India’s net oil and gas import in value terms for April-January of fiscal year 2023-24 (FY24) declined by nearly a fifth on a year-on-year (YoY) basis to $101.3 billion due to relatively lower prices of crude oil, natural gas, and petroleum products in the international market, as per latest data from India’s Ministry of Petroleum & Natural Gas.
Price volatility and Russia’s role
Oil, natural gas, and refined petroleum products had seen extreme price volatility in the last financial year following Russia’s February 2022 invasion of Ukraine. In the initial few months of FY23, international prices of these commodities were overheated. Their prices in the current financial year have been relatively softer and far less volatile.
The average price of the Indian basket of crude for April-January of FY24 was $82.4 per barrel, but in the first 10 months of FY23, it was $96.
Apart from generally lower prices of crude oil globally, India has also benefited from ramping up imports of discounted Russian crude. Although the discounts are not as high as last year, the volume of oil imported from Russia has gone up notably. In April-December of FY23, Moscow had a share of nearly 18 per cent in New Delhi ’s overall oil imports (by volume), as per India’s official trade data. In the first nine months of the current fiscal, Russia accounted for a whopping 37 per cent of India’s oil imports.
Import volumes and dependence
This decline in the value of oil and gas imports came despite a rise in import volumes, suggesting that the fall in prices was significant enough to offset the volume growth. In the first 10 months of the previous financial year, 2022-23 (FY23), India’s net oil and gas import bill was $124.8 billion.
According to provisional data from the Petroleum Planning & Analysis Cell (PPAC) of the petroleum ministry, India imported crude oil worth $110.5 billion in April-January of the ongoing fiscal, against $136.2 billion a year ago. However, in volume terms, oil imports for the period were higher by 0.9 per cent at 194.2 million tonnes.
Interestingly, India’s dependence on imported crude oil escalated to 87.5% by December’s end, a slight increase from 87% in the same period last year. This shows that India’s domestic production has not kept pace with its growing consumption.
India’s consumption of petroleum products stood at almost 4.44 million barrels per day (BPD) in FY23, up from 4.05 million BPD in FY22. The major petroleum products consumed in India are diesel (40%), petrol (14%), LPG (12%), naphtha (7%), kerosene (3%) and others (24%).
India’s natural gas consumption was 63.91 billion cubic meters (BCM) in FY22. The major consumers of natural gas in India are power (23%), fertilizer (17%), city gas distribution (16%), refinery (12%), petrochemicals (8%) and others (24%).
Import bill : Outlook and challenges
In January so far, the Indian crude oil basket has averaged at $77.85 per barrel, compared to $83.76 in April 2023. This indicates that the downward trend in prices may continue in the near future.
However, there are also some risks and uncertainties that may affect India’s oil and gas import bill. One is the ongoing geopolitical tension between Russia and Ukraine, which may escalate into a full-scale war and disrupt global energy supplies. Another is the possibility of US sanctions on Russia, which may affect India’s trade ties with Moscow and force it to look for alternative sources.
India’s oil import bill doubles to USD 119 billion in FY22, which shows that energy prices are still high compared to previous years. India needs to diversify its energy mix and reduce its dependence on imported fossil fuels to ensure its energy security and economic stability.
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