Monthly trade data shows that the exports of refinery products declined 27.44 per cent in February, 13.22 per cent in March, and 4.48 per cent in April year-on-year.
India’s earnings from processed crude exports, one of the largest export segments, trailed expectations in 2017-18. “While exports of processed petroleum and other substances were $32.43 billion in 2016-17, they have tentatively gone up to $35.33 in 2017-18. This represents a rise of just 8.9 per cent,” a commerce ministry official said.
On the other hand, oil imports stood at $109.11 billion during 2017-18, more than 25 per cent higher than the year before.
Exports hit as refineries shut down
Officials from oil marketing companies (OMCs) attribute the shutdown to maintenance and upgradation by some refineries in Odisha’s Paradip, Madhya Pradesh’s Bina, and Punjab’s Bhatinda. “There was a spur in demand in the last few months. As far as exports are concerned, the shutdown of export-oriented refinery like 300,000 barrels per day (bpd) Paradip refinery in mid-March and April would have had an impact,” said an OMC official. The refinery was shut due to maintenance at its hydrogen unit for more than a month.
Industry sources indicate that the shutdown of Paradip refinery shutdown in April this year, with no export from the refinery as against 80 thousand metric tonne (tmt) in April 2017, is a major reason for the decline. In 2017, there was non-receipt of naphtha by Reliance’s Jamnagar refinery because of a shutdown due to which there was an additional export of naphtha to the tune of 30 tmt.
“Further, combined demand (actual sales) of major products in the domestic market was higher in April 2018 by 3.8 per cent, compared to that in April 2017. There were other such technical reasons as well,” he added.
Once operations of these refineries normalise, exports of petroleum may see an uptick, which would lead to overall rise in outbound shipments. Refinery exports constitute over 10 per cent of overall outbound shipments.
India guzzling oil
During March, petroleum product consumption was up 7.2 per cent in volume terms over the previous year. Interestingly, export of petroleum, oil and lubricants (POL) products decreased by 19.8 per cent during March 2018, from March 2017. On the other hand, the production of petroleum products in India stood at 254.39 million tonne (mt) during the financial year 2017-18, up 4.8 per cent from 242.69 mt in 2016-17.
“India is experiencing the fastest growth in oil consumption among all major economies, in excess of 5 per cent per annum. The refining capacity is not able to keep pace with growth in consumption, possibly the reason for falling export of petroleum products,” said Debasish Mishra of Deloitte Touche Tohmatsu LLC.
According to the Petroleum Planning and Analysis Cell, the total refining capacity of the country increased from 234 million tonnes per annum (mtpa) in April 2017 to 247.6 mtpa in April 2018.
Meanwhile, there was growth of 3.5 per cent in capacities of joint venture (public and private) and 10.2 per cent in private refineries. Production of petroleum products during March 2018 saw a marginal growth of 1 per cent over March 2017.
Experts have predicted that India’s oil bill will continue to expand in the current financial year as external pressures such as the fallout of the Iran deal and a possible cut-down in production by oil producers again heat up prices.
“Assuming the average price for the Indian crude oil basket of $70 per barrel, we expect the net petroleum, crude, and products import bill to surge to $93 billion in 2018-19, from $70 billion in 2017-18. This is likely to push up the current account deficit to $65-70 billion, or Rs 2.4 per cent of gross domestic product in 2018-19,” Aditi Nayar, principal economist at Icra, a credit rating agency, said.