Russian crude oil import at discounts coupled with levying windfall tax on domestic crude helped India gain Rs 35,000 crore. The Centre introduced the windfall tax in view of a surge in prices following the Russia-Ukraine conflict which began in February.
When the war between Russia-Ukraine broke out in February-March this year, political tensions increased around the world. Therefore, many traditional buyers who bought crude oil from Russia refused to take Russian crude oil. Because of this, millions of barrels of Russian oil got stuck.
As a result, Russia started offering crude oil at a great discount i.e. cheaper than the market rate. At that time, India opted to buy crude oil from Russia despite pressure from all the developed countries including America.
Within just months, Russia’s share of India’s oil purchases rose to a record 6%, about 277,000 barrels in April, up from about 66,000 BPD in March. In April, Russia became the fourth-largest oil supplier to India, up from its 10th position. By the end of June, Russia overtook Saudi Arabia to become India’s second-biggest supplier of oil behind Iraq.
India imported $11. 2 bn mineral oil from Russia during April-July. There is a significant 8-fold jump in the number as it was $1.3 bn in the corresponding period last year, according to the data from the commerce department. Since March, when India stepped up imports from Russia, imports have topped $12 bn.
To be clear, oil is purchased by refiners and not the government, however, cheaper oil has a positive impact on macroeconomic parameters of the economy. Oil bought at a lower cost helps in keeping the costs down, the current account deficit in check as it lowers the import bill and reduces dollar demand, reported TOI.
It is worth mentioning here that after this is the second time that looking for discounted rates in the global oil market has saved India money. Earlier, we managed to Rs 25,000 crore in 2020 when oil prices crashed as the pandemic shut down the world. The Indian government had than filled up strategic reserves and refiners stored oil in ships.