land parcel in Padur free of cost to MEIL for the storage facility.
Commercial Model & Emergency Rights
- MEIL will have commercial freedoms: it can lease storage space to governments or oil companies and also trade crude oil stored in the reserve.
- However, in times of national emergency, the government retains first rights over the oil stored in this facility, ensuring strategic control.
Why This Matters
- This is a major shift: previously, all SPRs have been owned and operated by government entities. Involving the private sector in such critical infrastructure is a new development.
- The reserve helps buffer India against disruptions, global oil market volatility, and geopolitical risks that can interrupt oil supply.
What to Watch Next
- How quickly MEIL completes the construction and begins operations.
- Whether the new facility will lead to reduced import costs or improved price stability for consumers.
- How India’s overall SPR capacity changes with further proposed facilities (e.g. in Odisha) under its Phase II SPR programme.
