The Indian Express (Delhi Edition)
Indian refiners likely saved $ 10.5 bn by buying discounted Russian oil
OIL HAS traditionally not been a major pillar of the India- Russia relationship, with the commodity languishing somewhere in the depths of the trade list between the two countries. But the outbreak of the war in Ukraine and what followed changed that completely, bringing oil to the very top of the trade relationship between Moscow and New Delhi.
During his visit to Moscow earlier this week, Prime Minister Narendra Modi acknowledged that Russia’s support helped India provide fuel to its vast population even as many countries faced an energy crisis. Modi also said that the world should accept that the India- Russia oil trade brought stability to global energy markets.
According to The Indian Express’s analysis of India’s official trade data, Indian refiners likely saved at least $ 10.5 billion in foreign exchange between April 2022 and May 2024 by ramping up purchases of discounted Russian crude oil following the outbreak of the war in Ukraine. With Western buyers cutting oil imports from Russia in the wake of its February 2022 invasion of Ukraine, Moscow began offering discounts on its crude. Indian refiners have been lapping up these discounted barrels, so much so that Russia,
which used to be a marginal player in India’s oil trade, is now New Delhi’s biggest oil supplier. The booming oil trade has also catapulted Russia into the club of India’s top trade partners.
India has had to walk the diplomatic tightrope on the surge in its oil imports from Russia, with some voices in the West initially criticising New Delhi, alleging that buying Russian oil was helping Moscow finance its war in Ukraine. India, on its part, has been emphasising that as the world’s thirdlargest consumer of crude oil with an import dependency level of over 85 per cent, energy security and affordability are key priority for it. The government has time and again stated that Indian refiners helped rebalance the global oil market and keep prices in check by buying more Russian oil, which the West had com
pletely shunned. Modi’s recent comments in Moscow are being seen as a reiteration of India’s long- held stance.
For 2023- 24 ( FY24), the total value of India’s oil imports was $ 139.86 billion, as per data from the Directorate General of Commercial Intelligence and Statistics ( DGCIS). Had Indian refiners paid for Russian oil the average per- barrel price they paid for crude from all other suppliers put together, the oil import bill would have been $ 145.29 billion, or $ 5.43 billion higher, the analysis shows. Similarly, for FY23, while India’s total oil import bill was $ 162.21 billion, it would have been higher by $ 4.87 billion had the average landed price of Russian oil been the same as the average price of oil from all other suppliers. In April- May— the first two months of FY25— the difference on account of Russian discounts is estimated at around $ 235 million. Although $ 10.5 billion may not appear to be a significantly high amount in the overall scheme of India’s foreign trade, the savings are substantial considering these were accrued by five Indian refining majors— Indian Oil Corporation, Reliance Industries, Bharat Petroleum Corporation, Hindustan petroleum Corporation, and Nayara Energy— and their arms.
It is also worth noting that the discounts offered by Russia to Indian refiners also forced a few other major oil suppliers like Iraq to offer discounts, which would have helped Indian refiners save more on cost of crude. The cushion from savings of crude purchases also partly enabled Indian fuel retailers to not hike petrol and diesel prices even as prices in the international market surged in periods of high volatility over the past couple of years.
The effective discounts, while significant from the point of view of Indian refiners, are not as high as what had been initially anticipated. Relatively higher cost of freight and insurance for Russian crude as compared to oil from other suppliers is seen as the most likely reason. With Moscow facing Western sanctions over the Ukraine war, freight and insurance costs for ferrying Russian oil shot up. This suggests that while the discounts might have been deeper on the actual price of oil, the discount on landed price— which includes freight and insurance costs— would work out to be much lower.
The average landed price of Russian crude imported by Indian refiners for FY24 was $ 76.39 per barrel, against $ 85.32— the average landed price of oil imported from all other suppliers, the analysis of DGCIS data shows. For FY23, the average landed price of Russian crude was $ 83.24 per barrel, while that of all other suppliers put together was $ 96.31.
The government releases commodity- wise and countrywise trade data with a lag, and currently, data up to May 2024 is available. While the price of crude oil depends on grades and their prices can vary substantially, the average landed price of crude and import volumes from the supplying countries were used for computations as the government does not release grade- wise data.
For FY24, Russian crude accounted for nearly 36 per cent of India’s oil imports totalling 232.31 million tonnes, or 1.70 billion barrels. In the first two months of FY25, too, Russian oil maintained a similar market share. For FY23, Russian oil had a market share of 21.5 per cent, given that Indian refiners had started ramping up Russian oil imports only from the beginning of that year. In the process, Russia displaced traditional heavyweights like Iraq and Saudi Arabia to emerge as India’s largest source market for crude.