NEW DELHI: India has saved around $13 billion by importing discounted crude oil from Russia in the past two years, according to a study by ICRA, the rating agency.
However, the rating agency's report also highlights a decreasing trend in the discount on crude year-on-year. India, being one of the largest energy consumers globally, has significantly increased its imports of crude oil from Russia since the latter's invasion of Ukraine in 2022.
The share of crude petroleum imported from Russia surged to around 36% in the 11 months of the fiscal year 2024 from a mere 2% in the fiscal year 2022.
“ICRA estimates this to have led to savings in India’s oil import bill amounting to $5.1 billion in FY2023 and $7.9 billion in 11M FY2024, thereby compressing India’s current account deficit (CAD)/GDP ratio by 15–22 bps in FY2023-24,” reads the study of ICRA.
According to energy cargo tracker Vortexa, India received 1.36 million barrels of crude oil per day from Russia in March 2024, compared to 1.27 million barrels per day in February 2024. According to the Commerce Ministry of India, the country imported $3.61 billion worth of crude oil from Russia in February 2024, following $4.47 billion in January 2024.
The reason behind Russia becoming the top supplier to India is its offer of discounted crude. After Western countries shunned Russian crude, India and China emerged as the biggest beneficiaries. Industry estimates suggest the discount on Russian crude oil was over $30 per barrel in 2022, but has fallen below $5 per barrel in 2024.
ICRA reports that the monthly discounts relative to price significantly narrowed throughout fiscal year 2024, from approximately 23% in April-August to an average of around 8% in September-February, resulting in a notable decline in savings during the latter period.
Consequently, if the discounts on purchases of Russian crude persist at the current low levels, ICRA anticipates India's net oil import bill to rise to $101-104 billion in fiscal year 2025 from $96.1 billion in fiscal year 2024, assuming an average crude oil price of $85 per barrel for the fiscal year.
Previously, Iraq, Saudi Arabia, and the UAE were India's traditional crude oil suppliers. According to February 2024 data from the Ministry of Commerce and Industry, India imported $2.6 billion worth of crude oil from Saudi Arabia, placing it in second position. The third position was filled by Iraq, with $2.24 billion worth of crude oil imported in February 2024. Overall, India's oil import bill for February 2024 stood at $13.25 billion.