Prime minister Narendra Modi’s renewed call for “Swadeshi” goods may have received a lot of traction but it may be a long shot before India’s energy sector can even be remotely self-reliant.
Various policy measures unveiled by the government over decades to raise domestic hydrocarbon (oil and gas) production have met with little success, and the country continues to face high – and rising– import dependency (see chart).
Currently, over 88% of the crude oil processed in the country is imported, up from 77.6% in 2013-14. Indeed, net imports could be much less, given that anywhere between 18-20% of the key refinery products – auto and aviation fuels – are exported.
Almost half the natural gas consumed in the country is imported too.
To be sure, the oil import bill has risen at a compounded annual growth rate (CAGR) of 6% in the six years to FY25 — from $101 billion in FY20, these imports surged to $137 billion in FY25. As per Rubix Data Sciences, India remained the world’s third-largest importer of crude in volume terms in FY25, with total purchases of 243 million tonne (MT).
A sudden increase in imports of Russian barrels since 2022 – share of Urals in imports rose from 2.4% in FY21 to 37% in FY25– has curbed oil import bill by as much as $17.2 billion between May 2022 to May 2025. But inflated LNG prices continued to jack up the overall energy import bill.
The Stagnant Reality of Domestic Production
“In the medium term, India might feel the pressure to broaden its energy basket and accelerate domestic exploration and production (E&P) activities to reduce reliance on high-risk external markets,” Kapil Garg, founder & managing director, Oilmax Energy, said.
The heavy imports of both crude oil and gas are the direct fallout of stagnant domestic output. India’s oil production has declined at a CAGR of 2%, dropping from 32.2 MT in FY20 to 28.7 MT in FY25.
While no new stunning oil recovery has been made in India’s onshore and offshore territories for years, gas producers were apparently waiting for market-determined pricing, before stepping up their capex. Recovery of the capital sunk in the geologically difficult fields has long remained their priority, so potential investors like the Reliance-bp combine and state-run ONGC merely chose to stay put for long years.
Policy Shifts to Spur a Production Revival
Things may now change for the better. Gas produced from difficult fields, such as assets in the 50,000 square-km Krishna Godavari (KG) basins off the Andhra Pradesh coast, is currently being sold at highly remunerative prices. Also, come January 2026, according to the recommendations made by the Kirit Parikh committee in late 2022, free pricing of such gas would be set in. This could result in more production volumes. Reliance-bp is seen to ramp up KG-D6 gas production, with the MJ field contributing too.
“While our vast domestic economy provides a significant cushion, true resilience requires a deliberate policy shift. It’s imperative that both government and industry move beyond price-only procurement models to create assured offtake for ‘Made in India’ products,” said Rishabh Jain, senior programme lead at Council On Energy, Environment and Water. According to him, such an approach would ensure domestic players have the stability to withstand global shocks and build for the future.
According to analysts, pricing freedom will doubtless encourage existing players like RIL-bp and ONGC to fast-track deep-water gas production schedules. Higher domestic production of this vital fuel/industrial feedstock is necessary to curb energy imports. Investments are required in fresh exploration ventures. Home-grown Vedanta is seen to have set an eye on this high-risk-high-reward business, even as overseas players remain wary.
Investments in hydrocarbon ventures would be in sync with “Atmanirbharata” doctrine propounded by the Modi government, analysts feel. “The real impact (of Trump tariff) could lie in strategic policy shifts. India may refocus on expanding renewable energy, scaling up exploration and deepening ties with alternate suppliers. At the same time, this also nudges negotiators to strategise towards softening tariff exposure or secure long term energy partnerships,” Garg said.
India imports oil primarily from Russia, Iraq, Saudi Arabia, UAE, USA, and Kuwait. These six suppliers accounted for 86% of the country’s oil imports in FY25, up from 65% in FY20, Rubix noted. LNG imports have grown 54% to $14.9 billion in FY25 from $9.66 billion in FY20, as per official data.
Though petroleum exports registered an increase, in value terms, these declined by 7% to $44.3 billion during the last fiscal.
Experts attribute the decline in oil production to the ageing production fields being operated by ONGC and Oil India. “India’s declining domestic oil production has further exacerbated its position as a relatively small oil producer with limited prospects for near-term output growth,” Rubix noted.
The government has been addressing reforms in the upstream oil and gas sector for several years now, to enable removal of roadblocks, policy uncertainty and facilitate better evaluation of risk. This has enabled the private sector and international exploration companies to look at the Indian E&P space more favourably.
“The Open Acreage Licensing Policy (OALP) and the National Data Repository (NDR) launched in 2017 enabled companies to carve out blocks of interest based on their analysis of geological data, which made the sector more attractive at that point of time” Ashwin Jacob, partner and energy, resources leader at Deloitte India said.
Additionally, introduction of the revenue-sharing model made the exploration in Indian basins much more efficient and easier, amounting to lesser disputes. While the government has expressed its willingness to give more incentives to the global energy giants to encourage them to invest in oil and gas exploration in Indian territory, experts remained cautiously optimistic about the plan. They suggested more flexible work programmes and waiver of goods and service tax (GST) on capital equipment to boost investor confidence in India’s hydrocarbon sector.
Industry expects a renewed thrust in the E&P sector with the recent amendment of the Oilfields (Regulation and Development) Act, 1948 which broadens the definition of mineral oils, which previously included only petroleum and natural gas.
Furthermore, to reduce its dependence on fossil fuels, the country has laid out ambitious plans to ramp up its renewable energy capacity to 500 giga watt (Gw) by 2030, from 234 GW at present.
The government has brought in several measures to promote solar power, green hydrogen, and wind energy. Plans are also afoot to build a large nuclear portfolio. However, industry players feel that issues like intermittent nature of RE and lack of proper RE evacuation infrastructure could slow progress.
“Our high-tech sectors, particularly clean energy, face a dual-sided dependency: reliance on imported raw materials on one end, and a growing dependence on export markets on the other. This creates a vulnerability where any global supply chain disruption—whether in materials or market demand—directly threatens domestic manufacturing and jobs,” Jain said.