How India Can Decrease Its Dependency Upon Crude Oil?

by | Oct 21, 2022 | Natural Resource Management, Renewable Energy

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The Oil Crisis in India

India imports almost all the oil it consumes, spending nearly 2,000 crore on oil imports every day. With the Ukraine-Russia war, prices have shot up to 100 dollars per barrel of oil. This brings India’s fragility in terms of oil and energy security to the forefront. It also forces the government to discuss how India can decrease its dependency upon crude oil.

India depends heavily on foreign oil. The calls for an Energy Independent India by 2047 seem like a distant dream. However, a sizeable decrease in clean energy costs can create new opportunities for the country. India can eliminate its oil dependency in the transport sector with falling renewable energy costs. The transport sector accounts for a bulk of India’s oil demand.

Today, petrol prices are over 90-100 rupees a litre in most cities and towns. Apart from petrol, even fuels like diesel and liquefied petroleum gas (LPG) witness a sharp price hike.

How India Can Decrease Its Dependency Upon Crude Oil?

India imports around 80% of its oil, making the country one of the world’s largest importers of crude oil. The high taxes on fuel imports are partly why India today has record-high fuel prices. Many studies have suggested that by 2040, the demand for oil in India will be more than in any other country.

Last year, the country’s Union Minister for Road Transport and Highways, Nitin Gadkari, expressed concern over the country’s rising trend of crude oil imports. He urged vehicle owners to switch to alternative fuels for their vehicles. He also asked investors to find interest in the manufacturing of ethanol and other clean, indigenous fuel sources to address the issue of how India can decrease its dependency upon crude oil.

Decreasing our dependency on crude oil will help the country save crucial revenue and act as a shield against currency fluctuations.

Reducing Oil Imports Will Take Time

Under the Prime Minister’s leadership, the central government had set a target of reducing India’s dependency on crude oil imports by 10% by 2022. While work on reducing India’s crude oil imports is underway in full swing, the task may take more time than expected.

During the initial lockdown period, crude oil imports in the country decreased by 15%. However, in December 2020, oil imports increased by 9.5% compared to December 2019. This was the highest rate of oil imports in nearly three years.

The data shows that even as the government hopes to decrease the country’s dependency on crude oil, the rising trend of fuel consumption has significantly slowed the process.

Building better fuel storage capacities can potentially reduce oil imports. But, this, too, will need time since we lack the capacity to blend ethanol in fuel. While sugar mills supply a record amount of ethanol, our country lacks adequate tankage.

The lack of adequate tankage causes distilleries to suffer financial losses. Experts say that India needs to first achieve a tankage capacity of 10% at the country level.

Easing Access to Alternate Energy Sources

Using alternate energy sources like natural gas and solar power is another way how India can decrease its dependency upon crude oil imports. It will save the government billions of dollars and prevent India from energy price shocks.

A few experts say that increasing our use of natural gas may be the only way out for India to decrease its dependence on crude oil. The Prime Minister said that 40% of the energy generated in India will come from renewable sources by 2030. They also planned to spend around 7.5 lakh crore rupees on developing oil and gas infrastructure over the next five years.

The government is currently working towards increasing the share of natural gas in the energy industry from 6.3% to 15%. The government also aims to leverage GST on natural gas stocks to eliminate cascading taxes.

To be energy independent by 2047, India needs to establish and achieve near-to-middle term milestones. The government has already amped up its ambition to create a clean power grid. Along with the ambitious target of generating 500 GW of clean energy by 2030, India could also establish a goal that all new vehicles sold by 2035 must use clean energy produced in the country.

Another sector that can help solve the challenge of how India can decrease its dependency upon crude oil is electric vehicles (EVs). The Council on Energy, Environment, and Water, in its 2019 report, said that India could have saved around 50 million barrels of crude oil if the country achieved 30% electric car sales that year.

How India Can Decrease Its Dependency Upon Crude Oil?

Trucks and buses account for over 60% of the oil used in the transport sector. However, the good news is that, with technological improvements in battery storage, even heavy-duty electric trucks are rapidly becoming commercially available in many countries. But, the upfront costs still remain high for these vehicles and charging infrastructure for these vehicles in urban areas, and highways pose a challenge. Electric passenger vehicles, trucks, and buses need policies to push consumers to adopt these vehicles.

India needs the mandate to ensure that a share of vehicles sold in India must use clean energy produced in the country. This will strongly encourage industries to invest at a higher pace in charging infrastructure and other services.

Securing Supply Chains

Securing the supply chains of materials like lithium for batteries could eliminate India’s 100 billion dollars’ worth of oil imports. A 100 billion dollars’ worth of oil imports would require the country to import only around 1-2 billion dollars’ worth of lithium. However, this would require India to collaborate with like-minded countries to secure its supply chain of raw materials and critical elements.

The Ministry of Petroleum and Natural Gas announced it had taken several steps to promote renewable and alternate fuels like ethanol, biogas, biodiesel, second-generation ethanol, and natural gas. The ministry hopes that promoting these alternate fuels will push the country towards a gas-based economy. They also aim to improve refinery processes, encourage energy efficiency and conservation, and increase the Indian production of oil and natural gas through various governmental schemes.

Currently, oil exploration and production activities are happening over a total area of 2,75,000 across different sedimentary basins in the Indian onshore and offshore regions.

We need to deal with how India can decrease its dependency upon crude oil imports soon to reduce the burden on citizens and prevent inflation and slow economic growth.

Also Read: EU To Slash Greenhouse Gas Emissions Up To 95% By 2040


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