New Delhi: India’s plan to reduce its dependency on oil imports by 10 percent by 2022 is likely to take a hit in current fiscal as good monsoon and acceleration of economic activity is all set to push up crude oil demand in the country by over 11 per cent.
This is higher than the growth level in FY16 that saw India reducing its oil import bill by almost half as the average price of Indian basket of crude oil (main source for India comprising Oman and Dubai sour oil and Brent Dated sweet crude oil) slumped from an level of $84.16 a barrel in FY15 to $46.17 a barrel in last financial year.
“The primary prediction for oil trajectory (last year) was 7 to 8 percent but we ended up with 11 percent. This year I am much more hopeful. This year (India’s oil demand) will break all the records and prediction and we are prepared,” Union minister of petroleum and natural gas Dharmendra Pradhan told Reuters in London.
Higher growth in oil demand may not be good news for India as this could also shoot up country’s high level of oil import bill, putting pressure on fiscal deficit.
The fiscal moderated to 3.9 per cent of GDP in FY16 and is targeted to fall further to 3.5 per cent level this year.
India imports around 80 per cent of its oil requirements and movement in global prices has a major impact on government finances. In fact, one of the reason for encouraging financial parameters such as lower fiscal deficit and current account deficit.
Analysts say that with crude oil prices likely to average around the same level as last year and dollar-rupee rate of around Rs 66-67, India’s oil import bill could increase by $7-8 billion or around Rs 54,000 crore in 2016-17.
