Barrels and Balancing Acts
- Amey Chitale

- Jul 9
- 4 min read
India is turning oil dependency into strategic advantage through deft diplomacy and diversification.

When the Reserve Bank of India unveiled a front-loaded monetary policy on June 5 to stimulate growth, few anticipated that events unfolding thousands of miles away would soon test the country’s economic mettle. Within days, Iran launched airstrikes on Israel, stoking fears of escalation across the Middle East. Tehran’s threat to blockade the Strait of Hormuz—a chokepoint for a fifth of the world’s crude oil and nearly half of India’s imports—jolted global energy markets. Yet, unlike in past crises, India remained largely unfazed.
This surprising resilience was not accidental. It reflects the steady recalibration of India’s energy strategy: from vulnerable dependency to a deliberate assertion of sovereignty over its oil lifeline.
India’s appetite for crude has grown voracious, fuelled by galloping industrialisation and swelling middle-class consumption. Domestic production, however, remains anaemic, just 28.7 million metric tonnes (MMT) in the face of a record 242.4 MMT of annual consumption. More than 90 percent of the country’s oil demand is met via imports, a figure that should signal national anxiety. And yet, markets remained calm. Investors and policymakers alike were reassured by India's evolving strategy to de-risk its oil supply chain.
Over decades, India has cultivated a formidable refining ecosystem. With 23 facilities and a total capacity of 256.8 MMT, it is the world’s fourth-largest refiner. Public sector enterprises account for two-thirds of this, while private giants like Reliance Industries and Nayara Energy hold the rest. This infrastructure, coupled with a Strategic Petroleum Reserve (SPR) of 5.33 MMT and 64.5 days of commercial stocks, gives India a crude cushion of around 74 days, buffering its economy against short-term global disruptions.
But India’s real achievement lies in how it has diversified its supply sources while leveraging refining strength into export competitiveness.
For decades, the Middle East was India’s energy umbilical cord. However, the region’s geopolitical volatility—from the Gulf War in 1991 to the more recent Houthi attacks in the Red Sea—has repeatedly unsettled Indian policymaking. It took the Russian invasion of Ukraine in 2022 to catalyse a historic shift. In the months that followed, Russian oil, once negligible in India’s energy mix, rose to account for nearly 40 percent of imports. Steep discounts on Russian Urals crude, up to 20 percent below global benchmarks, made it an economic no-brainer. Even as discounts narrowed to $2–5 per barrel, Moscow remained Delhi’s top supplier.
Crucially, India’s pivot to Russia wasn’t just about price. The Chennai–Vladivostok corridor has become an emerging artery of energy logistics, slashing delivery times and adding a durable new node to India’s supply map.
None of this has come at the expense of traditional Gulf partners. Iraq, Saudi Arabia and the UAE still jointly account for over half of Indian crude purchases. Rather than a substitution, Delhi has pursued a hedging strategy by deepening ties across blocs to ensure energy security on its own terms. A notable success is India’s strategic alliance with the UAE, which includes joint investments in storage, technology exchanges, and even renewables. Abu Dhabi National Oil Company’s decision in 2017 to store crude in India’s SPR marked a turning point in bilateral trust and logistical integration.
Energy diplomacy also extends across oceans. The United States now provides 10 percent of India’s oil, complementing its shale-rich profile with long-haul stability. Taken together, this mosaic of suppliers underscores India’s mantra: energy pragmatism over ideological purity. As External Affairs Minister S. Jaishankar bluntly put it, India buys oil, not ideology.
Yet India is not content with being a passive importer. With an expanding refining complex and the technical capacity to process varied crude grades, India has emerged as a petro-products export powerhouse. In FY2024–25, it exported 64.7 MMT of petroleum products. Diesel is the crown jewel, shipped mostly to Europe, while aviation turbine fuel (ATF) and motor spirit find eager buyers across Africa and Asia. The export basket is both diverse and globally aligned: diesel and ATF comprise over half of it, while petrol and liquefied petroleum gas (LPG) add another third.
This ability to refine and re-export not only offsets import bills but also projects India as a regional hub for energy value addition. The UAE, Singapore and the Netherlands are among the top importers of Indian petroleum, helping India convert crude vulnerability into geopolitical leverage.
Still, oil is a double-edged sword. A $10 spike in prices can raise India’s import bill by $1.6 billion, widen the current account deficit by $2.5 billion, and weaken the rupee. Inflation, too, is oil-sensitive: a 10 percent sustained rise in global prices can push up consumer price inflation by nearly 2.7 percent. The knock-on effects ripple through transport, manufacturing and food, impacting the poorest households hardest.
India’s decarbonisation drive is as much about security as sustainability. The ethanol blending programme, which is up from 1.5 percent in 2013–14 to 13 percent in 2023–24, aims for 20 percent by 2025–26, saving Rs. 1 trillion in forex, cutting 544 million tonnes of emissions and boosting rural demand by monetising surplus crops. Every 100 crore litres blended saves Rs. 6,000 crore.
Meanwhile, biogas, biodiesel and green hydrogen are being scaled up, aligned with India’s target of 500 GW of renewable energy by 2030. Domestic exploration and operational upgrades are also on the agenda. Digitised supply chains, smart metering, bulk shipping, and SPR digitisation are making the energy network nimbler and more responsive.
By hedging its imports, expanding its exports, and building future-ready domestic capacity, India is signalling a quiet confidence in managing its economic destiny.
(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)




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