India’s Crude Oil and Natural Gas Import Dependency Rises Amid Stagnant Domestic Production and Growing Demand

(Source: Indian Express; Section: Economy; Page: 13)

Topic: GS3 – Indian Economy

Context:

India’s increasing reliance on imported crude oil and natural gas highlights the challenges of rising energy demand and limited domestic production.

 Analysis of News:   

                        

Rising Import Dependency on Crude Oil and Natural Gas

• India’s import dependency for crude oil and natural gas has increased in the first half of FY25, reaching 88.2% and 51.5%, respectively, as domestic production remains sluggish amidst rising demand.
• This is a continuation of an upward trend, with oil dependency rising from 83.8% in FY19 to the current level, reflecting a widening gap between consumption and domestic output.

Economic Vulnerabilities

• India’s high reliance on imported oil makes its economy vulnerable to global price volatility, impacting the trade deficit, foreign reserves, inflation, and the rupee’s value.
• Despite government efforts to reduce import reliance, such as incentivizing domestic production, the limited growth in oil output hampers progress towards self-sufficiency.

Push for Natural Gas as a Transition Fuel

• The government aims to increase natural gas’s share in India’s energy mix to 15% by 2030, up from around 6% currently.
• Natural gas, being less polluting and typically cheaper than oil, is promoted as a transitional fuel.
• However, higher imports of natural gas, as seen with a 23% year-on-year increase in the first half of FY25, add to the import dependency challenges.

Efforts Towards Reducing Oil Imports

• To mitigate oil imports, the government has implemented policies encouraging electric mobility, biofuels, and alternative fuels.
• Although there has been a rise in electric vehicle adoption and biofuel blending, these measures are insufficient to offset the growing demand for petroleum products, with domestic production only meeting 11.8% of consumption in H1 of FY25.

Persistent Challenges

• India’s oil and gas import bill rose significantly in H1 of FY25, with crude oil imports costing $71.3 billion and natural gas imports at $7.7 billion.
• Despite ambitious targets set in 2015 to reduce oil import reliance to 67% by 2022, dependency has grown, highlighting the pressing need for sustainable solutions to manage the country’s increasing energy demands.

How can the Dependence on Oil and Gas be Reduced?

Setting Concrete Targets: Developed countries have absolutely no excuse – new oil and gas investments should have ended already. All the countries, especially richer countries, need to lead on this, and set phase-out dates for all fossil fuel production. Embrace Renewable Energy Innovation: Countries shall invest in research and development to accelerate the advancement of renewable energy technologies. This includes funding for breakthrough technologies such as next-generation solar panels, advanced wind turbines, and energy storage solutions. Foster International Collaboration: Countries can collaborate on research, knowledge sharing, and joint initiatives to develop innovative solutions for reducing oil and natural gas consumption. Sharing best practices and lessons learned can accelerate progress globally. Aid for Capacity Building: Developed countries shall assist developing countries in building their capacity to implement sustainable energy projects through technical assistance, training programs, and knowledge sharing. Green Industrialisation: Countries shall promote the development of green industries, such as renewable energy manufacturing, to create local job opportunities, increase energy self-sufficiency, and reduce dependence on fossil fuel imports.

PYQ: The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of (2020) (a) Crude oil (b) Bullion (c) Rare earth elements (d) Uranium Ans: (a)

Practice Question:  Examine the economic and strategic implications of India’s growing dependency on imported crude oil and natural gas. Discuss the measures needed to enhance energy security and reduce import reliance in the face of rising domestic demand. (250 words/15 m)