India saved over Rs 30,000 cr despite rising petro product imports in FY21

Analyst expect trend to continue this fiscal

India has saved over Rs 30,000 crore despite a firming up of petroleum product imports largely due to a fall in international hydrocarbon prices during 2020-21. According to official data, the country imported finished petroleum products worth Rs 1,50,176.31 crore from April 2020 to February 2021. The value of finished petroleum product imports during the same period of 2019-20 stood at Rs 1,81,681.69 crore. It is expected that this saving will only grow as the data for March 2021 is released.

While India has a robust crude oil refining and natural gas processing capacity, it regularly imports finished products. These largely include Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG), Petcoke, and Fuel oil. While LPG is used for cooking gas, the others find uses across industries from meeting heating requirement, to power generation, and running ships. Such finished products require minimal further processing and are sought by end-use industries.

The country imported 62.48 million tonnes (mt) of petroleum products in 2019-20 and 62.88 mt in 2020-21. LNG imports stood at around 23 mt in both years.

On the whole, there was a nine per cent fall in consumption of petroleum products as Covid-19 hit the Indian economy during 2020-21. But LPG showed a demand growth of five per cent and LNG consumption was flattish. “The trend in the share of imports is increasing in both these products in last few years,” said Debasish Mishra, Leader-Energy, Resources and Industrials for Deloitte in India.

The value of LNG imports to India was approximately Rs 57,661 crore during April 2020 to February 2021. This stood at Rs 65,264 crore during the same period of 2019-20. But this lower import was despite LNG imports rising. This means industries such as those in power generation and making fertilisers were able to get cheaper feedstock.

“LPG import has grown by 11.6 per cent year-on-year during the 11M FY2021 in volumes terms owing to provision of free cylinders and greater coverage under the Pradhan Mantri Ujjwala Yojana (PMUY) scheme. However, the import bill on account of LPG has remained stable due to the lower average crude oil prices,” said Prashant Vasisht, Vice President and Co-Head, Corporate Ratings at Icra.

“Another reason for greater consumption is preference for at home dining, but mostly it would be free cylinders and PMUY,” Vasisht added.

Pointing out that crude oil and prices linked to it will remain soft, Mishra said, “India’s LNG contracts are predominantly crude-linked. Even LPG is driven by the benchmark set by Saudi, which has a high degree of correlation with crude prices. As such crude price seems to have stabilised with a downward bias given the increased supply from OPEC and resurgent Covid wave might moderate global consumption.”

Brent crude, a benchmark for most crude oil traded in the world, was trading at $65.80 a barrel on Thursday, down from $67.05 earlier this week. The softening of prices is because a strong second wave of Covid-19 threatening further demand destruction or a more modest recovery in 2021-22.

But Vasisht says India’s LPG demand should remain buoyant as the Union Budget has envisaged PMUY to be extended to cover an additional 10 million beneficiaries. The next phase is expected to kick off in May, as the assembly elections in key states conclude.