Indian Oil Corporation (IOC) Chairman A S Sahney issued a warning at the Energy Technology and Innovation Meet held in Goa on October 27, 2026, stating that India's inadequate shipping capacity is preventing the country from fully capitalizing on discounted crude oil available in global markets. Sahney stated bluntly at the meeting: "We have been neglecting shipping... we must build our shipping capabilities. Today we can get crude oil at a discount, but freight costs are eating up the savings. Freight is a killing factor". His remarks directly pointed to the structural vulnerability facing India as the world's third-largest crude oil importer.
The core logic of this issue lies in the mismatch between crude oil procurement discounts and freight costs. India has long relied on importing discounted Russian crude oil, but since early October 2026, freight rates for Russian oil exports from western ports to India have hit record highs, driven by heightened risks in the Black Sea and a global rally in tanker fees. This means that the price advantage refiners gain at the procurement end is substantially offset at the transportation end. Sahney's statement highlights a reality: without control over transportation capacity, so-called "cheap crude" is merely nominal.
Sahney's proposed solutions encompass two levels. In the short term, India needs to invest in building crude oil and LPG storage facilities to provide the country with several additional days of buffer capacity. In the long term, India must build its own tanker fleet to reduce dependence on foreign shipping capacity. This perspective aligns with the Indian government's policy direction. In April 2026, the Ministry of Ports, Shipping and Waterways announced a plan to add 62 vessels (totaling 2.85 million gross tons) in fiscal year 2026-27, with a total investment of 514 billion rupees (approximately $5.4 billion), focusing on crude oil tankers, LPG carriers, and container ships.
From an energy security perspective, India's shipping capacity shortfall carries geopolitical risks. Following Iran's control of the Strait of Hormuz in early 2026, cargo flows from the Middle East to India were severely constrained, and two India-flagged tankers were reportedly attacked by Iranian forces. Although India secured a certain degree of passage through diplomatic channels, this dependence on external forces for navigation safety underscores the strategic value of having a domestically controlled fleet. Sahney's call is therefore not only an economic issue but also part of the national security agenda.
There have been some positive developments at the fleet level. Official data shows that in fiscal year 2025-26 (April 2025 to March 2026), the Indian registry added 92 vessels, with total gross tonnage exceeding 14.2 million for the first time. Among them, 11 ocean-going tankers were added, contributing 737,582 gross tons, the highest tonnage among all categories. The addition of very large crude carriers (VLCCs) such as Sanmar Herald and Lila Jamnagar indicates that India's fleet is developing toward larger vessel types. However, this progress remains insufficient compared to the scale of demand.
The freight rate issue is not isolated. India's crude oil sourcing structure is undergoing significant adjustments. In September 2026, Russia's share of India's crude oil imports fell from a peak of 56% in July to approximately 35%, as the price advantage of Russian Urals crude diminished and the threat of US sanctions increased. Meanwhile, imports of Venezuelan crude oil surged to approximately 465,000 barrels per day in October, the highest level in nearly seven years, but freight costs for the long voyage to India's west coast add approximately $33 per barrel. This means that regardless of the source of crude oil, freight cost control is a key variable determining the actual procurement cost.
Sahney's remarks also indirectly point to another gap in India's shipbuilding policy. The Indian government has launched a 697.25 billion rupee shipbuilding and maritime industry support package, including the Shipbuilding Financial Assistance Scheme (247.36 billion rupees), the Maritime Development Fund (250 billion rupees), and the Shipbuilding Development Scheme (199.89 billion rupees). However, the key question is whether Indian shipyards can build tankers that meet commercial standards and whether domestic supply chains can provide marine equipment and components that meet specifications. Without a competitive shipbuilding industry, fleet expansion will still depend on foreign procurement.
From a logistics and trade perspective, IOC's statement reflects a broader structural issue facing India's energy supply chain: India is one of the world's largest crude oil importers but lacks sufficient control over transportation capacity, leaving it passive in the face of freight rate fluctuations. The Indian government's FY2026-27 plan to add 62 vessels demonstrates policy intent to address this shortfall, but the plan's implementation progress, financing arrangements, and actual vessel deliveries will determine whether the "cheap crude" dividend can be retained within India's refining system. Before the fleet expansion is realized, Indian refiners will continue to face the dual squeeze of crude oil procurement costs and freight costs.