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Modi govt failed to promote crude oil Atmanirbharata. Don’t let Iran war be a lost opportunity

The government’s supposedly investor-friendly Hydrocarbon Exploration and Licensing Policy in 2016 has failed to yield results. India’s domestic crude oil output has continued to fall.

How serious is the oil crisis for the Indian economy? What lessons must India draw from the current situation, where shortages and price increases have already begun to hurt economic activity?

First, it is important to understand that the price of Brent crude oil is not a proper indicator for gauging the impact of the oil crisis on Indian petroleum refining companies and the government’s finances. It is the Indian Basket crude oil price that needs to be tracked to assess the impact of an oil crisis on Indian refiners and the government’s external account. As of March 19, the Indian Basket crude oil price was about $150 a barrel. Brent crude oil price on the same day hovered between $105 and $108 per barrel.

The Indian Basket crude oil price is derived from a mix of crude oil varieties comprising sour grade (an average of Oman and Dubai oil) and sweet grade (Brent) oil, processed by Indian refineries in a 79 to 21 ratio. This mix causes a sharp variation between the prices of the Indian Basket and Brent crude. This difference cannot be ignored, as it underlines the nature of the crisis the Indian economy faces.

Indian refiners, therefore, have yet to face the full impact of higher crude oil prices on their operations. During the current financial year, ending in a few days, the average Indian Basket crude oil price was about $71 per barrel. Indeed, this is slightly lower than the average Indian Basket crude oil price of $78.56 a barrel in 2024-25.........

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