India's Growing Oil Import Dependency
India's increasing reliance on imported crude oil is a pressing issue as demand for fuel continues to grow while domestic production stagnates. During the first half of FY26, India’s oil import dependency rose to 88.4%, up from 87.9% in the same period last year. This trend is fueled by various factors, including the expansion of energy-intensive industries, rising vehicle sales, and a growing population.
The government has been attempting to reduce this dependency on imports. In 2015, a target was set to decrease reliance from 77% to 67% by 2022. However, current data shows an opposite trend, with import dependency only increasing. This persistent challenge highlights the complexities in balancing domestic production with rising energy needs.
India’s reliance on imported oil presents vulnerabilities to fluctuations in global oil prices, which can impact the nation’s economy, trade deficit, and inflation rates. For the first half of FY26, despite higher imports, the gross oil import bill decreased by 14.7% due to lower international oil prices. Nonetheless, the country remains heavily dependent on imports to meet its energy needs, with crude oil imports reaching 121.2 million tonnes, while domestic production slightly declined to 14.2 million tonnes.
Moreover, the consumption of petroleum products increased by 1% year-on-year, reflecting a persistent growth in demand. However, the self-sufficiency level from domestic production is alarmingly low at just 11.6%. This means that only a small fraction of the total consumption is being met by domestic output.
To address these challenges, the Indian government is implementing various policy reforms aimed at attracting investments in oil and gas exploration and production. Additionally, there is a push towards electric mobility and alternative fuels like biofuels, but these measures have yet to significantly offset the growth in petroleum demand.
As the world's third-largest consumer and one of the top importers of crude oil, India is expected to see substantial refinery capacity expansion in the coming years, highlighting its potential as a major market for oil demand. With the current refining capacity of nearly 258.1 million tonnes per annum, India's future energy strategy will be crucial in determining its reliance on imported oil.
