Data from the Oil Ministry showed that India paid $132.4 billion for oil imports in FY24. File
| Photo Credit: Reuters

India’s crude oil import dropped 16% in the fiscal year ended March 31 due to lower international rates, but the dependency on overseas suppliers rose to a new high, official data showed.

India imported 232.5 million tonnes of crude oil, which is refined into fuels like petrol and diesel, in the FY 2023-24 (April 2023 to March 2024), almost the same as in the previous financial year. However, it paid $132.4 billion for the imports in FY24 as against $157.5 billion import bill in 2022-23, the Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC) data showed.

Import dependence soared to 87.7% in 2023-24, up from 87.4%, according to PPAC. Domestic crude oil production was almost unchanged at 29.4 million tonnes in 2023-24.

Besides crude oil, India spent $23.4 billion on import of 48.1 million tonnes of petroleum products like LPG. It also exported 62.2 million tonnes of products for $47.4 billion.

Other than oil, India also imports gas in its liquid form, called LNG. After the price shock of 2022-23, import of 30.91 billion cubic meters of gas cost $13.3 billion in the fiscal year ended March 31, 2024. This compared with $17.1 billion spent on the import of 26.3 bcm of gas in 2022-23 when energy prices shot up to record levels in the aftermath of Russia’s invasion of Ukraine.

Net oil and gas import bill (crude oil plus petroleum product plus LNG import bill minus exports) stood at USD 121.6 billion in 2023-24, down from USD 144.2 billion.

India’s fuel consumption rose 4.6%

Petroleum imports as percentage of India’s gross imports (in value terms) stood at 25.1%, down from 28.2% in 2022-23. Similarly, petroleum exports as a percentage of the country’s gross exports came at 12% in 2023-24 as compared to 14% in the previous year.

India’s fuel consumption rose 4.6% to a record 233.3 million tonnes in the year ended March 31, 2023. This compared with 223 million tonnes consumption in 2022-23 and 201.7 million tonnes in 2021-22. While the country is short in crude oil production, it has a surplus refining capacity that can help export petroleum products like diesel.

Against the consumption of 233.3 million tonnes, petroleum product production was 276.1 million tonnes in 2023-24, PPAC data showed.

India is the third largest consumer of oil behind the US and China and this demand will increase despite the Government’s electric vehicle push. File
| Photo Credit: MURALI KUMAR K

India will overtake China as the biggest driver of global oil demand in 2027 as transportation and industry consumption in the world’s fastest-growing major economy will drive growth despite a big push for clean energy and electrification, the International Energy Agency said on February 7.

The Paris-based agency, in a special Indian Oil Market Outlook to 2030 report released at the India Energy Week in Goa, said the country’s oil demand will rise from 5.48 million barrels per day in 2023 to 6.64 million bpd in 2030. China currently is the biggest driver of oil demand and India ranks second in growth.

The numbers given by IEA in the report seem to talk of crude oil processed into fuel for domestic use as well as for exports. The domestic consumption as per the Oil Ministry data is around 5 million barrels per day (bpd).

“India’s oil demand will grow at a rapid pace by 2030 despite accelerated green energy moves,” IEA director of energy markets and security Keisuke Sadamori said. “Growth in India will surpass that of China in 2027.” However, demand in India will still lag China’s even in 2030 in absolute terms. “As oil demand slows in developed countries and China, India becomes the largest source of growth,” said Toril Bosoni, head of oil industry and markets division, IEA.

India currently is the third largest consumer of oil behind the US and China. It imports 85% of its oil needs and this dependence is likely to rise as domestic production falls. Diesel, she said, accounts for about 50% of Indian gains and 20% of global demand growth to 2030.

Oil demand to rise despite EV push

The demand growth is despite the push for electric vehicles which make up for a small fraction of the automobiles on the road currently. The EV push will see greater adoption in two- and three-wheelers while their penetration in the four-wheeler segment would be around 5%

“More than 500,000 bpd of oil demand will be avoided due to increased EV penetration, energy efficiency improvements and biofuels growth,” she said. Of this, around 200,000 bpd would be because of EV penetration.

She said refinery expansions will ensure India meets domestic needs and maintain its position as a key exporter of transportation fuel to Asia and the Atlantic Basin, she said adding Indian energy companies are targeting an additional 1 million barrels per day of refinery capacity.

On biofuels, IEA said raising ethanol blending in petrol from current 12% to 20% may be a challenge given feedstock constraints. Lack of major discoveries will see domestic production fall to 540,000 bpd by 2030, she said adding imports will rise from 4.6 million bpd in 2023 to 5.8 million bpd in 2030.

India holds oil stock equivalent to meet 66 days of requirement. This includes 7 days requirement stored in underground strategic reserves and the rest in depots and tanks in refineries and other locations. IEA member nations maintain a stockpile equivalent to 90 days of their demand. India is an associate member of IEA.

“India will become the largest source of global oil demand growth between now and 2030, while growth in developed economies and China initially slows and then subsequently goes into reverse in our outlook,” IEA said. “India is on track to post an increase of almost 1.2 million bpd, accounting for more than one-third of the projected 3.2 million bpd global gains, to reach 6.6 million bpd by 2030”.

The massive industrial expansion means that diesel is the single largest source of oil demand growth, accounting for almost half of the rise in the nation’s demand and more than one-sixth of total global oil demand growth through 2030. Jet-kerosene demand is poised to grow strongly, at around 5.9 per cent per year on average, but from a low base compared to other countries.

Petrol will grow by 0.7% on average, as the electrification of India’s vehicle fleet avoids a more substantial rise. LPG rounds out the growth picture, as petrochemical industry investments in production facilities boost feedstock demand.

As a relatively small oil producer, and with limited potential for near-term growth, India’s domestic production accounted for just 13% of the country’s supply needs. In 2023, domestic oil production averaged around 700,000 bpd. “Despite renewed efforts by the government to attract foreign upstream investment, domestic crude oil production is expected to see continued declines over the medium term,” IEA said.

Energy security

India’s spectacular economic growth story, however, brings myriad challenges for its security of energy supplies, IEA said. “India was already the world’s second-largest crude oil net importer in 2023, having boosted imports by 36% over the past decade to 4.6 million bpd to meet rising refinery intake. Increased refining processing will lift crude oil imports further, to 5.8 million bpd by 2030, with major implications for India’s security of supply”.

The energy crisis and recent surge in long-haul crude sources, notably from Russia, has also added further impetus to sustaining the country’s oil resilience in case of market disruptions, it said.