India's strong refining capacity reduced impact of energy shocks on India, helped save cost: EY
New Delhi, June 26
India's strong crude oil refining capacity helped reduce the impact of the recent West Asia-led energy crisis on the domestic economy by avoiding the need for large-scale imports of refined petroleum products, according to a report by EY.
The report highlighted the evolution of India's petroleum economy, stating that while the country's dependence on imported crude oil has increased over the years, it has successfully built a significant refining capacity to convert crude oil into petroleum products.
It stated, "India may continue to augment its refining capacity, which has helped save refining costs had India been forced to directly import refined petroleum products".
According to the report, India's dependence on imported crude oil rose to more than 90 per cent in FY 26 from 54.9 per cent in FY 1999. At the same time, domestic crude oil production declined to 26 million metric tons in FY26 from its peak level of 35.9 million metric tons in FY12.
The report noted that growing demand for petroleum products has increased the need for imports. Domestic consumption of petroleum, oil and lubricants (PoL) products rose sharply to 243.2 million metric tons in FY26 from 90.6 million metric tons in FY1999.
Despite the increase in crude oil imports, India has steadily expanded its refining capabilities over the years. The report said this refining capacity has helped save costs that would otherwise have been incurred if India had been forced to directly import refined petroleum products.
According to EY, the country's energy efficiency has also improved over time. The report stated that the energy intensity of India's output, as well as the use of petroleum products in GDP, has fallen over the years. This, it said, augurs well for sustaining energy-efficient growth at a relatively high level over a longer period.
Looking ahead, the report suggested that India should prepare for future supply and price shocks affecting critical commodities such as crude oil, gas and fertilizers by building strategic reserves.
It is recommended that India augment its strategic crude oil reserves to reduce vulnerability to external disruptions. The report also called for a detailed strategy covering the volume of reserves, purchase plans and release mechanisms while taking into account carrying costs.
The report further said India should continue expanding its refining capacity to strengthen energy security and reduce dependence on imported refined products.
At the same time, EY noted that the growing dependence on imported crude oil needs to be reversed through greater exploitation of domestically available crude resources. It also recommended accelerating the transition towards greener energy options and alternative sources of energy, including nuclear power.
— ANI
Reader Comments
Impressive numbers—243 million metric tons of petroleum consumption in a year! The strategic reserve idea makes sense too. But I hope the focus on nuclear and green energy isn't just lip service; we need real investment in solar and wind.
Yes, refining saved us during the West Asia crisis. But why is domestic production declining? We have oil fields in Rajasthan and Assam—shouldn't we exploit them more before importing? Building reserves is good, but we also need to reduce import dependency.
The energy intensity drop is a big plus—using less petroleum per unit of GDP means we're becoming more efficient. But long-term, we can't ignore electric vehicles and hydrogen. Let's not get complacent with just refining capacity. 🚗⚡
I agree with strategic reserves—imagine if the Strait of Hormuz gets blocked. But the report says "augment" crude reserves—we already have 5.33 MMT at Visakhapatnam, Mangalore, and Padur. Need more, yes, but also a clear plan for release during emergencies.
The refining angle is smart—we avoid paying international margins on finished products. But 90% import dependence is scary. Kudos to EY for highlighting the need to reverse domestic production decline. Let's not forget that every barrel we produce here saves foreign exchange!
V