India’s reliance on imported crude oil to meet its domestic consumption needs climbed to over 88 per cent in the first four months of the current financial year due to rising demand for fuel and other petroleum products amid flagging domestic oil production.
The country’s oil import dependency in April-July was 88.3 per cent, up from 87.8 in the year-ago period as well as for the full financial year 2023-24 (FY24), per latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC).
State of India’s Oil Imports
India’s energy demand has been rising briskly, leading to higher oil imports and increasing dependence on imported crude. Reliance on imported oil has been growing continuously over the past few years, except in FY21, when demand was suppressed due to the COVID-19 pandemic.
— The country’s oil import dependency stood at 87.8 per cent in FY24, 87.4 per cent in FY23, 85.5 per cent in FY22, 84.4 per cent in FY21, 85 per cent in FY20, and 83.8 per cent in FY19.
— Heavy dependence on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation.
—The government wants to reduce India’s reliance on imported crude oil but sluggish domestic oil output in the face of incessantly growing demand for petroleum products has been the biggest roadblock.
— Reducing oil imports is also one of the fundamental objectives of the government’s push for electric mobility, biofuels, and other alternative fuels for transportation as well as industries.
— Over the past few years, the government has also intensified efforts to raise domestic crude oil output by making exploration and production contracts more lucrative and opening vast acreages for oil and gas exploration. While there has been a pick-up in electric mobility adoption and blending of biofuels with conventional fuels, it is not enough to offset petroleum demand growth.
— The computation of the level of import dependency is based on the domestic consumption of petroleum products and excludes petroleum product exports as those volumes do not represent India’s demand.
— With a refining capacity of almost 257 million tonnes per annum, India is the world’s third-largest consumer of crude oil and also one of its top importers.
Export of crude oil from India, however, is not permitted.