New Delhi, Apr 30 (KNN) India's net oil import costs are projected to rise to USD 101-104 billion in the current fiscal year 2024-25, up from USD 96.1 billion the previous year, according to analysis by domestic rating agency ICRA.

This increase is driven by the diminishing discounts on Russian crude oil purchases that had provided substantial savings over the past year.

In the aftermath of Russia's invasion of Ukraine, some Western nations imposed sanctions, prompting Russia to offer discounted oil to India and other buyers. ICRA estimates these discounted Russian imports led to savings of USD 7.9 billion for India between April 2023 and February 2024, following USD 5.1 billion in savings during the 2022-23 fiscal year.

However, the discounts have narrowed considerably in recent months. From an average 23 per cent discount between April and August 2023, the discount shrank to just 8 per cent from September 2023 to February 2024.

As a result, ICRA calculates the savings from Russian oil dwindled to USD 2 billion in the latter half of the fiscal year, down from USD 5.8 billion initially.

"With India's high dependency on oil imports expected to persist, if the discounts on Russian crude remain at current low levels, we expect the net oil import bill to widen to USD 101-104 billion in fiscal 2024-25," stated ICRA.

The rating agency warned that any escalation in tensions between Iran and Israel could exert further upward pressure on India's import costs by driving up global crude prices. A USD 10 per barrel rise would increase India's net oil imports by USD 12-13 billion, widening the current account deficit by 0.3 per cent of GDP.

If the average crude price rises to USD 95 per barrel in 2024-25 from ICRA's current USD 85 per barrel assumption, India's current account deficit is projected to swell to 1.5 per cent of GDP, up from the 1.2 per cent estimate.

India remains over 85 per cent dependent on imported crude to meet its energy needs. While discounted Russian oil provided temporary relief, the narrowing discounts and potential conflicts in the Middle East threaten to elevate the nation's oil import burden in the coming year.

(KNN Bureau)