India reliance on imported crude oil at record high of 87.3% in FY23

India reliance on imported crude oil at record high of 87.3% in FY23

Subject: Economy

Section: External sector

• Rising demand for fuel and other petroleum products amid flagging domestic crude oil output has resulted in India’s reliance on imported crude increasing to a record 87.3 per cent of domestic consumption in 2022-23, up from 85.5 per cent in 2021-22, according to data released by the oil ministry’s Petroleum Planning & Analysis Cell (PPAC).
• India’s oil import dependency was 4 per cent in 2020-21, 85 per cent in 2019-20, and 83.8 per cent in 2018-19.
• The computation of the extent of import reliance is based on the domestic consumption of petroleum products and excludes petroleum product exports as those volumes don’t represent India’s demand. 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.
• India’s domestic consumption of petroleum products in 2022-23 rose over 10 per cent year-on-year to a record 3 million tonnes, underscoring robust demand, particularly for transportation fuels (petrol and diesel). However, domestic crude oil production for the year declined 1.7 per cent to 29.2 million tonnes. Crude oil imports in 2022-23 rose 9.4 per centyear-on-year to 232.4 million tonnes. In value terms, crude oil imports for the fiscal were at $158.3 billion, up from $120.7 billion in 2021-22, as per PPAC data.
• Total production of petroleum products from domestic crude oil was 2 million tonnes in 2022-23, which means that the extent of India’s self-sufficiency in crude oil was just 12.7 per cent, down from 14.5 per cent in 2021-22. In 2021-22, consumption of petroleum products sourced from indigenous crude oil was 29.3 million tonnes, while total domestic consumption was 201.7 million tonnes.
• While the government wants to reduce India’s increasing reliance on imported crude oil, sluggish domestic oil output in the face of growing demand for petroleum products has been the biggest roadblock. Cutting costly oil imports is also a fundamental objective 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 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

Challenge of High reliance on imported crude oil

• It 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