RISING DEMAND, STAGNANT OUTPUT PUSHES OIL IMPORT DEPENDENCY BEYOND 88%

Why in the news?

India’s reliance on oil imports surpassed 88% between April and July as a result of both increasing domestic consumption and sluggish local supply.

Key Details

  • Dependency on Oil Imports: India has historically relied heavily on imported crude oil because its local production capability is insufficient to meet the country’s expanding energy needs. India is now the third-largest oil importer in the world, behind the US and China.
  • Consumption Data:
    • April-July 2024-25: 88.3% dependency on imported oil.
    • 2023-24 (FY): 87.8% dependency.
    • 2022-23 (FY): 85.5% dependency.
  • Domestic Production Challenges: The production of crude oil in India has been decreasing over time as a result of a number of issues, such as aged oil sources, a dearth of fresh finds, and technological constraints. In comparison to the same period in FY19, the production in FY24 decreased by 8.7%.
  • Economic Impact: India’s trade imbalance and foreign exchange reserves are greatly impacted by its heavy reliance on oil imports. India’s import expenditure for oil was around $190 billion in FY24, making it one of the biggest items in the nation’s import portfolio.
  • Governmental Programs: Under programs like the Discovered Small Field (DSF) policy and the Hydrocarbon Exploration and Licensing Policy (HELP), the Indian government has been encouraging the production and exploration of oil and gas in an effort to lessen dependency. But the effects have taken a while to show.
  • Global Context: Shifts in demand patterns, supply chain interruptions, and geopolitical conflicts have all contributed to the volatility of oil prices globally. India’s economy is susceptible to these outside shocks because of its reliance on imports.