Covid-Depressed Oil Market To Save India Billions In Import Bill

The global health emergency posed by the spread of the novel coronavirus is coming to the country’s advantage, at least, in the oil sector.

India”s oil import bill is expected to fall by a sharper 10 per cent in FY20 as the increasing spread of coronavirus has depressed the crude oil prices to below $50 a barrel now against a high of over $70 a barrel in September and again in January this year.

According to the Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC), the country’s oil imports are projected to fall to 225 million tonnes (mt) in FY 20 against 227 mt in FY19 while the import bill would reduce 6 per cent to $105 billion from $112 billion worth of imports in previous fiscal.

However, this calculation is based on the average crude price of $64 a barrel for April-December of the current fiscal while the January-March imports have been worked on the basis of the crude price of $66 a barrel. It is worth noting that crude oil prices slipped to below $60 and now below $50 a battle now from heights witnessed in the first week of January. Analysts say that this would bring big savings on oil imports that generally surge in the latter part of the financial year.

A one-dollar fall in crude oil price results in reducing India”s import bill by almost Rs 2,900 crore while a rupee fall in the value of the currency against dollar results in increased spending by upto Rs 2,700 crore.

On a monthly purchase of oil worth $10 billion monthly, the additional savings for the months of January-March 2020 itself works out to about $7-8 billion. This would easily bring down the import bill to below $100 billion mark after a gap of almost one year.

While India imported crude oil worth $112 billion in FY 19, its import bill has transited substantially lower in the previous three financial years with oil import bill standing at mere $64 billion in FY16 when oil prices slipped on over supplies, especially with the entry of US shale oil.

The lower volume of crude processing by fuel refiners is also expected to have an impact on the import bill.

For India, lower oil prices act as a big incentive as the country depends on imports to meet 86 per cent of its oil requirements. Lower import bill would also have a positive impact on the country’s fiscal deficit that had already slipped from earlier targets in the wake of higher government expenditure this year to curb falling GDP growth.

(With inputs from IANS)