India’s reliance on imported oil, natural gas grows

The country’s oil import dependency in April-September (H1) was 88.2 per cent, up from 87.6 per cent in the year-ago period and 87.8 per cent for the full financial year 2023-24 (FY24), per latest data from the oil ministry’s Petroleum Planning & Analysis Cell (PPAC). Import dependency in the case of natural gas was 51.5 per cent in the first six months of FY25, up from 46.8 per cent a year ago and 47.1 per cent for the full FY24.

India’s energy demand has been rising rapidly, leading to higher oil and gas imports. 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.

In the case of natural gas, the government wants to increase its consumption and share in the country’s primary energy mix to 15 per cent by 2030 from over 6 per cent currently. The rationale behind the push for natural gas, even though it would lead to higher gas imports, is rather simple.

Natural gas is far less polluting than conventional hydrocarbons like crude oil and coal, and is usually cheaper than oil. It is also seen as a key transition fuel. To be sure though, the government has also been pushing India’s oil and gas companies to increase domestic production of natural gas in a bid to keep import dependency levels under check.

India’s crude oil imports rose to 120.5 million tonnes in H1 from 115.9 million in the year-ago period, while domestic production declined slightly to 14.4 million tonnes, per PPAC data. The country’s gross oil import bill in the first six months of FY25 rose nearly 12 per cent year-on-year to $71.3 billion. Natural gas imports rose 23 per cent year-on-year to 18.98 billion cubic metres in H1, and cost $7.7 billion against $6.5 billion a year ago.

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. 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.

Total domestic consumption of petroleum products in April-September was 117.7 million tonnes, of which just 13.8 million tonnes came from domestically produced crude oil, resulting in a self-sufficiency level of 11.8 per cent, per PPAC data.