The easing of crude prices is expected to give the government an opportunity to cut back on the oil subsidy bill.
Global crude oil prices have fallen by almost 47%?from the scary levels of $149 a barrel in June, with the Brent crude futures ruling at $74.09 a barrel. The price of crude oil that India imports has also fallen by 43% and is ruling at $75 a barrel.
India imported 121.672 million tonnes of crude oil in 2007-08 and the oil import bill was $68 billion. As an immediate impact, the softening of crude oil prices in the past four months has reduced the monthly oil import bill of Indian refiners by nearly 30%. Under-recoveries on petroleum products, including petrol and diesel, have also come down drastically. The countrys major importer of crude oil, Indian Oil ? which imports 75 % of Indias annual crude oil requirement? said its monthly bill on crude oil purchases is down from about $4 billion in July this year (when oil was ruling over $140 a barrel) to between $2 billion and $2.5 billion now. IOCs under-recoveries on sales of petrol, diesel, LPG & kerosene have come down from Rs 420 crore a day in July to Rs 193 a day as on September 30.
If crude prices stabilise at current levels, the total under-recoveries of OMCs for 2008-09 would be Rs 1,65,000 crore. Following the Parliamentary approval on October 17, the government is expected to issue close to Rs 50,000 crore as oil bonds for the last quarter of 2007-08 and also for the first quarter of 2008-09. It is here that the finance ministry is likely to achieve savings. The changes could be reflected in the mega supplementary budget that the ministry will place in Parliament later this month.
Sarthak Behuria, chairman & managing director, IOC, said, ?The fall in prices have brought down our under-recoveries on petrol & diesel but those on LPG & kerosene are still very high.?
The petroleum ministry is emphatic that the easing crude prices have helped the sector. RS Pandey, petroleum secretary, said, ?The fall in crude oil prices have helped the oil sector. Not only has this reduced the under-recoveries burden of the oil marketing companies (IOC, HPCL and BPCL) but has also reduced the cost of purchasing the raw material, which is crude.?