New Delhi: Faced with a surge in global crude oil prices, India plans to import larger volumes of Russian crude as Moscow offers a discount of more than $ 20 a barrel on the Indian coast in addition to covering the transportation risks, said two officials familiar with the development. .
The Russian offer would help India to some extent calm rising prices at the pump, they said, speaking on condition of anonymity. Retail petrol and diesel prices were increased by 50 and 55 paise a litre, respectively, on Sunday, the fifth rise in six days, making petrol more expensive by ₹3.70 per liter and diesel per ₹3.75 since an unofficial price freeze was lifted on March 22.
It is the government’s priority to ensure India’s energy security and provide fuel at affordable rates to its people, especially at a time when other oil producers are unwilling to increase production to calm the surge in global oil prices, officials said.
“Western nations do not hesitate to import energy from Russia in very large quantities. America, which is self-sufficient, has no interest in pressuring OPEC (Organization of the Petroleum Exporting Countries) to increase production,” one said. “India is the third largest importer of rough after the United States and China, and imports around 85% of the needs. He cannot afford to refuse the offer, especially when there is no explicit sanction against Russian crude.
Three state-owned refiners have already pledged to buy 6 million tonnes of Russian crude, and other refiners are negotiating terms with Russian oil companies for another 4 million tonnes, the second official said.
So far, India has imported a small amount of Russian crude, which accounted for less than 1% of its total crude oil imports, he said. In 2021-22, India imported just 0.419 million tonnes of Russian crude against a total import of 175.9 million tonnes, according to official data up to January 31. In 2020-21, the volume was only 0.633 million tonnes.
“Previously, imports from Russia were miniscule due to economic reasons such as transportation costs, insurance costs, rough quality and prices. Now with discount, risk-free door-to-door delivery and surge in international oil prices have made Russian crude viable for Indian refiners,” he said.
Companies are free to make decisions solely on commercial considerations as international oil prices have soared due to supply issues, he said. Benchmark Brent crude jumped 25.58% to $120.65 a barrel on Friday from $96.84 on Feb. 23, a day before Russia declared war on Ukraine.
“When the European Union can buy Russian crude, why not India?” asked the second official.
There are expected to be price corrections as part of the European Union’s move to avoid restrictions on Russia and ease supply concerns over Kazakhstan, the agency said. brokerage Kotak Securities in a March 25 report. “The EU is heavily dependent on Russian energy supplies and wants to avoid any negative impact on economic activity and inflation,” he said.
India fears that high oil prices will fuel inflation and negatively impact economic growth, experts have said.
“India is a net importer of crude oil and it is estimated that every 10% increase in crude oil prices has an impact on the current account deficit of around 30 basis points (basis points) and inflation CPI (consumer price index) ~40 bps and GDP ~20 bps, with everything else remaining constant,” said Shibani Kurian, senior executive vice president and head of equity research at Kotak Mahindra Asset Management Company.
“However, unlike in the past, this time around there are some trade-offs from a domestic perspective, including high foreign exchange reserves, strong FDI (foreign direct investment) flows, and improved growth in foreign exchange. exports,” Kurian said.