LOW CRUDE PRICES: NO RESPITE TO THE CONSUMERS
On 26th April 2019 Brent crude closed at around $72 , a year later Brent crude is at trading much below the $ 30 level which is good news for India because country’s oil imports is projected to fall to 225 million tonnes (mt) in FY20 against 227 mt in FY19 while the import bill would reduce 6 per cent to $105 billion from $112 billion worth of imports in previous fiscal.
If the price remains around $30 for most parts of 2020, import bill could reach its all time low in many many years. The potential is it could fall to $64 billion in FY 21, .
The inference we draw from the entire analysis is that the government of India’s balance sheet is going to get a much needed boost, yet the million dollar question is will the government pass on the benefits of low crude oil prices to the Aam Admi .
The answer is no given the tough situation government faces in terms of managing fiscal deficit amidst rising demand for fresh expenditure to tackle the novel corona virus spread. The government may use the current low oil prices to further increase excise duty on petrol and diesel to raise additional resources required for keep rising deficit under check and meet additional expenditure needs arising from COVID-19 outbreak
It said that crude at $30/barrel could potentially lower the petrol and diesel prices by Rs 10-12 /litre from their present prices but government may limit fall in retail price of the two petroleum products to increase excise duty on them further.
CRUDE WILL STILL BE RUDE TO ITS CONSUMERS
DATA SOURCE: SBI ECOWRAP REPORT&OILMINISTRY’S PETROLEUM PLANNING AND ANALYSIS CELL (PPAC)
