Crude Import Bill | Indian Economy | 13 Points

Delhi / Moscow / New York / Dubai

Key Points

1. Crude Oil Price Volatility Since 2020

   • Pandemic-led crash, war-driven spikes, and OPEC+ supply controls defined global oil markets.

   • Non-OPEC supply (U.S. shale, Brazil, Guyana, Canada) kept markets balanced.

2. India’s Heavy Oil Dependence

   • India imported ~244 million tonnes of crude (≈1.8 billion barrels) in FY 2024–25.

   • Every $1 per barrel rise in oil = ~$1.8 billion increase in India’s oil import bill.

3. Geopolitics Driving India’s Oil Costs

   • Conflicts in Ukraine, Gaza, and Red Sea routes disrupt supply and freight costs.

   • OPEC+ production cuts vs. rising non-OPEC supply impact Brent and Indian Basket prices.

4. Indian Basket – The Key Benchmark

   • Weighted average of Brent and Dubai/Oman grades.

   • Averaged $70–71 per barrel in 2025, much lower than the 2022–24 highs.

   • Directly used by the government to track external oil price pressure.

5. Russia’s Discounted Crude Advantage

   • Post-Ukraine war, Russia diverted barrels to India at steep discounts.

   • At peak, Russia supplied over 30% of India’s crude imports.

   • Saved India billions of dollars compared to sourcing only from the Middle East.

6. Hidden Costs of Russian Oil Reliance

   • Secondary sanctions risk and political pressure from the U.S.

   • Operational issues due to varying crude quality.

   • Despite risks, fiscal benefits outweighed concerns.

7. Alternative Sources Strengthen Bargaining Power

   • U.S., Brazil, Guyana, and Canada supply keeps oil markets diversified.

   • Reduces India’s over-dependence on Middle Eastern crude.

8. Short-Term Oil Price Shocks

   • Red Sea shipping disruptions, drone attacks, and sanctions tighten supply.

   • Spot premiums and freight costs directly increase India’s crude import bill.

9. India – The Future Growth Driver of Oil Demand

   • Rising vehicle sales, freight expansion, and aviation boom.

   • India projected to be the largest contributor to global oil demand growth till late 2020s.

10. Policy Tools to Manage Import Bill

    • Buying discounted Russian crude.

    • Increasing imports from the U.S. and Brazil when competitive.

    • Strategic oil reserves drawdowns.

    • Excise duty/tax adjustments to shield consumers.

    • Currency management since a weak rupee inflates the import bill.

11. Risk Scenarios That Can Hurt India

    • Deep OPEC+ cuts with higher Chinese demand → Brent spikes.

    • Sanctions tightening on Russia → Loss of discounted barrels.

    • Rupee depreciation → Higher import bill even with stable oil prices.

12. Key Data India Must Track Monthly

    • Indian Basket (PPAC data).

    • Import volumes & country-wise sourcing.

    • Brent spot & futures prices.

    • Freight rates & refining margins.

13. Long-Term Reality

    • India cannot change geology or geopolitics.

    • What matters:

      • Access to cheaper crude (Russia, non-OPEC).

      • Domestic pricing discipline.

      • Currency stability.

    • These decide whether oil is a fiscal burden or a manageable cost.