If the trend continues, the oil import bill could further drop 35-40 per cent to $65-70 billion in 2020-2021.
“The sharp decline in crude prices will also provide a cushion to the government to hold back some gains in the form of additional tax revenue. That is exactly what it did by increasing excise duty on petrol and diesel by Rs 3 per litre recently. This would rake in additional revenue of Rs 40,000 crore, resulting in some fiscal bandwidth to spend on infrastructure projects,” rating agency CRISIL said.
It added the benefit of low crude oil prices may not completely be passed on to the end consumer on account of excise duty hikes. “Going forward, we expect petrol prices to further fall by Rs 6-8 per litre and diesel Rs 4-6 per litre as the drop gets fully reflected. At the same time, the impact of rupee depreciation would be passed on to the end consumers,” the agency said.CRISIL also added the country’s oil marketing companies may take a hit on their revenue and profitability as multiple challenges regarding domestic petroleum demand, declining product cracks and inventory losses weigh on the sector. The drop in oil prices is also expected to adversely impact revenue and profitability of exploration and production companies.
India’s petroleum consumption growth is expected remain in the low range of 2-3 per cent in 2020-2021. The demand is estimated to have risen just 0.8 million bpd in 2019 compared with the average annual increase of 1.6 million bpd over the past five years.
Before Covid-19, some green shoots of global recovery after the truce between US and China on trade war had sent hopes up that oil demand would bounce back by 1.0-1.2 million bpd. However, considering the fall-out of Coronavirus on global energy markets, the report projects global oil demand to remain flat in 2020, with a possibility of shrinking as compared to the growth witnessed in 2019.
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