by R. Sasankan

India has always asserted its sovereign right to protect its energy security. In recent times, this is an argument that the Narendra Modi government has repeatedly made in the face of dire threats from the US to stop Delhi from sourcing cheap crude from sanctions-wracked Russia.

Actions must speak louder than words. It is time now to raise a disturbing question: are we importing cheap crude oil from the Urals to really protect the country's energy security? If that was really the case, Indian consumers would not have been moaning about the scandalously high prices of fuel at the pump and LPG cylinders in household kitchens.

The uncomfortable truth is that Indian refineries have been fattening their profits by processing cheap crudes into lucrative petroleum products and exporting them to the West, circumventing the sanctions that the latter imposed on the Kremlin after the outbreak of the Ukraine war four years ago.

Let us look at the facts. India is the third largest importer of crude oil after China and the United States. It is also the second largest importer of liquefied petroleum gas (LPG) after China, and the fourth largest importer of liquefied natural gas (LNG).

And here is the curious paradox: India is the second largest exporter of refined petroleum products by value after the US. Moreover, it is the largest exporter of refined petroleum in Asia.

This raises the question: whose energy security are we really protecting?

Indian consumers are clearly not benefiting at all if the country's refineries are merely processing crude oil primarily for exports of petroleum products. Worse, they are being forced to shoulder the burden of rising fuel taxes to shore up the country's treasury.

India has the world's fourth largest crude refining capacity which enables it to process critical fuels like diesel, petrol, and aviation turbine fuel. Its major buyers include the Netherlands, the United Arab Emirates, the European Union, and Russia.

In FY26, India exported $53.83 billion worth of petroleum products, totalling 61.5 million metric tonnes (MMT). This accounted for approximately 8.8% of India's gross merchandise exports. In the previous calendar year (2024), total refined petroleum exports peaked at $65.4 billion.

Enthused by this success, India's energy planners have now decided to expand the country'srefining capacity. The refineries have just raised capacity from 258.1 million tonnes per annum (MTPA) to 267 MTPA (or 5.4 million barrels per day) with the commissioning of HPCL's Rajasthan refinery. The near-term goal is to raise it to 290-300 MTPA. The medium-term target is to have a refining capacity of 310-320 MTPA by 2030.

On the face of it, this intent sounds very noble. After all, this is the sole area in the petroleum sector where India has achieved any semblance of success. So, why not press our advantage?

However, a number of energy experts have now started to wonder whether the thrust on exports has compromised the interests of the Indian consumer. Last week, I spoke to several experts who were extremely critical of India's efforts to consolidate its position as a major exporter of petroleum products.

They contend that there is a basic theory of trade: a country must export products in which it has a competitive advantage. How can India claim a competitive advantage in petroleum products when it has to import crude oil as well as the technology and equipment to convert the product? The value addition in refining crude (during normal times when there are no wars and sanctions) is less than the additional cost of shipping. Moreover, the refiners rely heavily on the country's limited physical resources of land, water and infrastructure.

The refiners are profiteering by simply playing a game of margins - which in no way benefits the Indian consumer. And if this is true, then the argument about protecting India's energy security is blown into a puff of dust.

India taxes its own people heavily on the consumption of petroleum products. The public money collected is then passed on to the exporters of petroleum products in the form of land, water and physical infrastructure plus tax holidays and incentives from the States and the Centre.

All governments have persisted with this practice. One energy expert pointed out that Pranab Mukerjee as finance minister had slashed import duty on petroleum equipment to zero for two weeks to benefit a particular company. "So, we socialise costs and privatize profits and benefits," said another expert .

India, they say, should produce just enough petroleum products to meet its own demand. The government should also remove taxes on petroleum products so that people can consume more energy and move up the ladder of development.

India prides itself on being one of the world's fastest-growing economies. The government recently announced with great relish that the economy had grown by an astonishing 7.8% in the first quarter (April-June) of this fiscal. The policymakers are making a grand push to create a new ecosystem focussing on the widespread adoption of Artificial Intelligence with the rapid growth of data centres, cloud infrastructure, semiconductor facilities including chip fabrication plants across the country. All of this will require massive amounts of energy and water.

It is important to dovetail refineries to the grandiose AI mission. They must emerge as cheap sources of energy for the country. India's per capita energy consumption is currently at about a third of the world average - which is abysmal and significantly trails other emerging economies like Brazil and South Africa.

India hopes to become a fully developed nation by 2047. But it cannot do so unless it ratchets up its per capita energy consumption at least to the global average. China is an economic giant whose per capita energy consumption is over 1.5 times the global average. India's petroleum policy mavens need to understand that the focus should be on boosting consumption at home rather than pushing the envelope on exports. It is time for them to revisit their priorities.