Increased domestic demand results in a 15% increase in India’s net oil import bill

According to the most recent data from the petroleum ministry, India’s net oil and gas import bill increased by almost 15% year over year for the first seven months of the current fiscal year (FY25). This increase was mostly due to higher import volumes of crude oil, liquefied natural gas (LNG), and petroleum products amid rising demand and stagnant domestic production. The increase in the net oil and gas import bill was also influenced by the lower value of the nation’s petroleum product exports.

India’s net oil and gas imports in value terms for the April-October period were at $79.3 billion, up from $69.2 billion a year ago, per provisional data from the Petroleum Planning & Analysis Cell (PPAC) of the oil ministry.

India is the world’s third-largest consumer of crude oil with an import dependency level of over 85 per cent. It is also a large consumer of natural gas and depends on imports to meet over half of its demand. Oil and gas imports have the highest share in India’s overall merchandise import bill. Petroleum product exports are among India’s top merchandise exports in value terms.

Heavy dependence on imported crude oil makes the Indian economy vulnerable to global oil price volatility, apart from having a bearing on the country’s trade deficit, foreign exchange reserves, rupee’s exchange rate, and inflation. The government wants to reduce India’s reliance on imported crude oil but sluggish domestic oil output in the face of incessantly growing demand for petroleum products has been the biggest roadblock.

 The government wants to reduce India’s reliance on imported crude oil but sluggish domestic oil output in the face of incessantly growing demand for petroleum products has been the biggest roadblock.

India’s crude oil imports for April-October rose 3.5 per cent year-on-year to 140.2 million tonnes, while the oil import bill for the period rose 7.6 per cent to $81.7 billion, according to the PPAC data. The country’s oil import dependency for April-October was 88.1 per cent, up from 87.6 per cent in the year-ago period. Domestic crude oil production was down nearly 3 per cent at 16.7 million tonnes.

LNG imports for April-October in value terms rose 17.1 per cent year-on-year to $8.9 billion due to a 22.2 per cent increase in imported LNG volumes to 22,085 million standard cubic metres (mscm). The growth in LNG imports was fuelled by rising consumption amid flat domestic natural gas production. Much of the incremental gas demand in the current fiscal came from gas-based power plants as electricity demand surged during the peak summer months.

Import dependency in the case of natural gas was at 51.3 per cent for April-October, up from 46.7 per cent a year ago. Domestic natural gas output for the period was 1.6 per cent higher at 20,948 mscm.

The government wants to increase the consumption and share of natural gas in the country’s primary energy mix, even though it would lead to higher gas imports. Natural gas is far less polluting than conventional hydrocarbons like crude oil and coal, and is usually cheaper than oil. It is also seen as a key transition fuel. To be sure though, the government has also been pushing India’s oil and gas companies to increase domestic production of natural gas in a bid to keep import dependency levels under check.

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The country’s petroleum product imports in value terms in April-October rose 8.5 per cent year-on-year to $14.1 billion, while petroleum product exports were down nearly 7 per cent at $25.4 billion. India is a net exporter of petroleum products, thanks to its refining capacity of over 250 million tonnes per annum slightly exceeding the domestic demand. The country, however, does not export crude oil and natural gas and is heavily dependent on imports of both due to high domestic demand and low production.