New Delhi, India – In a significant development for the energy sector, India’s oil marketing companies (OMCs) are projected to increase the country’s crude oil refining capacity by 35 to 40 million tonnes (MT) by the end of fiscal year 2030. This expansion will bring the total installed capacity to approximately 295 MT, according to a recent report from Crisil Ratings.
The anticipated growth in refining capacity comes with an estimated capital expenditure (capex) ranging from Rs 1.9 lakh crore to Rs 2.2 lakh crore, primarily driven by brownfield expansions. The report underscores the strategic importance of this expansion, as it is crucial for meeting the growing domestic demand for petroleum products. Anuj Sethi, Senior Director at Crisil Ratings, commented, “We expect overall petroleum product consumption to slightly moderate, registering a 3 percent compound annual growth rate (CAGR) over the next six years.
This is primarily attributed to the slower growth of transport fuel consumption, which is projected to be between 2 to 3 percent.” The moderation in growth is expected to be influenced by several factors, including improvements in fuel economy, the increasing market share of vehicles using alternative and cleaner fuels, and the government’s target of 20 percent ethanol blending in fuel.
Over the past decade, India has successfully increased its refining capacity by 42 MT, reaching a total of 257 MT by fiscal 2024. This increase was essential to cater to rising domestic consumption, despite exports remaining stable at 60-65 MT during the same period. The report highlights that domestic consumption of petroleum products has witnessed a CAGR of 4 percent over the past decade.
Notably, transport fuels, which account for 56 percent of total consumption, experienced a growth rate of 4 percent, while naphtha—comprising 7 percent of consumption—grew by 2 percent. Among the various transport fuels, diesel sales are predominantly linked to commercial vehicle usage, with 75 percent of sales attributed to this segment. The shift towards electric vehicles and natural gas usage in public transport is expected to moderate diesel demand, leading to a projected growth rate of 2-2.5 percent CAGR over the next six years.
Meanwhile, petrol consumption, largely driven by internal combustion engines (ICE) in two-wheelers and passenger vehicles, represents a significant area of focus for refiners. Joanne Gonsalves, Associate Director at Crisil Ratings, noted the balancing act oil refiners have had to perform amid volatile oil prices.
The report reveals that oil refiners have earned a rolling average return of 9-11 per barrel between fiscals 2016-2024, achieving a return on investments of 12-14 percent. Gonsalves further emphasized the strategic significance of the refining sector, stating, “The sector benefits from its strategic importance to the government, underscoring its role in ensuring energy security