Share of petro products in exports touches record high at 21.2% in Apr-Aug

India's heavy dependence on energy exports have also boosted its overall merchandise exports

High international energy prices and cheaper crude oil sourced from Russia have lifted the share of India’s petroleum products in exports to their highest ever at 21.2 per cent during April-August.

India’s heavy energy exports have boosted its outbound merchandise shipments.

During April-August, while non-petroleum exports grew only 8.1 per cent, overall exports went up 17.68 per cent on account of petroleum products, which increased 76 per cent. In August, while non-petroleum exports contracted 1.8 per cent, overall outbound shipments went up 1.6 per cent, thanks to 22.8 per cent growth in petroleum exports. According to the disaggregated trade data available till July, the UAE got the highest share of India’s petroleum exports (9.1 per cent), followed the Netherlands (8.8 per cent), Togo (5.8 per cent), the US (5.7 per cent), and Singapore (5.4 per cent).

The Netherlands became India’s third-largest export destination during April-July with half the $6.2-billion shipments to the country coming from petroleum items. Of the $35.4-billion exports of petroleum products during April-July, the country’s key fuel shipments included diesel ($11.7 billion), aviation turbine fuel ($9 billion), petrol ($5.4 billion), high-speed diesel ($4.7 billion), and light naphtha ($2.4 billion). The slowdown in petroleum exports in August could be attributed to the windfall tax imposed by the government on July 1. A windfall tax is a one-off tax levied on companies deemed to have made high profits, normally due to unusually favourable market factors.

The government on July 20, however, exempted the export of petroleum products from units located in special economic zones (SEZs) from the windfall tax and slashed export levies on these fuels amid easing global crude oil prices, less than three weeks after imposing them.

The government continues to review the windfall taxes once every fortnight. While the export duty on petrol continues to be nil, the duty on diesel exports stands at Rs 7 per litre and ATF at Rs 2 per litre.

Russia became India’s largest source country for crude oil after Iraq during the April-July period due to the discounted price the country offered after the Ukraine war started.

In May, Russian crude oil was cheaper by $16 a barrel than the average Indian crude import basket price of $110 a barrel.

The difference was reduced to $14 a barrel in June, when the Indian crude basket averaged $116 a barrel. As of August, Russian crude oil cost $6 less than the average crude oil import basket price. In a bid to counter the growing clamour among the G7 nations to enforce a price cap on Russian oil, Moscow has told New Delhi it is willing to provide petroleum at even lower rates than before, Business Standard reported on September 11. Biswajit Dhar, professor of economics at Jawaharlal Nehru University, said the government’s efforts to diversify exports to more labour-intensive ones had not worked.

“With the global economy entering a more sluggish period and headwinds becoming stronger, it will be more difficult for us to diversify exports. Once we lose the advantage of cheaper crude oil from Russia, our exports will face greater downward pressure,” he added.

The World Trade Organization (WTO) last month said its latest goods trade barometer pointed to stagnating global trade growth. The volumes of world merchandise trade plateaued with year‐on‐year growth slowing to 3.2 per cent in the first quarter of 2022, down from 5.7 per cent in the fourth quarter of 2021.  The WTO has projected 3 per cent growth in the volume of global merchandise trade in 2022 compared to 9.8 per cent growth in 2021.

“Uncertainty surrounding the forecast has increased due to the ongoing conflict in Ukraine, rising inflationary pressures, and expected monetary policy tightening in advanced economies,” it said.