West Asia Crisis Disrupts March Crude Imports as India Maintains Growth Trajectory into FY26
Driven by a surge in petroleum consumption, India’s crude oil imports for the fiscal year 2025-26 saw a slight increase of nearly 1%. However, March 2026 marked a significant decline in imports, plummeting by 17% due to disruptions in trade routes amid ongoing tensions in West Asia. Despite these challenges, India’s overall net oil and gas import bill decreased by over 10%, reflecting lower oil prices.
Crude Imports and Consumption Trends
India’s crude oil imports reached 245.3 million tonnes (MT) in the fiscal year 2025-26, a rise from 243.2 MT in the previous year. However, March 2026 saw a sharp drop in imports, falling to 18.9 MT from 22.8 MT in March 2025. This decline is attributed to trade route disruptions caused by the West Asia crisis, which significantly impacted supply chains. Despite the challenges, Indian refiners processed 272.1 MT of crude in FY26, an increase from 268.6 MT in FY25. This uptick in processing aligns with a rise in domestic consumption of petroleum products, which grew from 239.2 MT to 243.2 MT during the same period.
Diversification of Supply Sources
With nearly 90% of its crude oil requirements met through imports, India has historically relied on the Strait of Hormuz, a critical energy chokepoint. However, the ongoing conflict has prompted India to diversify its import sources. In response to the disrupted maritime routes, the country has increased spot purchases from Russia and Iran to fill the supply gap. This strategic shift aims to stabilize the domestic market and ensure a steady supply of crude oil amidst geopolitical uncertainties.
Impact on Oil Marketing Companies
Despite the increase in crude oil processing and consumption, oil marketing companies (OMCs) are facing significant financial challenges. According to ratings agency ICRA, OMCs are currently selling petrol and diesel at substantial losses, estimated at Rs 14 per litre for petrol and Rs 18 per litre for diesel. This situation arises from elevated crude prices, which have squeezed marketing margins. The agency also projected that domestic LPG under-recoveries could reach Rs 80,000 crore for FY2027 if current trends persist, alongside a potential rise in fertilizer subsidies.
Shifts in Energy Consumption Patterns
Amid government initiatives encouraging a transition from LPG to natural gas for cooking, liquefied natural gas (LNG) consumption saw a 7% increase in March 2026 compared to the same month in the previous fiscal year, rising from 5,386 million standard cubic meters (MMSCM) to 5,737 MMSCM. However, overall LNG consumption for FY26 declined by 2.4% compared to FY25. This mixed trend in energy consumption reflects broader shifts in consumer behavior and government policy aimed at promoting cleaner energy alternatives.
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