India’s reliance on imported crude inched up to 88.3 per cent in April-June from 86.5 per cent a year ago as consumption of fuels and other petroleum products rose while domestic oil production declined slightly, as per data released by the Petroleum Planning & Analysis Cell (PPAC) of the oil ministry. The reliance on imported crude in the first quarter (Q1) of the current financial year (FY24) was also higher than the previous fiscal’s 87.4 per cent-the highest-ever for a full year. While the government wants to reduce India’s high dependency on imported crude oil, sluggish domestic oil output in the face of continually growing domestic demand has been the biggest obstacle. 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 dependence has only grown. Heavy reliance on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s foreign trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation. At 60.1 million tonnes, the volume of India’s oil imports in April-June was a tad lower than 60.7 million tonnes in the year-ago period. However, reliance on imported crude still rose as the country’s petroleum product exports declined to 14.7 million tonnes from 16.6 million tonnes in the year-ago quarter. The computation 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. According to the PPAC, total production of petroleum products from domestic crude oil in April-June was 6.8 million tonnes, which translates to a self-sufficiency of just 11.7 per cent. In the corresponding quarter of last year, petroleum product production from indigenous crude was 7.5 million tonnes and self-sufficiency stood at 13.5 per cent. With refining capacity of a little over 250 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 petroleum products. Interestingly, even as the dependency on imported oil rose in Q1 from the corresponding period of last year, the oil import bill was nearly 35 per cent down, thanks mainly to relatively lower prices of crude oil in the international market. Global oil prices had surged a year ago to multi-year highs in the aftermath of Russia’s invasion of Ukraine, but have cooled off significantly since. India’s import of discounted Russian oil in large quantities has also played a role in savings on oil imports. Indian refiners started snapping up Russian oil after the war in Ukraine broke out. Moscow started offering discounts to willing buyers as Western buyers started shunning its oil following its February 2022 invasion of Ukraine. In April-June of last year, India’s oil import bill was $48.1 billion dollars, while in Q1 of the current fiscal, it was $31.4 billion, according to the PPAC data. The price of global benchmark Brent crude averaged at around $114 per barrel in Q1 of FY23, while in the corresponding quarter of the current financial year, it averaged at around $78, as per data from the US Energy Information Administration. Cutting costly oil imports is one of the central objectives of the government’s push for electric mobility, biofuels, and other alternative fuels for transportation and 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. However, oil imports continue to grow, mainly because domestic oil production has remained stagnant while demand has been on the rise. There has been a pick-up in electric mobility adoption and blending of biofuels with conventional fuels, but not enough to dent petroleum demand.
