India’s reliance on imported crude oil is projected to reach a new high in the fiscal year 2024-25 (FY25), driven by escalating domestic demand and stagnant local production. In the first 11 months of FY25, the country’s import dependency exceeded 88%, surpassing the previous fiscal year’s record and highlighting a growing trend over the past decade.
Escalating Import Bills
The surge in import dependency has significantly impacted India’s financial landscape. In the first half of FY25, the net oil and gas import bill rose by 20% to $69 billion, up from $63.7 billion in the same period the previous year. This increase is attributed to elevated global oil prices and a depreciating rupee. Projections indicate that the total import bill for FY25 could swell to between $101 and $104 billion, marking a substantial rise from $96.1 billion in the previous fiscal year.
Stagnant Domestic Production
A critical factor contributing to this growing import reliance is the stagnation in domestic crude oil production. Despite efforts to boost output, India’s crude oil production has remained relatively flat, failing to keep pace with the burgeoning demand. This stagnation underscores the challenges faced by domestic exploration and production companies in countering natural declines from mature fields.
Rising Natural Gas Consumption
The natural gas sector mirrors this trend, with consumption increasing by 9.1% in FY25. Consequently, liquefied natural gas (LNG) imports surged by 19.4% during the same period, raising the import dependency for natural gas to 51.3%, up from 46.8% in the previous fiscal year.
Government Initiatives
In response to these challenges, the Indian government has enacted legislation aimed at boosting oil and gas exploration. The new law seeks to attract investments by stabilizing policies, allowing international arbitration, and extending lease periods, with the goal of reducing the nation’s heavy reliance on imported crude oil.
Conclusion
India’s escalating oil import dependency in FY25 underscores the urgent need for effective strategies to enhance domestic production and diversify energy sources. Addressing these challenges is crucial for ensuring the nation’s energy security and economic stability in the face of fluctuating global oil markets.
