ICRA says oil import bill to rise to $101-104 billion in FY25

India’s net crude oil import bill could reach $101-104 billion in the current financial year 2024-25 from $96.1 billion in FY24 provided the discounts on Russian crude purchase remain at prevailing lower levels amid rising import dependency, Icra said in its latest report. The estimate assumes an average crude oil price of $85 per barrel in FY25.

Additionally, any escalation in the conflict between Iran and Israel and rise in global crude prices  could impart an upward pressure on the value of net oil imports in FY25, it said.

As per the domestic rating agency’s calculations, a $10 per barrel increase in the average crude oil price could push up the net oil imports by approximately $12-13 billion during the year, widening the country’s current account deficit (CAD) by 0.3% of the GDP.

Presently, the agency expects the CAD to widen to $44-46 billion in FY25 (-1.2% of GDP) from $29-30 billion in FY24 (-0.8% of GDP), albeit remaining at comfortable levels.

India imports almost 88% of its crude oil requirements with Russia emerging as the top supplier in the past few years owing to the healthy discounts it offered post its conflict with Ukraine. However, analysts say that the discounts which had earlier exceeded $30 a barrel are now seen narrowing to $5-6 per barrel.

According to ICRA, discounts on Russian oil narrowed sharply to around 8% during September to February against 23% in the first five months of FY24. Consequently, the estimated savings on account of discounted Russian crude have reduced to $2.0 billion in Sep-Feb period of FY24 from $5.8 billion in Apr-Aug.

The value of India’s imports of petroleum crude and products declined by 15.2% on year during April-February FY24, even as volumes rose slightly in this period. “This was supported by the fall in average global crude oil prices as well as savings from stepped up purchases of discounted Russian crude,” as per the report.

In the first 11 months of FY24, the imported volumes from Russia averaged at 6.9 million tonne per month, much higher than the 4.2 million tonne per month seen in FY23.

According to the International Energy Agency (IEA), India’s share in Russia’s oil exports has risen markedly from a meagre 1% in 2021 to 12% in 2022, and further to a sizeable 26% in 2023.

While the imports of Russian volumes rose to 36.1% in Apr-Feb of FY24 from 2.0% in FY22 and 21.5% in FY23, that of West Asia narrowed to 23.3% during the same period from 34.0% in FY22 and 30.9% in FY23.

In value terms too, Russia’s share in India’s crude petroleum imports rose to 33.3% in the first 11 months of FY24 at $42.3 billion from 19.3% or $31.3 billion in FY23.