With 232.4 million barrels of crude oil imported in, India’s reliance on imported crude oil has reached a record high of 87.3%.
As per the data released by Petroleum Planning and Analysis Cell (PPAC) of Oil and Petroleum ministry of the government of India, India’s crude oil dependency on imported sources has risen to a record high of 87.3% of the total domestic consumption.
In FY 20-21 India imported 84.4%, 85% in FY 19-20 and 83.8% of its domestic oil requirements. India, which is the world’s third highest oil importer has increased its reliance for imports on Russia, since the war-torn nation started providing crude oil at a discounted price less than 16-32$ than its Middle eastern counterparts.
India’s total domestic consumption of crude in absolute terms is 222.3 million tonnes which is 10% higher on a YOY basis. While Indian imports crude oil worth little more than 232 billion tonnes were 9.4% higher on YOY basis which in value terms equals to a whopping 153 billion dollars.
Domestic production of oil declined 1.7% to 29.2 million tonnes; which in FY 21-22 was 29.3 million tonnes.
The surging crude oil imports are mainly due to plunging domestic consumption and lower crude extraction domestically due to low cost effectiveness and other concerns.
As per data available with PPAC from FY 1998-99, FY 22-23 recorded highest import of petroleum in India and also consumption. FY 20-21 recorded a low demand due to the Covid-19 pandemic and a worldwide lockdown. The demand which bounced back in FY21-22 reached new levels in the current FY.
PPAC has also predicted that the demand will reach a new high in next year indicating more consumption and more economic activities.
A rising crude oil demand indicates a growing economy and infrastructural development. After refining of crude oil many products such as petrol, diesel, Aviation turbine fuel, Bitumen, etc. are derived which are used in a range of objectives such as Logistics supply, passenger travel, road development, production of petroleum jelly and other useful products.
The refineries which help derive these products have a capacity of 250 million tonnes in India, which is expected to be increased to 450 million tonnes soon. With this capacity India is a net exporter of petroleum products.
The export of petroleum products is carried only by private players such as Reliance Refineries, Nayara, etc and the domestic demand is fulfilled by Government oil refineries.
The largest crude oil product derived is diesel which is followed by petrol and then Liquefied Petroleum Gas (LPG).
A larger dependence on foreign sources exposes India to vulnerabilities such as foreign exchange, currency values, current account deficit and inflation in economy. Thus the successive governments try to keep the crude imports as low as possible.
Crude oil import sources of India
Russia is India’s largest crude oil exporter which is followed by Iraq and then Saudi Arabia. UAE and Canada find their place in 4th and 5th spot respectively.
India imports close to 25% of its oil requirements from Russia and close to 18% from Saudi Arabia. The former successor Soviet Nation which exported close to 1% of oil to India before 2022 has increased its share by offering huge discounts to all the Asian countries after its yearlong war with Ukraine.
Russia became the largest importer in December 2022 defeating Iraq, another major oil exporter.
Imports from Russia increased close to 25%, from Saudi it increased to 18% but from the USA the imports decreased from 10% to 4 %.
Image source: Reuters
India mostly imports sour crude oil which contains a high amount of sulfur. Though this is a cheaper option, it is very cost intensive. But modern refineries have a good capacity to refine sour crude oil. The share of sour crude oil is a whopping 77.5 % which is majorly imported from Russian sources.
While the sweet crude which contains less amount of sulfur has a share of close to 23.5%
With the increasing imports from Russia the share of sour crude is expected to rise further.
