The oil ministry hopes to shave off $22 billion (Rs 1,44,540 crore) from its import bill by paying for Iranian oil in rupees.
“The Prime Minister has told us to save $25 billion (Rs 1,64,250 crore) from the oil import bill. As of today, we have already put together a plan to save $22 billion,” petroleum minister Veerappa Moily said, adding that the savings would amount to more than 1% of India’s GDP.
Further, the ministries of petroleum, finance and external affairs have worked out a joint action plan to cut dollar-denominated oil imports and, instead, explore the possibility of paying other oil exporting nations either in rupees or in their local currencies.
“We are talking to Iraq and are in an advanced stage of talks with Iran on the matter,” a senior official said, identifying two of the countries.
This will provide a huge shot in the arm for India’s economy, which is staring at a potentially crippling oil import bill of more than $200 billion this year following the 20% depreciation in the rupee against the dollar and a possible spike in global crude prices if the US attacks Syria. India imported oil worth $170 billion last year.
The Indian crude basket (the various grades of crude that India imports from different countries) has already jumped 10% to more than $114 (Rs 7,490) per barrel. This could rise further to $120-130 (Rs7,884-8,541) per barrel in if the US does attack Syria. There is speculation that this attack may take place as early as next week.
Without the deal with Iran, such a scenario could debilitate India’s balance of payments situation and result in the already bloated current account deficit going completely out of control. Finance minister P Chidambaram has said he is confident of capping CAD at $70 billion or 4.8% of GDP.
During the last fiscal, India had imported 13.1 million tonnes of oil from Iran, down from 18.11 million tonnes of 2011-12.