Context
- India’s crude oil import bill rose sharply in July 2026, reflecting the impact of higher international crude prices amid the West Asia crisis.This brings into focus India’s dependence on imported crude oil, LPG and natural gas and the vulnerability of its energy security to global price and supply disruptions.
Why is India’s Crude Import Bill Important?
1. High Import Dependence
- India is among the world’s major crude oil consumers and importers.
- A substantial share of crude processed by Indian refineries is imported.
- This creates vulnerability to international price fluctuations, geopolitical conflicts and supply disruptions.
2. Impact on Current Account
- Crude oil is a major component of India’s merchandise imports.
- A sharp rise in crude prices can increase the import bill, thereby widening the trade deficit.
- If higher oil imports are not offset by exports and other inflows, it can put pressure on the Current Account Balance.
3. Inflationary Impact
- Higher crude prices → Higher cost of petroleum products → Higher transportation and production costs → Cost-push inflation
- The impact can spread across the economy because petroleum products are used in transport, agriculture, manufacturing and logistics.
4. Pressure on the Rupee
- Higher oil imports increase India’s demand for foreign currency, particularly the US dollar.
| Higher oil prices → Higher dollar demand → Potential pressure on Rupee |
What is India’s Crude Oil Import Dependence?
Import dependence refers to the proportion of domestic crude oil requirements met through imports.
- India’s domestic crude production is insufficient to meet its consumption and refining requirements.
- PPAC data show that imported crude constituted around 89.7% of crude processed in 2023–24.
- Therefore, India’s energy security is closely linked to the stability of global oil markets and maritime supply routes.
Indian Crude Basket
- The Indian Crude Basket (ICB) is a representative basket of crude oil grades imported by India.
- It is used as an important indicator of the international crude oil price relevant to India.
- The basket broadly comprises Oman & Dubai crude and Brent-related crude.
- It is different from the price of a single crude benchmark such as Brent.
| Important CTC from This Article for UPSC liquefied natural gas (LNG) Brent crude |
Q. With reference to India’s crude oil imports, consider the following statements:
1. India meets a substantial proportion of its crude oil requirement through imports.
2. An increase in international crude oil prices can widen India’s merchandise trade deficit even if the volume of crude imported remains unchanged.
3. The Indian Crude Basket is identical to the Brent crude oil benchmark.
4. LNG is natural gas converted into liquid form primarily to facilitate transportation and storage.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 1, 2 and 4 only
(c) 2, 3 and 4 only
(d) 1, 3 and 4 only
Answer: (b) 1, 2 and 4 only
• Statement 1 – Correct: India has a high dependence on imported crude; imported crude accounted for around 89.7% of crude processed in 2023–24.
• Statement 2 – Correct: Higher crude prices increase the value of imports and can worsen the trade balance.
• Statement 3 – Incorrect: Brent is an international crude benchmark; the Indian Crude Basket is a representative basket relevant to India.
• Statement 4 – Correct: LNG is natural gas cooled to a very low temperature and converted into liquid form for easier transportation and storage.