Oil minister Veerappa Moily on Tuesday said that his ministry has been instructed by the Prime Minister to save $25 billion on oil imports in this financial year to help reduce the current account deficit (CAD). “I have already made attempts for $22 billion, and I will make attempts for another $3 billion,” Moily said, without elaborating. The move comes at a time when the sharp depreciation of the rupee is threatening to upset the Centre’s fiscal math by causing a spike in the oil import bill.
The forex savings on oil imports planned through a set of measures including an increase in imports from Iran where the payment is made in the rupee is pegged at 1% of GDP. Other measures may include ethanol blending as well as improving project management and efficiencies. A one-time steep hike in the price of diesel was also said to be on the government agenda but Moily said this might not be an immediate option.
As US and western sanctions blocked all payment routes, India pays Iran in rupees in a Uco Bank branch in Kolkata. In 2012-13, India imported about 13 million tonnes of crude oil from Iran, which was partly financed by euro (55%) and rupee (45%) payments.
India’s oil import bill rose 9.2% to $169.25 billion in 2012-13. The oil ministry said that if India was to import 10 or 11 million tonnes oil from Iran this fiscal, it could save a minimum of $10 billion in foreign exchange outflow.
India has been, since July 2011, paying in euros to clear 55% of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45% was remitted in rupees in accounts the Iranian government’s oil company opened in Kolkata-based Uco Bank.
India, which in June won another 180-day waiver from US sanctions after it cut crude oil imports from Iran by over 27%, did not buy any oil from the Persian Gulf nation in first four months of the current financial year as insurance firms refused to provide cover to refiners processing Iranian oil. Imports have, however, resumed this month with Mangalore Refinery