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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).
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.
India’s crude oil imports rose to 81.6 million tonnes in April-July from 79.7 million in the year-ago period, per PPAC data. In value terms, the growth was even more due to relatively higher prices of oil in the international market. The country’s gross oil import bill in the first four months of FY25 rose nearly 17 per cent year-on-year to $49 billion from $41.9 billion.
In early 2015, the government had set a target to reduce reliance on oil imports to 67 per cent by 2022 from 77 per cent in 2013-14, but the dependency has only grown since. Cutting costly oil imports continues to be a key focus area for the government, which has taken a number of policy measures to incentivise investments in India’s oil and gas exploration and production sector.
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—the world’s third-largest consumer of crude oil and also one of its top importers—is a net exporter of fuels and other petroleum products. Export of crude oil from India, however, is not permitted.
India’s domestic consumption of petroleum products in April-July rose 4.8 per cent year-on-year to 80.9 million tonnes, underscoring robust demand, particularly for transportation fuels petrol and diesel. Domestic crude oil output for the first four months of FY25 declined marginally to 9.7 million tonnes from 9.8 million tonnes in the corresponding period of last year.
Total production of petroleum products from domestic crude oil was 9.5 million tonnes in April-July, which means that the extent of India’s self-sufficiency in crude oil was just 11.7 per cent, down from 12.2 per cent in the corresponding period a year ago. In April-July of last year, consumption of petroleum products sourced from indigenous crude oil was 9.4 million tonnes, while total domestic consumption was 77.2 million tonnes.
