Despite a modest decline in its reliance on primary energy imports, India continues to depend on foreign crude for a staggering 90% of its consumption, according to a newly released industry report.

A joint study conducted by the Confederation of Indian Industry (CII) and EY reveals that India's dependence on primary energy imports decreased to 42% in the financial year 2025, down from 47% in FY 2017. However, the nation's reliance on crude oil imports remains critically high, with overseas purchases fulfilling 90% of total demand. The gap between the two figures underscores how domestic coal production and a rapid build-out of renewable energy capacity — particularly solar — have helped reduce overall energy import exposure even as oil dependency remains structurally entrenched.

"Overall primary energy import dependence has reduced modestly from 47% to around 42% between FY17 and FY25, indicating gradual diversification of the energy system despite persistent dependence on imported oil," media outlets cited the report as stating.

As the world's third-largest crude oil importer, India has witnessed a steady increase in its reliance on foreign oil, driven by surging domestic demand — fueled by economic growth and rising vehicle ownership — and declining local production from mature fields.

Geopolitical instability in the Middle East has forced Indian refiners to seek alternative supply sources while prompting the government to expand its strategic petroleum reserves to mitigate future supply disruptions. India's existing strategic reserves, located at Visakhapatnam, Mangaluru, and Padur, were built in an initial phase years ago; the current expansion push reflects a recognition that earlier capacity falls well short of the 90-day coverage level recommended by the International Energy Agency for net oil importers. Consequently, India's state-owned Oil and Natural Gas Corporation (ONGC), the country's leading exploration company, is set to construct a new storage facility in Mangaluru capable of holding approximately 13 million barrels of oil.

The conflict involving Iran and the subsequent disruption of crude shipments through the Strait of Hormuz — through which a significant share of Middle Eastern oil flows — compelled India to seek replacements for lost Middle Eastern barrels. Although record imports of Russian crude, sold at discounts amid Western sanctions, have helped offset these shortages, India recognized the urgent need for expanded commercial and strategic storage infrastructure.

Currently, India's maximum reserve capacity can only cover eight days of national oil demand, leaving the major crude importer highly vulnerable to global supply shocks. By comparison, countries like the United States and China maintain strategic reserves measured in hundreds of millions of barrels. To navigate ongoing Middle Eastern uncertainties and unreliable deliveries, India's state-run refiners have accelerated their procurement of crude from West Africa.

By Tsvetana Paraskova for Oilprice.com

Source: OilPrice.com