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India is suffering from both, increasing international crude oil prices, which is raising domestic fuel prices, and a downward trend in domestic oil production since 2011. While both NDA (National Democratic Alliance) and UPA (United Progressive Alliance) governments introduced policies to promote domestic production, which we will discuss later in this article, no real effort has been made to hinder the decline of domestic production.
The Numbers
In 2000, the two largest public-sector oil-producing companies, Oil and National Gas Corporation (ONGC) and Oil India Limited (OIL), were collectively producing 29.7 million metric tons (MMT) of crude oil, per Study IQ. As per the data from the government site, which is shown in the below chart, India had produced a total of 38.09 MMT of crude oil in 2011-12. From that peak, domestic production saw a dramatic decline to 35.68 MMT in 2017-18. According to unproven data, India produced a total of 30.5 MMT of crude oil in 2019-20. Study IQ also asserted that India saw a decline of around 30% in 20 years in domestic crude oil production.
Why India does not produce enough crude oil?
India's major oil-producing fields running out of resources and maturing, while the industry is lacking foreign financing but has complex government policies. This can be connected to the lack of production and exploring new fields. Subsequently, these factors made production almost dead considering India's need for fossil fuels.
According to data, hardly 22% of India’s sedimentary basins have been explored, and some large deepwater blocks are untouched as the country has got a large exclusive economic zone or 200 nautical miles from the coastal area. Moreover, during the last 15 years, the government has awarded around 450 blocks for exploration, although hardly 30 blocks are developed. According to Worldometer and Wikipedia, India ranked 20th and 23rd in crude oil production in the World.
Dependency on government-owned companies
Not only foreign companies such as Cairn Energy, British Petroleum, and Shell but also Indian companies such as Reliance and Essar explore oil fields in the country, however, most of the oil production is done by the government-owned ONGC. All other majors except the state-owned major failed to expectations.
Oil production by ONGC accounts for nearly 70% of the total output in the country, but because of the declining age of oil fields, the production is shrinking. ONGC’s 75% of total production, as per data, comes from Bombay High. In fact, India's most production comes from aging oil fields.
Policies
The government has been pushing for reducing oil imports, but imports surged over the years significantly that now India has started purchasing some of its need for oil from the United States, decreasing imports from middle-east. However, it is a case of different political opinions between India and Saudi Arabia.
In 1997, the government came up with the New Exploration and Licensing Policy (NELP), aiming to boost domestic production and find new oil reserves.
The Narendra Modi government introduced the Hydrocarbon Exploration and Licensing Policy (HELP) in 2015, aiming to solve issues for stakeholders of oil exploration in India. The policy removed the need to pay oil cess and allowed 100% participation by foreign companies while only a single license is required for conventional and non-conventional hydrocarbon exploration. Also, the policy is based on a revenue-sharing model rather than a tax on profit.
Despite these policies, India's crude oil production declined over the years, while the surging demand for fuel in the country.