The severe demand squeeze due to the pandemic prompted lockdowns and low global crude prices has helped India in reducing its crude import bill. Declining consistently since April, India’s oil imports fell about 29 per cent (YoY) to around 13.44 million tonnes in June, the lowest since October 2011.
In value terms, the June oil imports stood at $4.93 billion (Rs 37,341.70 crore), down 55.29 per cent in the dollar terms from $11.03 billion (Rs 76,586.73 crore) in June 2019.
In April, it fell to 16.55 million tonnes, a 16 per cent YoY decline, from 17.28 million tonnes reported earlier. In May, crude oil imports fell 22.6 per cent, the biggest drop since at least 2005, to 14.61 million tonnes against the year-ago month.
If the trend continues, crude oil imports in FY21 may fall to 180 million tonnes, 50 million tonnes lower than 227 million tonnes imported in FY20. At current prices, the value of this 50 million tonnes will be around $20 billion.
Moreover, India may further reduce its oil import bill with crude oil prices remaining low or range-bound around $35-45 a barrel in FY21.
Assuming $40 a barrel average crude oil price and the rupee-dollar rate holding closer to current levels, and monthly imports remaining low at 15 million tonnes (average), for FY21, the import bill could slip to 60 per cent of the last year’s $60-65 billion. Similar level of import bill was witnessed in FY16 when crude had fallen to $26 a barrel for some time.
India has already reduced oil import bill by over 60 per cent in the first quarter (April-June) of FY21. In Q1FY21, oil imports were worth $13.08 billion (Rs 99,259.42 crore), which was 62.47 per cent lower in the dollar terms from $34.85 billion (Rs 2,42,398.55 crore) for Q1FY20.
According to the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry, imports stood at around 227 million tonnes in FY20 against 226.5 mt in FY19.
The import bill last year was $101.4 billion against $111.9 billion in FY19. A $1 fall in crude oil prices helps India reduce import bill by almost Rs 2,900 crore, while one rupee fall in value of the currency against dollar raises spending by around Rs 2,700 crore.