India’s Growing Dependence on Crude Oil Imports
India’s heavy dependence on crude oil imports has once again come under scrutiny, with a parliamentary committee warning that rising geopolitical tensions pose serious risks to the country’s energy security. In a report tabled in Parliament last week, the Public Undertaking Committee (PUC) highlighted that India imports nearly 89 per cent of its crude oil requirements, leaving the nation highly vulnerable to global disruptions.
Crude oil imports are the backbone of India’s energy system, supporting transportation, manufacturing, power generation, and industrial growth. However, this dependence also exposes the country to risks arising from international conflicts, sanctions, political instability, and disruptions in global shipping routes. The committee cautioned that without stronger safeguards, India could face supply shocks, price volatility, and long-term energy insecurity.
Geopolitical Risks Threatening India’s Energy Supply
The parliamentary panel pointed out that recent global developments have clearly exposed weaknesses in India’s crude oil import strategy. Events such as the Russia–Ukraine war, ongoing tensions in West Asia, and conflicts like the Israel–Hamas war have disrupted global energy markets and shipping routes.
Sanctions imposed on major oil-producing nations such as Russia, Iran, and Venezuela have further complicated crude oil imports. These sanctions limit payment mechanisms, restrict shipping insurance, and reduce availability of supply. In addition, political unrest, strikes, or civil disturbances in oil-producing countries can quickly interrupt crude flows.
The committee also flagged concerns over disruptions in critical maritime routes, particularly the Suez Canal and the Red Sea, which play a vital role in global oil transportation. Any blockage or insecurity in these routes can delay shipments, raise freight costs, and increase crude oil prices for importing countries like India.
Why Diversification of Crude Oil Sources Is Critical
To reduce exposure to geopolitical risks, the committee strongly recommended that India accelerate efforts toward oil supply diversification. This includes diversifying crude oil imports geographically as well as contractually.
Geographic diversification means sourcing crude oil from a wider range of producing countries rather than relying heavily on a few regions. Contractual diversification involves balancing spot purchases with long-term contracts and flexible agreements that allow adjustments during global disruptions.
According to the committee, diversification of crude oil imports would help India maintain stable supplies even during periods of geopolitical turmoil. It would also reduce price shocks and improve bargaining power in global energy markets.
Strengthening Strategic Petroleum Reserves
Another key recommendation from the parliamentary panel was to strengthen India’s strategic petroleum reserves (SPRs). Strategic petroleum reserves act as emergency stockpiles that can be used during supply disruptions, wars, or sudden price spikes.
India has already taken steps to build and expand its SPR facilities, but the committee believes these efforts must be accelerated. With crude oil imports accounting for nearly 89 per cent of demand, existing reserves may not be sufficient to handle prolonged global disruptions.
Expanding strategic petroleum reserves would give the government greater flexibility to respond to emergencies, stabilise domestic fuel prices, and ensure uninterrupted supply to critical sectors such as defence, transport, and power generation.
Need for Alternative Import Routes
The panel also stressed the importance of developing alternative crude oil import routes. Over-dependence on traditional shipping corridors increases vulnerability during conflicts or blockages.
By investing in diversified maritime routes, port infrastructure, and logistics planning, India can reduce the risks associated with chokepoints like the Suez Canal. This recommendation is particularly relevant given recent attacks on commercial shipping and rising security concerns in key sea lanes.
Institutionalising Risk Management Practices
One of the most important recommendations of the committee was the institutionalisation of risk management tools across the oil and gas sector. These include financial hedging mechanisms and flexible term contracts that can protect against price volatility and supply uncertainty.
Hedging allows companies to lock in prices or reduce exposure to sudden market fluctuations. Flexible contracts provide room to adjust sourcing during geopolitical crises. The committee believes such tools must become standard practice rather than ad-hoc measures.
By strengthening risk management frameworks, India can protect its economy from sudden energy shocks and maintain stable fuel prices for consumers and industries.
Internal Challenges Facing India’s Oil and Gas Sector
Apart from external risks, the parliamentary report also highlighted several internal challenges affecting India’s energy sector. These include ageing oil fields, delays in project execution, cost overruns, rising land acquisition expenses, and crude production failing to keep pace with capital expenditure.
Despite significant investments, domestic crude oil production has not increased sufficiently to reduce reliance on imports. This imbalance puts additional pressure on crude oil imports and foreign exchange reserves.
The committee also flagged serious environmental concerns, including greenhouse gas emissions, air and water pollution, and waste management issues associated with oil and gas operations. These challenges further complicate India’s energy transition and long-term sustainability goals.
Overseas Investments and Regulatory Constraints
The report acknowledged efforts by Indian companies such as Indian Oil Corporation and ONGC Videsh to diversify crude oil sources through overseas investments. However, it noted that sanctions, financial volatility, and regulatory hurdles in host countries continue to limit success.
These constraints affect India’s ability to secure overseas exploration and production assets, which are crucial for long-term energy security. Rising geopolitical risks also increase uncertainty around returns on overseas investments.
According to the committee, these issues not only raise India’s energy import bill but also weaken strategic control over future energy supplies.
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Role of Diplomacy in Energy Security
To address these challenges, the parliamentary panel recommended closer coordination between the Ministry of Petroleum and Natural Gas (MoPNG) and the Ministry of External Affairs (MEA). Strong diplomatic engagement with oil-producing nations is essential to secure favourable investment terms and address taxation and regulatory challenges faced by Indian companies abroad.
Energy diplomacy, the committee noted, must be treated as a strategic priority. By strengthening bilateral and multilateral relations, India can improve access to crude oil, protect overseas assets, and enhance resilience against geopolitical disruptions.
Digital Risk Management and Future Strategy
Finally, the committee urged central public sector undertakings (CPSUs) to adopt digital and enterprise risk management frameworks. These systems would allow continuous monitoring of geopolitical risks, supply chain vulnerabilities, and market volatility.
Such tools can help policymakers and companies respond quickly to emerging threats, ensuring a more resilient and sustainable energy strategy for the country.
A Wake-Up Call for India’s Energy Strategy
The parliamentary panel’s report serves as a timely warning about the fragility of India’s crude oil import dependence. With nearly 89 per cent of crude oil sourced from abroad, geopolitical risks pose a serious challenge to national energy security.
Diversification of crude oil imports, expansion of strategic petroleum reserves, adoption of risk management tools, and stronger diplomatic engagement are no longer optional, they are essential. As global uncertainties continue to rise, India must act decisively to safeguard its energy future while balancing economic growth, environmental responsibility, and geopolitical realities.
Source: shippingtribune.com
