India’s efforts to promote rupee transactions for crude imports have failed to find buyers as suppliers expressed concerns about repatriation and high transaction costs, the oil ministry said.
Currently, the default payment currency for all crude oil import contracts is US dollars, in accordance with international trade practices. However, with an aim to internationalize the Indian currency, the Reserve Bank of India on July 11, 2022 allowed importers and exporters to trade in Indian rupees.
Although some non-oil transactions have taken place in rupees with selected countries, the Indian currency continues to be shunned by oil exporters.
“During the financial year 2022-23, no crude oil imports by oil PSUs were paid in Indian rupees. Crude oil suppliers (including the UAE’s ADNOC) continue to express concerns about converting capital to preferred currencies and also highlight the high transaction costs associated with converting capital as well as the risks exchange rate fluctuations,” the Petroleum Ministry told Parliament. Department Committee.
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“Payment for crude oil can be made in Indian rupees, provided the suppliers comply with the regulatory guidelines in this regard,” the ministry said. “At present, Reliance Industries Ltd and the oil PSUs have not entered into any agreement with any crude oil supplier for purchase in Indian currency for supply of crude oil.”
India is the third largest energy consumer in the world. With domestic production meeting less than 15% of demand, the country must import the remaining crude oil to convert into fuels such as gasoline and diesel at refineries.
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In fiscal 2023, India spent $157.5 billion to import 232.7 million tons of crude oil. Iraq, Saudi Arabia, Russia and the United Arab Emirates are its main suppliers. Of this total, 141.2 million tons came from the Middle East, or 58% of total supply.
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In the current financial year, India imported 152.6 million tonnes of crude oil from April to November, worth $113.4 billion.
“India’s consumption will be around 5.5-5.6 million barrels per day,” the ministry told the committee. Of this, we import about 4.6 million barrels per day, accounting for about 10% of the country’s total oil trade in the world.”
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