India’s reliance on oil imports hits fresh full-year high in FY24

INDIA’S RELIANCE on imported crude to meet its domestic demand hit a fresh all-time-high for the full financial year 202324 (FY24) due to growing demand for fuel and other petroleum products amid flagging oil production.

As per latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC), India’s oil import dependency for FY24 climbed to 87.7 per cent from 87.4 per cent in FY23.

Given India’s rapidly rising energy demand, reliance on oil imports has been rising continuously over the past few years, except for FY21, when demand was suppressed due to the COVID-19 pandemic. India’s oil import dependency was 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 reliance 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 extreme dependence on imported crude oil but sluggish domestic oil output in the face of incessantly growing demand for petroleum products has been the biggest roadblock. In fact, 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, and it even found a mention in the Bharatiya Janata Party’s manifesto for the impending Lok Sabha polls.

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 dependence 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 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.

India’s domestic consumption of petroleum products in FY24 rose 4.6 per cent year-onyear to a record 233.3 million tonnes, underscoring robust demand, particularly for transportation fuels petrol and diesel. Domestic crude oil output for the year rose 0.7 per cent to 29.4 million tonnes.

Total production of petroleum products from domestic crude oil was 28.6 million tonnes in FY24, which means that the extent of India’s self-sufficiency in crude oil was just 12.3 per cent, down from 12.6 per cent in FY23. Consumption of petroleum products sourced from indigenous crude oil was 28.2 million tonnes, while total domestic consumption was 223 million tonnes.