Policies to reduce India's crude oil import dependence amidst clean energy transition

Abstract

This study estimates the income, price, and cross-price elasticity of crude oil import demand for India to assess whether policies adopted to reduce India's oil import dependence are on the right trajectory and recommends policies for clean energy transitions. We find that the oil import demand changes over time with its price, income and electricity price. The demand reacts differently with the increase or decrease in its determinants and as the demand for oil imports rises or falls. The outcomes reveal that the crude oil import demand has become more inelastic in price and income than in earlier studies (Dash et al., 2018; Ghosh, 2009). Also, the study finds that electricity is a potential substitute for crude oil. The inelastic price indicates that imposing a carbon tax would have a marginal impact on reducing carbon emissions from crude oil. Results advocate that the reduction in electricity prices would lead to a drop in crude oil import dependence with a cascading impact on India's carbon emissions. The study recommends a judicious mix of renewables supplemented by cleaner coal technologies to instigate India's clean energy transition by reducing carbon emissions from electricity generation and transportation.