Rising crude oil prices could become a concern for the Indian economy with the government expecting the oil import bill to rise by 20 per cent in the current year to $105 billion, up from $88 billion in 2017-18. Crude oil imports would be crossing the $100-billion mark after three years, though it would be still lower than the $140 billion and more for three years continuously starting 2011-12.
According to a report by the Petroleum Planning and Analysis Cell (PPAC), the $108 billion is estimated at an average Indian basket crude oil price of $65 a barrel, up from an average of $56.39 a barrel in 2017-18. On a cumulative basis, crude oil imports were 220.8 million tonne (MT), posting an increase of 3.2 per cent during 2017-18 as compared to 2016-17.
“India is experiencing robust growth in domestic consumption of petroleum products, which is expected to exceed 215 MT in 2018-19. With import dependency touching 83 per cent, the import bill would go up by 20 per cent or more in 2018-19,” said Debasish Mishra, partner and head of energy and resources at Deloitte Touche Tohmatsu India. The Indian basket crude averaged $63.80 a barrel during March 2018 as against $63.54 during the previous month. The last close of the Indian basket on Friday was $66.02, while on Monday Brent crude was $73.41 a barrel, raising concerns among Indian importers.
“Coming on the back of a 25 per cent increase in the oil import bill in 2017-18, the increase in 2018-19 is going to put India’s trade deficit under stress,” Mishra added.
Though the government has been emphasising on increasing domestic oil production, there was a decrease of 0.9 per cent in indigenous crude oil and condensate production in 2017-18. The percentage share of crude oil and condensate production of PSU companies increased to 71.8 per cent during 2017-18 from 70.8 per cent during the previous year. However, the share of production sharing contract fields declined to 28.2 per cent during 2017-18 from 29.2 per cent during 2016-17.
The price of petrol breached a three-year high on Monday at Rs 74.50 a litre, while the price of diesel was at its highest at Rs 65.75 a litre. Since pricing of both these products is market-linked, it will not impact the subsidy bill. However, LPG and kerosene are a cause for concern. The total consumption of liquefied petroleum gas (LPG) in the last 55 months has continuously recorded growth. LPG consumption saw cumulative growth of 8 per cent over the period April 2017 to March 2018.
During the period under review, the eastern region saw the highest growth of 14.7 per cent in total LPG consumption. This is mainly owing to the push by the government through Pradhan Mantri Ujjwala Yojana in which the government added 35.6 million new LPG consumers.
During the period, petrol consumption saw a rise of 10.1 per cent as compared to the same period last year. “Since March 2017, MS (petrol) consumption has consistently recorded more than 2 MT growth every month,” the PPAC said in its report. Diesel sales also posted growth of 6.6 per cent compared to the same period last year.
Between April 2017 and March 2018, kerosene consumption saw a 28.8 per cent decline compared to the previous year, mainly because of reduced allocation to states and also voluntary surrender of public distribution system kerosene quota by a few states.
The cumulative gross production of natural gas of 32649.3 million standard cubic metres for the financial year till March 2018 was higher by 2.36 per cent compared with the year-ago period.