NEW DELHI: The Covid-19 pandemic has put a brake on India’s trade in oil and petroleum products, both import and export growth slowing down sharply in the month of March 2020. However, the collapse of global oil prices in the last quarter of the 2019-20 financial year has helped the country reduce its oil import bill, while increasing import volumes at the same time.
According to data from the Union oil ministry’s Petroleum Planning and Analysis Cell (PPAC), India’s crude oil imports grew a mere 1.8 per cent year on year during March — the lowest rate of growth since January 2019.
Total oil and petroleum product import growth slowed to just 2.6 per cent during the month, going from 22.83 million metric tonnes (MMT) the previous year to 23.43 MMT in March this year. Export growth has also slowed precipitously compared to the previous month, as global demand for oil and petroleum products plunged after worldwide travel restrictions were imposed by the governments of most major economies.
According to PPAC data, total petroleum products exports from India during March clocked a volume of just around 5.93 MMT, growing at just 7.4 per cent from 5.52 MMT in March 2019. In contrast, this figure had grown upward of 21 per cent in February 2020.
Low prices soothe India’s import bill in 2019-2020
For the full financial year 2019- 20, total oil imports in terms of volume grew by 4 per cent to 270.28 MMT from 259.74 MMT the previous year. However, the sharp fall in global crude oil prices from the beginning of 2020 has helped India substantially reduce its import bill -- the amount of money it shells out to buy its oil requirements. India imports upward of 80 per cent of its total crude oil needs.
But, since brent crude oil prices have fallen over 70 per cent from its peak of $68.91 per barrel in January, India’s total oil import bill for 2019-20 fell by 6.46 per cent to $120 billion from $128.3 billion the previous year. worth of imports in previous fiscal. If the price remains around $30 for most parts of 2020, import bill could reach its all time low in many years.
POSITIVE IMPACT The potential is import bill could fall to $64 billion in FY 21, the same as FY16 when crude prices slipped below $26 a barrel, say experts. For India, a lower import bill will also have positive impact on fiscal deficit that had already slipped from earlier targets.