In 2015, Prime Minister Narendra Modi set an ambitious target of reducing India’s dependence on imported oil to meet its energy needs to 67% by 2022 from 77% back then. Officials have since emphasized the need to lower oil imports, given their damaging effects on the economy. But for all the talk, those efforts so far appear to have come to naught. On the contrary, India’s dependence on imported oil has gone up over the past five years.
According to latest official data, India imported 83.7% of the crude oil it consumed last fiscal year, the highest in many years. It also compares unfavourably with the 77.6% oil dependency figure for 2013-14.
In absolute terms, crude oil imports stood at 226.6 million metric tonnes (MMT) last year, compared with 189.2 MMT in 2013-14. The reason: demand for petroleum products has shot up by more than a third, while local crude oil production has failed to keep pace. Consumption of petroleum products climbed to 211.6 MMT from 158.4 MMT during the previous five years. In contrast, local crude oil output dropped about 10% to 34.2 MMT. All these come at a heavy financial cost. India spent a whopping $112 billion on oil imports last year, almost double the $64 billion expended in 2015-16.
Although the price of crude oil and the strength of the dollar have a big role to play in determining the country’s import bill, it can’t be overemphasized that India needs to reduce its imports to keep a check on inflation, prevent the current account deficit from widening and the rupee from weakening. All these have been brought under control after years of struggle. To be sure, policymakers have been focusing on conserving energy and promoting the use of bio-fuels. The Prime Minister’s administration has also tried to attract greater investment in exploration, both from domestic and foreign explorers, but clearly, little has come of its efforts. Perhaps it’s time for fresh reforms to reverse India’s growing reliance on oil imports that could potentially rock the country’s macro-economic stability.