New Delhi [India], September 22 : Crude sourcing flexibility, along with the ability to process “diverse grades” are set to become key drivers of profitability for Indian refiners, particularly amid geopolitical disruptions and sharp regional price differentials, according to a report by Yes Securities Institutional Equities.
According to the report, the country is heavily dependent on crude oil imports. With domestic production declining to 28.0 mmt in FY26 from 28.7 mmt in FY25, India’s import dependence rose to 88.7 per cent from 88.2 per cent. However, Indian refineries processed 272 mmt of crude at an average utilisation of 106 per cent, widening the gap between domestic production and refinery requirements. 
At the same time, “Crude imports increased 1.0% YoY in FY26, while the value of crude imports declined to USD 123.4bn, reflecting lower average crude prices versus the previous year,” it noted. 
Notably, the key structural shift is the “greater diversification of imported crude supply,” as the country has reduced its dependence on any single geography by expanding its crude sourcing network from 27 countries to 41 countries. 
However, it highlighted, India’s domestic production remains geographically concentrated, with 
“Western Offshore contributing ~43%, followed by Gujarat Onshore at 19%, Assam Onshore at 16%, Rajasthan at 11% and Eastern Offshore at 10%,” which further limits the ability of domestic production growth to materially reduce import dependence in the near term. 
Thus, “Going forward, crude sourcing flexibility rather than simply import volumes will remain a key competitive advantage for Indian refiners,” it said. 
As per Yes Securities, India’s 258.1 mmtpa refining capacity and 272 mmt crude throughput in FY26 require refiners to continuously optimise crude grades, freight and sourcing costs across different markets. At the same time, the country’s extensive pipeline network and coastal refineries provide greater sourcing flexibility, while alternative supply routes and strategic reserves are expected to strengthen supply security. 
“The key implication for refiners is that crude optionality, access to seaborne barrels and the ability to process diverse grades will increasingly determine margin capture, particularly during periods of geopolitical disruption and sharp regional crude price differentials,” it said. 
Overall, India’s downstream market is underpinned by robust domestic demand, substantial refining capacity and a well-developed distribution network, supporting structurally high refinery utilisation. For refiners, steady domestic consumption provides a strong demand base, while incremental margins will increasingly depend on product cracks, crude sourcing flexibility and the ability to optimise sales between domestic and export markets, it noted.
Also, “The gradual rise of alternative fuels is unlikely to displace conventional products materially in the near to medium term, but it reinforces the need for refiners to optimize product yields and invest selectively in higher-value and transition-linked products.”