If the trend of importing more oil continues, India’s dependence is likely to reach 90 percent by 2020 from 79 percent last fiscal (2014-15) on widening supply-demand gap, accentuated by growing appetite for fossil fuels, said the report titled “Let’s energise — Meeting India’s growing fuel demand” by India-Tech Foundation and Pricewaters Cooperhouse Ltd (PwC).
Noting that the country had to diversify its energy basket through use of alternative fuels, the report said otherwise higher percentage of GDP (gross domestic product) would have to be spent on imports, increasing vulnerability to price shocks.
“Though we imported 79-80 percent of our oil needs, spending $138 billion last fiscal (2014-15), dependence on overseas suppliers will continue due to limited domestic production,” said Deepak Mahurkar, PwC India leader for oil and gas.
Admitting that the country’s economy could not be insulated against external shocks, the report, however, said their impact could be limited by boosting domestic production, increasing use of alternative fuels and reducing oil imports.
Dwelling on the impact of oil on the economy and its significance in the country’s coal-dominant energy basket, the report said as major oil suppliers were in the unstable regions of West Asian and North Africa, the nation faces host of risks ranging from geopolitics to volatile price.
“As boosting domestic production has limitations, we should focus on diversifying into alternative fuels like coal bed methane, hydrogen, shale gas and ethanol blended fuel,” Mahurkar said.
The report also favoured shoring up oil reserves by encouraging state-run and private Indian oil firms to scout for potential reserves overseas.
“As oil is a traded commodity, equity oil offsets the impact of stagnant domestic production and acts as a hedge against fuel prices. Sharp fall in global oil prices (from $110 in June 2014 to $40 per barrel) is a good opportunity to acquire oil assets overseas,” India-Tech Foundation president Indra Mohan added.