Matter of Concern
Rupee Depreciation major risk, import bill may go up - Oil ministry official
This story was originally published at 17:09 IST on 10 February 2025
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By Priyasmita Dutta and Afra Abubacker
NEW DELHI – The continuing fall in the Indian rupee against the dollar has become an area of concern for the oil sector and is negating the "sweet spot" that lower crude oil prices could have offered, a top official in the Ministry of Petroleum and Natural Gas said. "Of course, it is a major risk. It pushes up our overall import bill," the official said.
The Indian currency has been weakening amid a globally strengthening dollar and strong foreign fund outflows. The rupee has depreciated over 2.7% against the dollar so far this year. Crude oil prices, on the other hand, had eased since since September but rose sharply in January, after the US announced fresh sanctions against Moscow. Brent crude oil futures opened at $74.59 per barrel on Monday.
"The government is trying to diversify oil import sources to ease price pressures but depreciating currency undos that effort," the official told Informist. However, the oil ministry will not make a formal representation to the Reserve Bank of India or the Ministry of Finance to look into the matter. "The central bank knows its job, we do not want to interfere," the official said.
More than 87% of India's domestic demand for crude oil is met through imports. As part of its diversification efforts, the country is now buying crude from 39 sources, up from 27 earlier. While oil availability is not an issue so much in particular, ensuring the availability of cheaper oil has been the prime concern. Since the Russia-Ukraine war broke out, India has depended heavily on Russian crude oil at a time when oil prices shot up.
The sharp depreciation of the rupee has significantly raised oil companies' import costs, and has squeezed profit margins, the official said. The oil and gas sector is seeing higher cost pressures, which could eventually lead to either cost-cutting or passing on the increase to consumers. The official, however, added that oil companies have so far indicated that they will absorb the hit in higher cost of oil imports and not raise market prices.
In the first nine months of 2024-25 (Apr-Mar), India imported crude oil to the tune of $138.31 billion, up 6.4% on year. End
US$1 = INR 87.48
Edited by Saji George Titus
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