At least in the oil sector, the global health emergency posed by the spread of the novel Coronavirus and Saudi Arabia declaring a price war, is coming to India’s advantage.
India oil import bill is expected to fall by a sharper 10 per cent in FY20 as the increasing spread of Coronavirus and now the fallout of talks between OPEC and Russia has depressed the crude oil prices to about $30 a barrel now against a high of over $70 a barrel in September and again in January this year.
For FY21, the import bill could slip to half of current levels at $64 billion witnessed in FY16 when crude had fallen to $26 a barrel for some time.
According to oil ministry’s Petroleum Planning and Analysis Cell (PPAC), country’s oil imports is projected to fall to 225 million tonnes (mt) in FY20 against 227 mt in FY19 while the import bill would reduce 6 per cent to $105 billion from $112 billion worth of imports in previous fiscal.
However, this calculation is based on average crude price of $64 a barrel for April-December of current fiscal while the January-March import has been worked on the basis of crude price of $66 a barrel. It is worth noting that crude oil prices slipped to below $60 and now around $30 a barrel from highs witnessed in first week of January. Analysts say that this would bring big savings on oil imports that generally surge in the later part of the financial year.
If the price remains around $30 for most parts of 2020, import bill could reach its all time low in many many years. The potential is it could fall to $64 billion in FY 21, the same as FY16 when crude prices slipped below $26 a barrel.
A one dollar fall in crude oil price results in reducing country’s import bill by almost Rs 2,900 crore while a rupee fall in value of currency against dollar results in increased spending by upto rs 2,700 crore.