The bill for India’s net oil imports could widen to USD 101-104 billion in the current fiscal from USD 96.1 billion in 2023-24, according to a report released by ICRA on Tuesday.

Furthermore, escalation in the Iran-Israel conflict could exert upward pressure on the value of imports, it added.

Based on its analysis, ICRA said the lower value of Russian oil imports is estimated to have led to savings of USD 7.9 billion in 11 months (April-February) of 2023-24, up from USD 5.1 billion in 2022-23.

“With India’s oil import dependency expected to remain high, if the discounts on purchases of Russian crude persist at the prevailing low levels, ICRA expects India’s net oil import bill to widen to USD 101-104 billion in FY2025 from USD 96.1 billion in FY2024, assuming an average crude oil price of USD 85/bbl in the fiscal,” ICRA said.

As per ICRA’s calculations, a USD 10/barrel uptick in the average crude oil price for this fiscal will push the net oil imports by USD 12-13 billion during the year, thus enlarging the current account deficit (CAD) by 0.3% of GDP.

If the average crude oil price rises to USD 95/barrel in FY2025, then the CAD is likely to widen to 1.5% of GDP from ICRA’s current estimate of 1.2% of GDP for 2024-25.

India is over 85% dependent on imports for its needs of crude oil, which is converted into fuels such as petrol and diesel at refineries.

The rating agency said that the value of India’s imports of petroleum crude and products declined by 15.2% YoY during April-February of last fiscal, even as volumes rose slightly in this period.

This was supported by the fall in average global crude oil prices as well as savings from stepped-up purchases of discounted Russian crude.

In terms of volume, the share of crude petroleum imported from Russia jumped to 36% in April-February FY2024 from 2% in FY2022.

From West Asian countries – Saudi Arabia, the UAE, and Kuwait – the imports fell to 23% from 34%, respectively.

ICRA estimates that the lower imputed unit value of imports of Russian oil, compared to imports from West Asia, has led to savings in India’s oil import bill amounting to USD 5.1 billion in 2022-23 and USD 7.9 billion in 11 months of 2023-24, thereby compressing India’s CAD/GDP ratio by 1522 basis points in FY2023-24.

The extent of monthly discounts relative to price narrowed sharply over the fiscal, to 8% on an average in September-February FY2024 from 23% in April-August FY2024.

Consequently, the savings related to the purchase of Russian crude are likely to have dipped to USD 2 billion in September-February FY2024 from USD 5.8 billion in April-August FY2024, ICRA said.