Context: India’s reliance on imported crude oil has increased to over 88% in the first 11 months of the current financial year ending March (FY25). This is due to growing demand for fuel and other petroleum products amid stagnant domestic crude oil output.
Relevance of the Topic: Prelims: Crude oil imports- Trends.
Major Highlights:
- Increasing reliance on imported crude oil: India’s crude oil import dependency has reached 88.2% in April-February FY25. This marks a steady increase over the years from 83.8% in FY19. Crude oil imports rose to 219.9 mt in the same period.
- Declining domestic oil production:
- Crude oil production declined from 26.9 million tonnes (mt) to 26.2 mt in April-February FY25.
- Self-sufficiency level stands at just 11.8%, as only 25.8 mt of the consumed petroleum products came from domestic crude oil.
- Future projections: Petroleum product consumption is expected to rise to 252.93 mt, marking another record high.
Factors driving Higher Oil Imports
- Growing energy demand due to population growth and economic expansion.
- Increase in vehicle sales leading to higher fuel consumption.
- Rising petrochemical consumption for industrial growth.
- Expanding the aviation sector with greater jet fuel needs.
Economic and Strategic Implications
- Vulnerability to global oil price fluctuations impacting fiscal stability.
- Trade deficit pressure as oil imports form a major portion of total imports.
- Foreign exchange reserve depletion affecting currency stability.
- Inflationary pressures as fuel prices influence overall price levels.
Government Initiatives to Reduce Import Dependency
- Policy reforms: Oilfield (Regulatory and Development) Amendment Bill to attract investment in the oil & gas sector and boost domestic exploration and production.
- Promotion of alternative fuels: Encouraging biofuels blending with conventional fuels. Incentives for electric mobility adoption to reduce petrol and diesel demand.
- Refinery expansion plans: India’s current refining capacity is 257 mt per annum, expected to grow further.