India’s Oil Import Bill Likely To Jump By $26 Billion On Rupee Woes

India's crude oil import bill is likely to jump by about $26 billion in 2018-19 as the rupee hitting a new low has made buying oil from overseas costlier, government officials said today.

Besides, the rupee hitting a low of 70.32 per U.S. dollar in the opening deal today will lead to a hike in the retail selling price of petrol, diesel and cooking gas.

India, which imports over 80 percent of its oil needs, spent $87.7 billion, or Rs 5.65 lakh crore, on importing 220.43 million tonnes of crude oil in 2017-18. For 2018-19, the imports are pegged at almost 227 million tonnes.

“At the beginning of the financial year, we estimated that crude oil import bill will be around $108 billion at an average price of $65 a barrel and an exchange rate of Rs 65 a dollar,” an official said.

But the exchange rate has been at an average of Rs 67.6 a U.S. dollar till Aug. 14. If the rupee is to stay at around 70 a dollar for the rest of the ongoing financial year, the oil import bill will be $114 billion, he said.

The rupee has been among the worst performing currencies in Asia, witnessing an 8.6 percent slump this year.

Fanned by a higher oil import bill, India's trade deficit, or the gap between exports and imports, in July widened to $18 billion, the most in more than five years. Trade shortfall puts pressure on the current account deficit, a key vulnerability for the economy.

Rupee depreciation will result in higher earnings for exporters as well as domestic oil producers like Oil and Natural Gas Corp, who bill refiners in U.S. dollar terms. But this would result in a rise in petrol and diesel prices, with full impact likely to be visible later this month.

“Though oil firms fix retail selling price of petrol and diesel on a daily basis, the inputs for that fixation are an average of previous fortnight. So today's rate is based on average benchmark of international oil prices and the exchange rate of Aug. 1 to Aug. 15. And since the rupee in the beginning of the month was at 68.3-68.6 a dollar, the exact impact of today's depreciation is not visible,” he said.

Prices of petrol and diesel were today hiked by 6 paise a litre each to Rs 77.20 and Rs 68.78, respectively in Delhi. These rates are the highest in two months.

Fuel prices in Delhi are the cheapest in all metros and most state capitals due to lower sales tax or value added tax.

If oil prices continue at these levels and the rupee at 70 a dollar, retail rates should go up by 50-60 paise a litre.

Petrol price had touched an all-time high of Rs 78.43 a litre on May 29 and had since receded. On that day, the diesel price had touched an all-time high of Rs 69.30 a litre.