India’s net
oil import bill
is projected to increase to $101-104 billion in the current fiscal year from $96.1 billion in 2023-24, states ICRA. The agency also notes that any escalation in the
Iran-Israel conflict
could put upward pressure on the value of imports.
ICRA
‘s analysis suggests that lower value of Russian oil imports led to savings of $7.9 billion in 11 months (April-February) of 2023-24, compared to $5.1 billion in 2022-23.
According to a PTI report, ICRA has said, “With India’s oil import dependency expected to remain high, if the discounts on purchases of Russian crude persist at the prevailing low levels, ICRA expects India’s net oil import bill to widen to $101-104 billion in FY2025 from $96.1 billion in FY2024, assuming an average
crude oil price
of $85/bbl in the fiscal.”
ICRA’s calculations indicate that a $10/barrel increase in the average crude oil price for this fiscal year would push up
net oil imports
by $12-13 billion, widening the current account deficit (CAD) by 0.3 percent of GDP.
If the average crude oil price rises to $95/barrel in FY2025, the CAD is likely to increase to 1.5 percent of GDP from ICRA’s current estimate of 1.2 per cent for 2024-25. The CAD is estimated at 0.8 per cent in 2023-24.
India heavily relies on imports for its crude oil needs, with more than 85 per cent dependency. ICRA noted that the value of India’s imports of petroleum crude and products declined by 15.2 per cent YoY during April-February of last fiscal, despite a slight increase in volumes. This was supported by the fall in average global crude oil prices and savings from increased purchases of discounted Russian crude.
The share of crude petroleum imported from
Russia
jumped to 36 per cent in April-February FY2024 from 2 percent in FY2022, while that from West Asian countries (Saudi Arabia, the UAE, and Kuwait) fell to 23 per cent from 34 per cent, respectively.
ICRA estimates that the lower imputed unit value of imports of Russian oil has led to savings in India’s oil import bill amounting to $5.1 billion in 2022-23 and $7.9 billion in 11 months of 2023-24, compressing India’s CAD/GDP ratio by 15–22 basis points in FY 2023-24.
However, the extent of monthly discounts relative to price narrowed sharply over the fiscal, resulting in a dip in savings related to the purchase of Russian crude to $2 billion in September-February FY2024 from $5.8 billion in April-August FY2024.
The recent conflict between Iran and Israel also poses a threat to India’s crude oil import route through the Strait of Hormuz, a narrow sea passage between Oman and Iran, from where India imports oil from Saudi Arabia, Iraq, and the UAE, as well as liquefied natural gas (LNG) from Qatar.
