Executives at state-run oil refiner-fuel retailers said their dollar requirement has gone up sequentially by about 40-45% in the first half of the year compared to the second half of 2021 but declined to share the numbers.
They allayed fear of any dollar shortage, saying in addition to the revolving credit for crude purchase, the companies also have limits available under additional dollar window opened in 2018 for capital expenditure.
The executives said a surge in fuel demand amid elevated oil prices has added to their forex requirement. “We are buying more barrels to keep the market supplied. We also imported diesel to meet a demand spike in June. At today’s elevated prices, it takes more dollars to pay for them than six months ago,” one industry executive said, requesting anonymity.
In 2021-22, the oil companies spent $144 billion on importing about 212 million tonne (mt) of crude and 40 mt of products. Oil prices have been rising since October 2021 but spiked after the Russia-Ukraine conflict broke out on February 24, hitting a 14-year high of $139 per barrel on March 7. The price is hovering around $107.
Oil ministry data shows a 17.9% growth in overall demand for products. Segment-wise, petrol consumption grew at nearly 23%, diesel 24% and jet fuel almost 130% from a year ago.
The rising demand makes India vulnerable to high oil prices since the country meets 85% of its crude requirement through imports. High oil prices weaken the rupee by draining the forex kitty as more Indian currency is needed to buy each dollar.
As the rupee loses strength, raw material imports become costlier. This impacts India Inc’s profitability by raising production costs, leading to higher inflation as goods and services become more expensive and make finances tougher for the aam-admi.
India is the world’s third-largest oil consumer and is expected to be a major driver of incremental demand till 2030, with consumption growing at 5-6% annually.