Pandemic-hit govt finances get a crude shock; oil import bill to fall to decade-low levels

New Delhi: In a clear indication that the global oil market may not present an advantage to India as it provided during the pandemic-hit fiscal 2020-21, the country’s oil import bill in the first three months of the current fiscal has increased close to three times to reach scales not seen in past few years.

As per recent numbers on oil trade, the country’s oil import bill has risen to $24.7 billion in the April-June quarter 2021-22, a whopping growth of over 190 per cent over $8.5 billion worth of imports made in Q11 of the last fiscal year FY21.

   

And the high growth in oil bill during the first three months may just be the beginning as crude is set to get more expensive in coming months with a rise in global demand and falling inventory levels of the US.

This is despite the oil cartel OPEC agreeing to raise crude production by 400,000 barrels per day stating August to increase production by 2 million barrels a day by the end of the year.

“The way the oil market is giving signals now, crude may remain range-bound between $70-75 a barrel this fiscal. This could add a significant jump in the country’s oil import bill as average crude oil purchase price stood at mere $45 a barrel in FY21 and May be above $70 a barrel in FY22,” an oil sector expert from one of the four largest global consultancy firms said on the condition of anonymity.

If the projections for average crude prices to be over $70 a barrel in FY22, the country’s oil import bill could once again shoot above the $100 billion mark. It last remained at that level in FY20 at $101.4 billion.

The government received big advantage of softer oil prices in the pandemic hit FY21 when it had to pay just $62.7 towards oil import bill with overall import quantity also sliding with demand as lockdowns eroded demand. This also helped the government to raise level of taxes on auto fuels petrol and diesel and earnings from there contributed significantly towards Covid-19 relief and stimulus measures that the Centre announced in FY21.

The problem of higher imports at expensive prices is already becoming real this year. The first quarter over 190 percent growth in import bill is based on an average crude price of $67.5 a barrel. If the projections for crude at $70 a barrel stays, the import bill will be even higher in Q2 and the remaining months of the year.

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