When a country is able to produce enough of its own fuel to meet its own demands, then it is referred to as being energy independent. Energy independence is important because it affects not just fuel, but also politics. Currently, foreign policy is somewhat linked to import relationships a country has with other countries. Countries that supply fuel to other countries have more political leverage on those countries as those countries rely on the imported fuel to meet their own demands. If a foreign country decides to stop selling oil to other countries, those other countries would suffer because they would not have enough fuel to meet their demands. Shipping departments would be impacted and so would defense departments that rely on transportation to get around.

• India’s energy imports are estimated to grow 43.6 % in FY2023 over the previous year.
• Energy imports include coal, coke, crude oil, LNG, and LPG.
• Energy-related products account for 36.6 % of the total merchandise import bill.
• India’s energy import bill for FY23 is estimated to be $260 billion.
• If the present energy import growth rate continues, the energy import bill will exceed the bill for all remaining merchandise imports in the next two years.
• At this rate, bill could very well exceed the $1 trillion mark by December 2026.
• Thus, to cater the growing energy prices and increasing import bills, India must see its options in the domestic production of coal and crude oil.

Factors affecting the surge in energy sources

• High growth in energy-related imports is mainly due to the challenging external environment.
• These are the disruption of oil supply chains due to the US sanctions on Russia post the Russian invasion of Ukraine
• Weakening of the US-Saudi Arabia 1970s deal that led to the dollar becoming the world’s reserve currency and leading to the sale of oil and currencies other than the dollar.
• High inflation in developed countries, including the US, Canada, Germany, and the UK, and the US.

India’s Petroleum crude and products data

1. Petroleum crude and products:

• The estimated values of petroleum imports for FY 2023 are $210 billion.
• It includes crude oil with an import value of $163 billion and LNG and LPG of $17.6 billion and $14 billion, respectively.
• In the 1980s, India met 85 % of its crude oil needs mainly from ONGC’s Bombay High offshore oil field, but now 85 % is imported.
• Top 5 suppliers of crude to India: Iraq ($36billion), Saudi Arabia ($31billion), Russia ($21billion), UAE ($17billion), US ($11.9billion).
• Crude imports grew by 53 % over the last fiscal.
• Imports from Russia grew by 850 % over last year.
• India paid prices ranging from $90-92 per barrel for imports from Iraq, Russia, and the US.
• It paid a price ranging from $101-103 per barrel for imports from Saudi Arabia and UAE.
• One tonne of crude equals 7.35 barrels
• Export of crude oil: India used its refining capacity to process part of the imported crude oil and exported products worth $96 billion.

2. Coke and coal

• Coal imports have increased mainly because of demand from new power plants that use only high-grade imported coal.
• Several issues favor imports such as:
• Low quality (high ash content of 30-40 %) Indian coal,
• Inability of Coal India Ltd to increase production and use technology to increase the calorific value of coal, and
• Transport restrictions within-country
• Disruption in oil trade due to sanctions on Russia and the weakening of the US-Saudi Arabia 1970 oil deal put pressure on governments to secure long-term coal supplies.
• India’s estimated coke and coal imports for FY2023 are $51 billion.
• India imports both coking coal and thermal coal.
• Coking coal is used as raw material for making steel, and thermal coal is used to generate electricity.
• The coking coal imports may exceed $20.4 billion, an 87 % increase over last year.
• India imports about 60 % of coking coal from Australia ($11.8 billion). India also bought coking coal from the US ($2.7 billion) and Singapore ($2.1 billion).
• Singapore does not mine coal.

3. Steam Coal

• Estimated Steam coal imports (FY2023): more than 23.2 billion, a 105 % increase over last year.
• India imports about 59 % of steam coal from Indonesia ($13.6 billion). Other significant suppliers are South Africa ($3.8 billion), Australia ($1.7 billion), and Russia ($1.6 billion).
• The most increase in imports is on account of the rise in prices.
• Country-wise price rise in 2022 over 2021: Indonesia (22 %), South Africa (49 %), Australia (35 %), Russia (46 %).

How India can reduce its energy import bill?

1. Domestic Production

• India must reenergize the exploration of local oil fields and enhance production through coal mines.
• Increased domestic production will substantially cut the energy import bill and improve the current account.

2. Sedimentary basins

• India has 26 sedimentary basins divided into the following four categories:
• Category I (7 Basins): established commercial production.
• Category II (3 Basins): known accumulation of hydrocarbons but no commercial production as yet.
• Category III (6 Basins): indicated hydrocarbon reserves considered geologically oil-bearing.
• Category IV (10 basins): uncertain potential may be prospective by analogy with similar basins worldwide; and deep-water reserves.
• Crude oil and natural gas production in India is from category-I basins and deep-water areas.
• Hydrocarbon discoveries have been made in Category-II basins, but commercial production is yet to commence.
• India must evaluate its options to increase local production.

3. Reducing coal imports

• There’s not enough scope for reducing the import of coking coal as India does not have high-quality reserves. But, the import of thermal coal can be managed.

India’s merchandise imports for the fiscal year ending March 2023 are estimated to touch $710 billion, up from $613 billion in FY2022, an increase of over 15.8 % over last year. Containing energy imports will ensure that the overall import bill does not strain the current account.