How is Oil Used in the Power Sector of India?

The oil industry in India is one of the largest public sectors that dates back to 1889 with the discovery of oil deposits in Digboi, a small town in Assam. India imports nearly 82% of its oil and aims to reduce it by 67% in 2022 by replacing alternative sources and renewable energy. India’s energy policy aims to develop alternative sources of energy that are sustainable, renewable, and contribute to clean energy. The power sector in India is diverse, which includes the generation of energy from conventional sources like oil, natural gas, coal, nuclear energy, hydroelectric etc. The non-conventional renewable sources include solar, wind, etc., and energy. As of August 2021, India’s total crude oil production decreased by 2.3%, with an increase observed in homegrown natural gas by 20.23%. 

Use of Oil in the Power Sector in India

• India’s largest oil reserve is located in Western Offshore, with 37% and 27% in Assam. Some of the major PSUs used in the deployment, regulation and management of oil and its use in the power sector are ONGC (Oil and Natural Gas Corporation), IOC (Indian Oil Corporation), Oil India, etc.

• Oil is largely used in India’s power sector to generate electricity. Crude oil is the second-largest source of electricity generation in India. 

• The oil and gas industry contributes to nearly 34.4% of primary energy consumption and fuels India’s power sector.

• According to the World Bank, the total power generation in India in the form of electricity will be over 1000 billion units from 2015 to 2022. The largest electricity generation is obtained from thermal power. 

• Data shows that until March 31, 2021, the total installed capacity of gas-based power plants is 24,924 MW, and it produces 6.5% of the total installed power capacity. 

• Diesel contributes to the generation of electricity with 0.3% installed capacity of the diesel-based power plants accounting for the production of 927.89 MW. 

Importance of Energy Policy of India 

The Energy Policy of India aims at improving the development and use of alternative sources of energy that are sustainable, renewable, and clean. About 80% of the electricity generation in India is dependent on fossil fuels, including the oil in the power sector of India. The energy policy aims to improve the growing demands for energy by limiting the domestic oil and gas reserves while focusing on harnessing and using renewable energy. 

• The energy policy is needed for total power generation in India from renewable energy to reduce the use of fossil fuel and non-renewable energy. 

• The use of incentives by state and central governments is one of the attractive ways to develop renewable energy. 

• As of April 2017, oil’s total power generation capacity is 837.63 MW with 14,285 MW captive power capacity. The energy policy aims to reduce oil use to generate electricity and opt for mostly renewable resources. 

• Energy Conservation Act 2001 aims to conserve energy and require large energy consumers to adhere to the adequate energy consumption norms. It brings energy-efficient lights and electrical appliances at a subsidised price to reduce electricity consumption. 

Important Aspects of Oil in the Power Sector of India 

• Oil is used across many industries and is a crucial material for the power sector in India. Apart from its use in electricity generation, it is used in LPG, kerosene, and as fuel for vehicles. It is estimated that India’s oil demand is likely to increase by 50% by 2030.  

• The energy policies aim at decreasing the total power generation in India from fossil fuels as these are non-renewable and limited. 

• The demand for diesel in India is expected to increase to 163 MT by 2029-30. It is estimated that 58% of oil demand will be covered by diesel and gasoline by 2045. 

• The Indian government has allowed 100% FDI in the private refining projects for oil. According to the India Energy Outlook 2021 report, the primary oil demand is expected to increase by 1,123 million tonnes. 

• As of September 2021, the total refinery capacity is 246.90 MMT, and the largest domestic refiner is the Indian Oil Corporation. There has been some major investment in the oil and natural gas sector, with FDI worth US$ 7.92 billion from April 2000 to March 2021. 

Conclusion  

Oil is a predominant power sector in India and is one of the largest industries governed by large PSUs. The energy policy of India aims to make the country energy-rich and focus on the use and implementation of alternative and renewable energy sources. With the growing demand for total power generation in India, many initiatives and ambitious plans are in the works to expand renewable resources. India ranks third globally in its oil consumption, and hence there is a significant import of oil every year. The world-class refining capacity built by India compensates for the import of oil with the export of refined petroleum products. Oil is one of the most commonly used resources for generating electricity and hence contributes to the growth and expansion of the power sector in India. The article offers a brief insight into how oil is an indispensable and high in demand resource for the power sector in India.