The crude oil
import bill for India is expected to increase by $37 billion to $125
billion during the current financial year (2018-19, or FY19) — a 42 per cent
spike over the 2017-18 (FY18) bill of $88 billion, according to the latest
estimates released by the Petroleum Planning and Analysis Cell (PPAC)
oil prices and a weak rupee are the main reasons for this rise.
The benchmark Indian crude
oil basket is now estimated to average $77.88 a barrel for FY19,
compared to the government’s earlier estimate of $65 a barrel for the year and
$56.39 for FY18.
In rupee terms, the estimated increase in the import bill will be
Rs 5.66 trillion. Last year, it was Rs 8.81 trillion.
With global crude
oil prices rising over the past two months, retail prices of petrol,
diesel and liquefied petroleum gas have also scaled new highs, forcing the
government to cut excise duty on October 4.
It is said for every rupee per litre cut in
excise duty on petrol and diesel, the Centre will have to forego around Rs 140
billion in revenue and the Government will not be willing to have its
developmental expenditure cut as it is to face elections soon.
“The current situation will have an impact on our trade
deficit and fiscal deficit, and our foreign exchange (forex) reserves will
continue to deplete” said Deepak Mahurkar, partner and leader (oil and gas),
For every $1 increase in crude oil prices, the impact on the
current account deficit (CAD) is likely to be $1 billion. Based on estimates,
the CAD is expected to widen to $72-77 billion (2.8
per cent of gross domestic product or GDP) in FY19, from $48.7 billion in
2017-18 (1.9 per cent of GDP).
India’s forex reserves saw its biggest single-week fall in seven
years, by $5.14 billion to $394.46 billion in the week ended October 12.
This will be the first time that the crude oil import bill
will cross the $100-billion mark in three years.
It was $140 billion for consecutive three years starting 2011-12.
The Prime Minister Narendra Modi-led government would also be
worried because of the increase in consumption of crude between April and
September by 5.8 per cent to 113 million tonnes (mt) this year. For the same
period last year, it was 106.8 mt.
In FY19, the total consumption is likely to be 228.6 mt, up from
220 mt in FY18.
On Monday, the price of Brent
crude was $79.89 a barrel at one point, while the Indian basket price
was $78.81 a barrel.
Every $1 a barrel increase in crude oil may transform to an
increase of 63 paise per litre of petrol and
diesel, while a depreciation of Rs 1 per dollar may require a spike of 50 paise
on both fuels. According to a Bloomberg survey, the rupee is likely to resume
its losses, touching 76.50 per dollar.