Strategic crude oil purchases paused as LPG support dominates MoPNG budget 2026-27

New Delhi: Strategic crude oil purchases have been effectively paused in Budget 2026–27, with the Ministry of Petroleum and Natural Gas providing only a token allocation for filling strategic petroleum reserves, even as household fuel support continues to absorb the bulk of the ministry’s spending.

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According to the detailed Demands for Grants, the allocation for payments to Indian Strategic Petroleum Reserve Ltd (ISPRL) for crude oil storage has been cut to Rs 0.01 crore in 2026–27, down sharply from Rs 850 crore in 2025–26 (revised estimate), signalling that no fresh crude oil stocking is planned in the coming financial year.

Strategic reserves see maintenance funding, not expansion

While allocations for purchasing crude oil have been pared back, operational spending on strategic petroleum reserves continues. The budget provides Rs 180 crore for operation and maintenance of caverns at Visakhapatnam, Mangaluru and Padur, marginally higher than the previous year.

Funding for Phase II construction of strategic storage caverns remains limited at Rs 20 crore, indicating a focus on upkeep rather than capacity expansion.

LPG support remains central to ministry spending

Despite the pause in strategic crude purchases, the Petroleum Ministry budget remains overwhelmingly subsidy-driven. A one-time grant of Rs 17,500 crore has been provided in 2026–27 to public sector oil marketing companies (OMCs) to compensate for under-recoveries on domestic LPG sales, following a Rs 12,500 crore provision in the revised estimates for 2025–26.

In addition, total LPG subsidy outgo, including direct benefit transfer and connections to poor households, stands at Rs 11,084.5 crore in 2026–27. An extra Rs 1,000 crore is to be met from the Oil Industry Development Fund to finance LPG connections for poor households.

Biofuels get a sharper push from a low base

Biofuels emerge as one of the few areas seeing a meaningful increase in budgetary support. Allocations for the Pradhan Mantri JI-VAN Yojana, which supports advanced bioethanol projects, have been raised to Rs 196.9 crore in 2026–27 from Rs 37.9 crore in the previous year’s revised estimates.

Support for biomass collection has also been increased to Rs 100 crore from Rs 10 crore, pointing to a renewed focus on feedstock availability for bioenergy programmes, albeit from a relatively small base.

Gas infrastructure priorities narrow to the Northeast

Spending on natural gas infrastructure presents a mixed picture. The allocation for the Indradhanush Gas Grid in the Northeast has been raised to Rs 700 crore from Rs 300 crore in 2025–26 (revised estimate), restoring funding for the region’s pipeline network.

By contrast, support for pipeline infrastructure to inject compressed biogas into city gas distribution networks remains limited at Rs 20 crore, suggesting that large-scale CBG integration is still at a pilot stage.

Upstream exploration funding continues

The budget maintains support for domestic hydrocarbon exploration through Mission Anveshan, with Rs 200 crore allocated for 2D seismic surveys aimed at appraising unexplored sedimentary basins and the extended continental shelf.

The continued funding indicates that boosting domestic oil and gas output remains a priority, even as India scales up its clean energy transition.

Hydrocarbon capex routed off-budget

Large capital investments in the oil and gas sector continue to be routed through public sector balance sheets rather than direct budgetary support. Internal and extra-budgetary resources remain the primary funding source for upstream and downstream companies, including ONGC, Oil India, IOC, BPCL and HPCL.

Budgetary support for refinery and marketing investments remains largely flat or lower compared with earlier years, reinforcing the reliance on PSU-led financing.

Numaligarh refinery expansion sees no fresh allocation

No fresh budgetary allocation has been provided in 2026–27 for the Numaligarh Refinery expansion project, following a tapering of support in recent years, suggesting that the project is moving out of the budget-funded phase.

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