New Delhi: Domestic crude oil imports requirement may go up to about 85% by 2012 from current level of 70% even though refining capacity in India is set to increase by 58% to touch 235 mn tonnes in next five years from present level of about 159 mn tonnes. This trend is on account of growing demand of energy with little resources at India’s disposal for harnessing its alternate sources.
According to a paper brought out by Assocham on ‘Future Imperatives of crude oil scenario’ present trends indicate that oil will continue to hold an important position as the preferred fuel in the long term.
* India’s dependence on crude oil will increase as domestic discoveries have not been taking place, while energy demand will multiply and rise to 12-13% compared to 7-8% now
* Alternate sources of energy though available in abundance does not imply that harnessing it will be easy
* India’s dependence on crude oil import will go up to 85% as compared to 70% now until massive discoveries take place for extracting crude oil
* Refining capacities will register manifold increase for which crude oil is needed
* Refining capacities stand at 148.97 mn tonnes. Some projects that are likely to be commissioned during 11th plan are Reliance Petroleum, 29 mn tonnes at the Jamnagar SEZ, IOC’s 15 mn tonnes refinery coming up in Orissa, HPCL 9 mn tonnes refinery in Bhatinda, Punjab and BPCL’s 6 mn tonnes ,refinery in Punjab. From the trade perspective, these capacity additions imply higher imports of crude oil
* Higher crude oil imports unlikely to impact trade deficit adversely as most new capacity additions are aimed at exporting value added products. Import bill to a great extent will be offset by export of petroleum products
* During FY 2005, export of petroleum products recorded 96% growth. Export of petroleum products expected to substantially grow in coming years, especially after commissioning of Reliance refinery at Jamnagar
*High economic growth prospects likely, especially in China and India will lead to high prices internationally
* Artificial ceiling on prices of petroleum products will continue to persist; it would be difficult for the government to continue diverting development revenues to foot the increasing oil import bill as it will result in fiscal pressures in servicing oil bonds
* In FY 2005 - 06, India’s petroleum and crude oil products (POL) import bill grew at average 46% per year. POL imports which account for 28% of total imports, recorded 47% jump in value terms during fiscal year 2006, compared with fiscal year 2005, while in volume terms growth was just 33%.
* Indian basket of crude oil rose from less than $28 barrel in FY 2004-05 to $55 barrel in FY 2005-06 and $67 barrel in 1st half of fiscal 2006-07.
Despite such high dependency on oil imports, its impact on domestic prices and economic growth has remained muted so far largely because of subsidies.