India has strongly defended its plentiful purchases of Russian crude since the start of the Ukraine war, saying all import deals had been done within the purview of sanctions that in turn helped keep a lid on global oil prices, despite its refiners facing currency and payment hurdles.
A recent parliamentary panel report quoted a representative of the petroleum ministry as saying that all purchases of Russian crude were under the ambit of Western sanctions on Moscow for its war in Ukraine.
“Indian oil and gas companies have been sourcing crude oil keeping in view all international laws and sanctionsNagpur Investment. If they had not imported Russian oil into India, which may be a big number of 1.95 million b/d, that deficiency would have created a havoc in the crude oil market and the prices would have shot up by about $30-$40/b. It would have created a havoc,” the report said quoting the petroleum ministry official.
Commenting on the Russian crude import strategy, the official said India’s purchases benefited its own consumers in the form of low retail fuel prices, as well as helped ease the global supply situation.
“The Western world said that there is a price cap of $60 free-on-board These are transactions within the financial domain. We have to use SWIFT and other channels. There are banking channels, and we have to make paymentsAhmedabad Investment. They are following all the price caps and all the rules and regulations,” the official said, referring to Indian refiners.Kolkata Stocks
Due to the economic sanctions, Indian buyers were facing challenges in making logistics arrangements, such as the availability of ships as well as insurance.
“Hence, Indian buyers like Indian Oil Corp. and others arrange imports of Russian origin crude oil grades from the counterparties on a delivery basis, whereas the seller takes responsibility in delivering crude oil with suitable insurance coverage at discharge ports in India,” the report said.
“Oil public sector undertakings face challenges related to payment for Russian crude oil cargoes. Not all Indian banks are smoothly processing payments for crude oil imports in US dollar,” it added.
Russia continues to be India’s primary supplier, contributing to over 35% of total crude imports of 1.51 million b/d in October and approximately 1.58 million b/d in November. For 2023, it is anticipated that Russian crude imports will be around 1.73 million b/d, according to S&P Global Commodity Insights.
The total bill for crude oil imports accounts for about 25% of all merchandise imports to the country and impacts India’s trade deficit. Accordingly, the government planned to promote settlement of crude oil imports in rupees to save on foreign exchange, the panel said.
In addition, the Reserve Bank of India has introduced additional arrangement for invoicing, payment and settlement of exports and imports in rupees.
“However, crude oil suppliers have expressed their concern on the repatriation of funds in the preferred currency and high transactional costs associated with conversion of funds along with exchange fluctuation risks,” the report said, adding that currently, state oil companies do not have an agreement with any crude oil supplier to make purchases in rupees.
About 250 grades of crude oil are currently traded globally but Indian refineries buy only about 50 grades based on parameters such as refinery configuration, seasonal demand, price of crude, required oil products and operational exigencies, the parliamentary panel report said.
“The vintage refineries have constraints in processing different grades of crude while advanced refineries can process a variety of crude. Similarly, crudes having wax content and petrochemicals derivations also influence the decision to go for purchase of certain types of crudes. The committee would exhort the oil public sector undertakings to modernize their vintage refineries so as to improve their capabilities to process a wide variety of crude oil,” the report said.
It added that currently over 60% of crude imports by state-owned refiners come from the Persian Gulf region.Ahmedabad Wealth Management
“The majority of India’s hydrocarbon imports are being sourced from the Middle East region wherein due to geopolitical flashpoints, supplies can face disruption. Even small skirmishes or conflicts in any region cast a cloud on the supply of crude oil and increase the price of crude oil significantly in the international market,” the report said.
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