Oil import bill may rise to $27 bn

Higher prices and 10% increase in crude demand to fuel increase.

India's oil import bill is expected to rise 50 per cent to $27 billion during the current fiscal as against $18 billion in 2003-04, on account of higher prices and a 10 per cent increase in demand for crude.

India's crude import was expected to touch 100 million tonnes during 2004-05 as against 90.43 million tonnes last fiscal, petroleum ministry officials said.

Oil prices struck a fresh record high above $47.50 a barrel today as fresh evidence of demand growth in China and India underlined how rising appetite for oil is straining the world's supply system.

US light crude rose 28 cents to $47.56 a barrel and London Brent gained 27 cents to $43.30 a barrel. China's refineries have processed 17.2 per cent more crude so far this year than in 2003, the country's State Statistical Bureau said on Thursday. Crude imports have soared nearly 40 per cent from last year.

India's state-run firms reported a 6.2 per cent rise in domestic sale of oil products in July compared with the same month last year. "Refineries are running flat out. Demand is expected to rise 3.7 per cent in 2004-05," MS Ramachandran, chairman of Indian Oil Corporation (IOC), told reporters today.

Crude oil imports in April-June rose 12.4 per cent to 25.97 million tonnes from the year-ago quarter, while exports of refined products increased 15.3 per cent to 3.63 million tonnes over the same period, the latest data from the oil ministry showed.

Ramachandran said India's exports of refining products were expected to rise to 16 million tonnes this fiscal from 14.7 million tonnes in 2003-04.

India has a surplus refining capacity forcing refiners to export oil products although they prefer to sell in the domestic market, where they realise a much higher price.

Ramachandran said changes in excise and Customs duties on refined products announced by the government on yesterday would make exports a little more attractive.

Domestic prices of fuels are fixed on the basis on the landed price of imports of the same fuel.

The reduction of import duty on petrol and diesel to 15 per cent from 20 per cent cut the gap between the domestic and export prices of these fuels by 5 per cent and helped the government prevent a retail price hike despite soaring global prices, officials say.

The government is banking on softening of international oil prices from January.

"The duty cuts will help in holding prices though the Indian basket has breached the $42 a barrel mark and marketing companies will report under-recoveries for some more time. But from the trends available, we anticipate prices to soften from January," a senior petroleum ministry official said.