A Bharat Petroleum retail fuel outlet in New Delhi. Photo: AFP / NurPhoto

The rise in global crude oil prices is taking a toll on India as the country relies on imports to meet 85% of its fuel requirements.

India’s crude oil imports may exceed US$100 billion in the current fiscal year ending March 31, almost double its spending last year. Data from the oil ministry’s Petroleum Planning & Analysis Cell states India spent $94.3 billion in the first 10 months (April-January) of the ongoing financial year that started April 1, 2021.

Global crude oil prices are now $100 a barrel, the highest in the last seven years. In January this year, when oil prices witnessed a surge, India spent $11.6 billion, as against $7.7 billion in the same period last year.

This month, global oil prices have crossed $100 per barrel after the Russia-Ukraine confrontation and if prices continue at this level, India’s oil import bill is expected to be in the range of $110-115 billion by the end of this fiscal year 2021-2022.

India spent $62.2 billion to import 196.5 million tonnes of crude oil in 2020-21. Last year global oil prices remained subdued in the wake of a fall in demand due to Covid-19 restrictions across the world.

However, Indian consumers have so far remained insulated from the ongoing oil shock as both gasoline and diesel prices have remained frozen for more than three months as elections are in progress in some states. It is expected to climb once polling is over on March 7.

Finance Minister Nirmala Sitharaman recently said rising crude oil prices posed a challenge to India’s financial stability and the government was monitoring the situation. India’s economy contracted 6.6% in the year 2020-21 and is showing signs of a gradual recovery after Covid-19 restrictions were lifted.

A rise in oil prices could stoke inflation and upset this nascent recovery. A high oil import bill could also worsen India’s current account deficit.